Creating a solid payment and banking strategy is an essential part of any business’s operations. Unfortunately, this area often doesn't get the attention it deserves due to a general lack of knowledge. Many businesses blindly trust their providers without fully understanding the broader effects of their choices. However, a well-planned strategy in this area is crucial—not only for ensuring smooth transactions but also for influencing cash flow, customer satisfaction, risk management, and overall operational efficiency.
How to develop an effective payment and banking strategy
To adopt the mindset of a bank we need to understand that banks focus on compliance, risk management, and strict adherence to regulations. Their main goals are to prevent illegal activities and ensure taxes are properly accounted for. By Understanding the basic motivators of your banks and financial institutions, you can make more informed decisions, carefully considering risks, costs, and long-term benefits.
Offshore or licence
If your business involves aspects that might raise concerns—such as an offshore entity or the need for a specific license—it’s essential to address these issues openly before working with any new payment or banking provider. By demonstrating a clear understanding of potential risks and how you plan to manage them, you can build trust with financial institutions and ensure that your operations remain reliable over time.
Starbucks
A great example of a company that has successfully integrated its payment strategy into its overall business model is Starbucks. While many people see Starbucks simply as a coffee chain, the company operates similarly to a financial institution in certain respects. Their loyalty program, linked to their mobile app, allows customers to add funds to their loyalty cards and earn rewards. However, a significant portion of these loyalty card balances remain unused, representing a major asset for Starbucks—valued at over $2 billion, which is more than the assets of many banks. This example highlights how a well-designed payment strategy can become a substantial part of a company’s financial structure.
User experience
It’s also important to remember that poor payment experiences can lead to dissatisfied customers. For example, if you don’t offer the preferred payment option at checkout, customers might abandon their carts, resulting in lost revenue. In today’s fast-paced environment, providing a seamless payment experience is essential.
Cash flow
Effective cash flow management is another key element of a strong payment strategy. A reliable payment and banking strategy ensures that you can access your funds promptly without delay. Without quick access to funds, even the best service can fall short of your needs. This principle also applies to your customers, especially in online industries, such as iGaming. If you can’t settle player winnings quickly, customers are less likely to return, which could hurt your revenue.
The right payment providers and banks
Choosing the right payment providers and banks is another vital aspect of your strategy. Not all providers are the same, as they operate under different regulations depending on their licensing jurisdiction. Some providers might offer lower fees but with less reliable service, while others may provide excellent support and advanced technology at a higher cost. Finding a balance that meets your business needs is crucial. Keeping an eye on the market and staying informed about the services and products available will help you assess the level of risk and ensure your strategy remains effective and aligned with industry trends.
Alternative payment methods
A good payment strategy goes beyond just selecting payment methods and providers; it’s also about keeping your customers satisfied. Today’s consumers expect a variety of secure and easy-to-use payment options. By offering multiple payment methods—like credit cards, bank transfers, and digital wallets—you can attract a wider customer base and build loyalty. Additionally, it’s important to tailor your payment options to the preferences of your target market. For example, while credit cards are popular in the EU and the USA, real-time payment systems like PIX in Brazil are becoming increasingly common. Overlooking these local preferences can lead to lost sales and unhappy customers.
Data
Data plays a significant role in shaping a strong payment strategy. The more data you collect, the better you can understand your customers and their payment preferences. Analysing this data allows you to refine your strategy, optimize payment processes, and expand your reach globally. For instance, data can reveal which payment methods are causing issues for customers, enabling you to make the necessary adjustments.
Security
Security and technology are also crucial. Ensuring that your payment methods and providers meet security and compliance standards is vital, not only to avoid legal problems but also to maintain your business’s reputation.
Payment experts
Given the challenges in the payments and banking field, working with a payment expert is highly recommended. An experienced consultant can guide you through the process, helping you identify risk areas and advising you on how to minimize these risks. Payment experts bring valuable insights and remain independent of provider sales pitches, allowing them to recommend solutions that truly benefit your business. Authors: Bhupesh Naranware https://www.linkedin.com/in/bhupeshvn/ and Viktoria Soltesz https://www.linkedin.com/in/viktoria-soltesz/