Fintech leaders are constantly challenged to deliver incremental value for their businesses and customers. This has become even more heightened in today’s landscape, as economic factors and a competitive market are leaving organizations strapped for solutions to stand out and get ahead. As a result, many are turning to technical innovations and trends like generative AI, but instead, fintech leaders should consider investing in and evaluating three strategic areas: return on investment for payments, embedded opportunities, and global capabilities.
Evaluating Payments ROI in Fintech Strategies
Payments can play a key role in driving growth and delivering ROI. Fintech leaders need to look beyond the traditional thinking of “getting better rates” as a payment strategy and instead, think about driving payment ROI to focus on increasing revenue and reducing costs by considering the following:
- Authorization Rates: Surprisingly, forty percent of businesses don’t know their authorization rates, and this fundamental payment KPI has a direct impact on revenue. Fintech leaders need to help their customers diagnose the drivers of poor authorization rates and put strategies in place to improve them.
- Technical Debt: Multiple payment gateways require valuable, highly skilled resources to monitor, maintain and troubleshoot them, which could distract from efforts to create new value-added capabilities for the business. The legacy of multiple gateways often comes from an outdated approach to global payments or trying to build payment routing, leading to technical debt. Additionally, multiple gateways often mean excess fees and challenges with financial reconciliation.
- Resiliency: If a business and its customers are relying on a single bank or processor, issues can emerge if they experience an outage or failure without built-in redundancy in place to keep operations efficient. This is why companies should evaluate their payment stack to ensure that they are working with payment providers who are equipped with a multi-bank structure, intelligent payment routing, and instant failover capabilities.
Embracing The Embedded Opportunity
There’s a wave of momentum behind all things ‘embedded’, including embedded payments, embedded banking, embedded insurance, and more. They all involve non-financial technology and software companies providing access to financial services via fintech, bank, or financial provider in a seamless user experience.
Take for example the recent launch of Apple’s savings accounts. This demonstrates the value of embedded banking, as Apple has created a seamless user experience for customers to open a savings account from Goldman Sachs, and then automatically deposit Apple Cash into that account.
Yet among the embedded family, embedded payments are the fastest-growing piece of the pie.
Embedded payments are forecasted to account for nearly 63% of the total addressable $800 billion embedded finance market by 2030, according to Credit Suisse.
Opportunities to embrace embedded technologies should be evaluated seriously because if done right, it can provide businesses with new revenue streams, increased client acquisition, revenue, and tenure as well as higher valuations.
Expanding Global Capabilities with New Fintech Strategies
Many businesses and their clients are looking to grow on a global scale. For example, platforms and merchants typically optimize their payments for a single region, but now realize that their customers are global and need to expand their business globally. However, getting payments right on a global scale can be complicated.
To consider a global payment strategy, businesses must ask themselves the following questions before building their own infrastructure or identifying the right payment partner:
- Is there access to a banking network within targeted regions without building up technical debt?
- Can transactions be routed to maximize authorization rates and reduce cross-border fees?
- Is there an opportunity to build payment resiliency on a global scale?
- Are all sales models able to be supported globally, including across online, mobile, invoicing, marketplace, and subscriptions?
- What payment methods and currencies must be offered?
- What measures can be implemented to combat fraud and risks without stifling revenue in each market?
- What local regulations and payment compliance measures are required?
- How can the complexity of reconciliation be reduced?
In today’s economy, leaders need to not only focus on fintech strategies that deliver value for their business and customers, but they also need to get creative and dismiss the old ways of thinking. Adopting and refining a payment strategy that embraces innovative approaches can deliver the timely and lucrative results that the fintech industry has been searching for.