26/08/2022

How to reduce payment operations costs

By Mariana Marques

Payment operations involve a range of costs, some of which may be fairly unheard of and therefore disregarded. Having a broad understanding of the costs associated with payments and how to reduce those costs while optimising your payment system will prove invaluable.

According to a study by Merchants Risk Council (MRC) and CyberSource, published in an RPGC report, the cost of payments is the second biggest payment challenge that enterprises face. It comes just below eCommerce fraud and above acceptance of alternative payments, security, and IT constraints. The complexity of payments and involving costs continue to increase as new payment providers and solutions enter the market.

The challenges of managing a payments system

There isn’t a single payment provider, or PSP, that covers all payment methods in all countries and regions. For these reasons, large enterprises are forced to connect with various providers to cater to their customers’ needs. These integrations, while vital, make payment operations increasingly cumbersome and expensive.

Aside from the payment fees that each provider charges, there is an array of functionalities that enterprises need to keep in mind, including smart routing, mandate management, and unified reporting. This complex architecture composed of different systems is complicated to manage, particularly for non-technical teams. This article discusses the complexity of payment operations and the various costs businesses face and provides solutions to reduce these.

Payment fees

There are various fees involved in payments, including interchange fees, assessment fees, and payment processing fees.

Any payment involving a card network like Visa and Mastercard will have interchange fees. These fees cover the payment processing costs for the issuing bank, processor, gateway, card network, and acquiring bank. Enterprises will have to pay a fixed fee per transaction, which can go from 0.2 to 3%. Usually, the interchange fee is composed of a percentage of the sale and a fixed amount. For instance, Visa currently charges 1.29-2.5% plus 10 cents per transaction for card-present payments (Nerd Wallet report). This fee may vary depending on an array of factors, such as the type of payment and card network. 

Assessment fees are charged on the enterprises’ total monthly sales. Each card network will charge its assessment fee, which is paid directly to them. Payment processing fees, on the other hand, are paid to each payment provider. They cover the costs of running software, billing, and technical support, amongst others. These fees can vary widely depending on the providers you use, and, naturally, the more providers you connect with, the more expenses you will have to pay.

Provider integrations

Another high cost comes with the integrations with payment providers. Connecting with payment providers is a cumbersome, resource-draining, and expensive process that typically lasts months. This is especially true for traditional enterprises that rely on old IT systems to power their operations. These systems are generally incompatible with the newest technologies, making it challenging to perform the technical integrations required. Yet, enterprises need to connect to multiple providers to meet customers’ needs across different markets. While these costs may seem unavoidable, a payment middleware can drastically reduce them.

The role of a payment middleware

A payment middleware solution enables enterprises to connect to any payment provider or technology. It does all the heavy lifting of pre-integrating with providers, significantly reducing integrations’ time and costs. Aside from the cost reduction aspect, middlewares make it much easier and more efficient to manage payment operations on a single platform. Unified reporting, for instance, is crucial to ensure that your data is fully updated and easy to visualise, regardless of how many payment providers you are using. Because enterprises get a single payment report from each provider, a unified reporting feature is necessary to put all this data coming from different places together.

The same can be said about many other features, such as smart routing. Smart routing automatically routes each payment to the most suitable provider, which is also the most likely to accept it. If a payment fails through one provider, it is directed to the second best. This can increase approval rates significantly and reduce payment failure, resulting in more successful sales, more revenue, and higher customer satisfaction.

Aside from payment integrations and other crucial payment functionalities, a middleware like Imburse also provides the agnostic payment expertise that enterprises need to navigate the complex payments world. In an ecosystem that is so rich in payment providers and solutions, finding the most suitable ones for your business can be quite challenging. Most enterprises don’t have the in-house payments team or payments knowledge[RR1] , and it may not be reasonable to build a payments team from scratch[RR2] . Having technical and competency support enables enterprises to make better payment decisions and save on a lot of costs in the long run.

About Imburse

Imburse is a cloud-based middleware connecting large enterprises to the payments ecosystem, regardless of their existing IT infrastructure. Through a single connection to Imburse, enterprises can collect or pay out using a variety of payment technologies and providers around the globe.

In a world where consumers payment preferences and technologies are ever-evolving, Imburse works with insurers to future-proof their payment requirements. Regardless of the business area, market, or requirements, Imburse will connect you to your choice of technology and provider.

Reach out to our team below should you want to discuss how Imburse can help you. Our team is happy to show you what our platform can do for your business and offer you a free demo.

About Mariana Marques

Mariana is a content writer at Imburse, specialising in Finance and Technology topics.

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