Revolutionizing digital payments: a strategy to reduce costs and enhance value by up to 30%

By Lasse I. Munck , Daniela Chikova , Hanno van der Zwan and Sara Hollung Nornes

A rapidly expanding global e-tablet company sought to oprimize its payment processes. Despite its growth, the company had been using the same payment service provider and fee structure since its inception.

This challenge is not uncommon among small- and medium-sized businesses. Payment inefficiencies often lead to abandoned transactions—accounting for over two-thirds of incomplete online shopping carts. This not only impacts revenue but also results in a poor customer experience.?

With payment costs typically ranging from 3% to 5% of total revenue, they can be the deciding factor between profitability and loss. However, many companies seldom renegotiate their payment agreements due to a lack of specialized expertise, leading to untapped savings opportunities.?

Additionally, as businesses expand into global markets, issues such as payment fraud and unfavourable exchange rates can escalate unless proactive payment solutions are in place.?

The solution

Payment processing is inherently complex and often carries significant costs. To address this, we implement a structured approach that enhances transparency and delivers measurable results within weeks. Procurement experts from Prokura and payments professionals from Kearney join forces to deliver a fit-for-purpose yet scalable payments setup and unlock significant savings.

This is how we optimized our e-tablet client's payment solution for maximum impact:

1. Assessment

To gain visibility into the total cost of ownership, we conducted an in-depth analysis of the company's spending. This involved collecting data from the payment provider’s portal and verifying its accuracy through direct engagement with the provider.?

This preliminary assessment was instrumental in identifying inefficiencies, such as unfavorable contract terms and a lack of transparency in fee structures. For instance, an undisclosed foreign transaction fee accounted for over 50% of total costs. While the company had previously questioned the high cost of international transactions, it lacked concrete data to negotiate better terms. This lack of transparency restricted the client's ability to optimize its payment setup effectively.?

2. Preparation

Next, we optimized the payment model and commercial strategy with the largest payments partner.

We refined the company’s payment model to align with its evolving business needs. Key priorities included structuring payment solutions to support international expansion, reducing transaction fees by establishing settlement accounts in major currencies, and enhancing fee structures through benchmarking against industry standards.?

Through comprehensive benchmarking, we identified cost-saving opportunities and established realistic yet ambitious negotiation targets. By assessing costs in relation to total spend, we ensured that strategic trade-offs maximized financial gains.?

3. Negotiation

Drawing from extensive experience across thousands of negotiations, we developed a tailored strategy to strengthen our client’s bargaining position. A critical factor was assessing the company’s attractiveness to payment providers, which informed our approach to leveraging volume-based incentives.?

Through renegotiated agreements, we secured lower transaction fees, more flexible payment schedules, and enhanced service levels. In addition, we explored ways to improve transaction efficiency and reduce cart abandonment, ultimately boosting conversion rates.?

4. Implementation and long-term optimization?

To sustain long-term benefits, we facilitated the rollout of the optimized payment model and established ongoing collaboration strategies with payment providers. This ensured continuous improvements and the ability to capitalize on emerging opportunities.?

Results

Optimizing payment processes delivers meaningful advantages for high-growth digital businesses.? (see figure).

For the global e-tablet company, we restructured its payment and acceptance contracts by increasing transparency, aligning costs with industry benchmarks, and incorporating volume forecasts. These optimizations led to a 30% reduction in payment costs while ensuring scalable growth.?

For other clients, similar strategies have yielded 8% to 12% cost reductions by streamlining payment ecosystems and automating processes. Additionally, we have observed 3% to 5% improvements in conversion rates by optimizing payment acceptance, reducing abandonment rates, and enhancing transaction efficiency.?

“Partnering with Prokura and Kearney has been a rewarding experience, with their expertise, collaborative approach, and dedicated effort enabling us to enhance the efficiency and value of our payment setup.” – Head of indirect procurement

Take the next step

By taking a proactive approach to payment optimization, businesses can achieve substantial cost savings, improved customer experiences, and stronger relationships with payment providers.?

To explore how your company can optimize its payment setup, connect with the Prokura–Kearney payments cost-optimization team today.?

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