CFOs Prioritize Payments Performance
CFOs at consumer companies surveyed say they’re more concerned about improving their payments performance than they are about the impact of macroeconomic headwinds. CFOs and their teams recognize the strategic potential of payments and their influence on revenue growth. They're eager to enhance their payments performance, not merely to recover losses, but also to grasp the potential for heightened profitability.
Identifying efficiencies
Unlike macroeconomic headwinds, payments performance and its impact on the bottom line is a tangible matter that can be controlled and improved at the individual and corporate levels. But the two issues are linked. In the face of ongoing inflationary and interest rate pressures, which hit the consumer retail sectors with particular force, businesses are under pressure to demonstrate robust profitability at a time when profit can be all too elusive.?
Only 16% of CFOs surveyed said they view payments purely as a cost center. 46% of respondents disagreed with the statement that “on balance, payments is more of a cost center than a potential driver of growth and revenue”.
Payments are a significant line item on many corporate balance sheets. The question CFOs must ask is whether or not it’s too significant. Payment pricing is complex. Some of these fees are fixed but others are variable, resting on factors within the businesses’ control. That is where finance teams will find opportunities.
The first place to look for efficiencies is the pricing structure provided by your PSP. If a business processes with a flat fee – known as blended pricing – there’s little room for optimization. Blended pricing helps take the guesswork out of cost analyses but may lead businesses to overpay for specific transaction types where true interchange is much less than the flat fee. That’s not the case for businesses using a provider offering an IC++ pricing structure. This structure provides merchants more transparency into the fees charged across the transaction lifecycle. And most importantly, any savings made through optimizations are passed onto the merchant. Strikingly, only 16% of CFOs surveyed said they view payments purely as a cost center. Some 46% of respondents disagreed with the statement that “on balance, payments is more of a cost center than a potential driver of growth and revenue”, while the rest (38%) reported being uncertain either way.
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Earning strategic value
“While we may know the strategic importance of payments optimization, you cannot expect payments to simply leapfrog into a strategic position within the business.”
Payments leaders we spoke to put increased C-level awareness down to a concerted effort by the payments teams to actively advocate for payments optimization. But? they also emphasize that this advocacy is very much a work in progress and that there is no place for complacency. “If you are responsible for payments in your business then you do have to keep beating the drum for payments.” one payments executive told us. “While we may know the strategic importance of payments optimization, you cannot expect payments to simply leapfrog into a strategic position within the business.”
According to a C-suite executive we surveyed, payments need to earn their place in strategic conversations. “First, the payments function needs to do the hard yards operationally: make sure your tech is optimal and working, make sure you can justify your costs and prove ROI, fine-tune your performance metrics, and show that you are indeed performing well.” Once these proof points are in place, payments have earned their place in high-level strategic conversations. For most teams that means having really smart payments partners who can support this mission – both in terms of achieving high performance but also by measuring it accurately, transparently, and meaningfully.
For more insights, download our 'High-Performance Payments' white paper, which sheds light on industry trends, emerging technologies, and best practices.