Is your payment system that effective? Main mistakes of businessmen
Payment services are indispensable for any business; they include accepting payments from customers, paying contractors and suppliers, exchange services, and savings. Business is linked with payments and subsequently their costs. This cost is typically considered in the form of fees paid to financial institutions, but is this the only aspect you need to consider?
In payment systems, the term "saving" is often viewed sharply, typically meaning minimal investments in payment structure, bypassing legal structures, and implementing weak technical solutions that can be done with minimum funds or for free. This way, minimal effort is expended, and everything seems to work.
At Monoup, we are convinced that this approach often does more harm than good. Why?
Let's examine the most common mistakes, in our opinion, that business owners make in payments, which may have unexpected consequences.
Choosing low-quality or scam payment systems
Unfortunately, online payment market is flooded with dishonest payment systems, or rather, companies posing as such. We have previously published a detailed article on this topic; feel free to read it if you haven't seen it before.
Often, such companies invest little in their reputation, recognition, and infrastructure, as their goal is to deceive clients and quickly exit the market. Based on our experience, in 9 out of 10 cases, you actually can determine whether a payment system is worthy during the initial stages of communication. However, many merchants cannot do this due to a lack of experience in dealing with similar services or market experience in business. In haste to connect with the first available provider, they may overlook important details or not even know which details to clarify at all.
To avoid this mistake, seek qualified advice or only deal with reputable payment companies on the market, about which you can gather reviews. If this is not possible and there are concerns, better to refrain from cooperation. Haste is the main weapon in the hands of such "PSP providers," especially when they encounter newcomers in the business.
Note that in some cases, merchants do not have a wide range of choices, as stable and high-quality fintech do not accept all business models and revenue generation websites. This can lead to the following mistake, which we will describe next.
Lack of legal structure: proper or any
In our practice, we have encountered many gaming and other specific products that did not want to establish legal entities or obtain necessary licenses for their activities, citing high costs.
Although we agree that legal aspects can bring a range of expenses and mandatory payments, will these costs exceed the losses from poor payment processing or inflated processing fees resulted from absence of a legal entity?
Most likely will not. Based on our clients' experience, we can confidently say that in most cases, it is cheaper to create a solid legal foundation for your business than to rely on poor-quality payment processors and always receive unfavorable payment acceptance terms. Today, you cannot obtain good payment processing in the EU or USA without a company. This is beyond the comprehension of payment systems licensed in these countries.
Operating without a legal entity condemns you to a constant search for new payment systems, getting extremely high fees, and the constant risk of encountering scammers from the first point. After all, no legal payment company will connect with a business that lacks documents and is not officially open. Without these formalities, it is just a group of people, not a company.
The same can be said for obtaining necessary permits or licenses. This is an investment in real well-being of your business and the ability to officially cooperate with payment systems that can provide required service. Projects without a license always face inflated interest rates and are of higher risk.
Poor hiring and training processes
Professional team plays a significant role in success of business, and if we are talking about payment team and financial specialists, this role is crucial. Recent boom in payment services market creates wrong impression that there are plenty of payment systems and they are all good. This devalues contribution of payment department employees in the eyes of business owners, as when something is abundant, it seems easy to obtain.
We have repeatedly encountered situations where the role of a payment specialist was either absent in the company or filled by another specialist who lacked relevant experience. In our opinion, this is an extremely wrong approach that does not allow for quality payment flow and constant improvement of this flow.
Payment services environment is very dynamic, not only in the number of PSPs but also in new approaches, technical nuances, and regulations. Therefore, a payment manager, department head, or even CFO must continuously develop their knowledge, have a good theoretical foundation, and networking. They must also understand the causes and consequences of compliance processes and make decisions based on this knowledge. Reaching out to a dozen payment systems and agreeing with them on a launch is not payment management.
Payment management is a job that consists 50% of analytics, a deep understanding of payment methods features, and formation of payment strategy. It would be a mistake to ignore these issues, as this can significantly increase cost of your payment processing. Due to the inexperience of employees, their inability to find growth areas, and their unwillingness to do so if employees are not well-motivated.
Lack of payment management
As a consequence of previous business mistake, another one emerges — lack of payment management in the company. By payment management, we mean the permanent process of managing payments, finding more effective methods to achieve desired results, and reducing payment processing costs based on analysis of weak points and search for advantageous alternatives.
Constantly connecting new payment systems is not payment management. It is a routine, repetitive action that can affect quality of payment processing but will not make it immediately efficient and adaptive. Here, you need to see the big picture and base decisions on the real possibilities and needs of business. This includes basic tools such as payment routing and cascading systems, as well as constant analytics of payment flows, searching for more advantageous transaction processing options, minimizing transfers to reduce commission fees, and many other methods.
Payment processing always adapts to business, and if business grows or changes, payment strategy should also change. It is impossible to plan all the steps in advance, but keeping the current situation under control and manipulating it with maximum benefit is definitely possible, and this is the task of payment department.
In conclusion, we want to note that "invisible" mistakes described today, which get lost in the daily routine and blurred in urgent matters, may seem random and possible for anyone to happen. We will not argue with this statement, as experience is indeed built on mistakes. However, it is important to notice weak points and nuances that hide inefficient payment acceptance and change approaches. This will allow the business to grow faster, avoid spending huge amounts on ensuring financial stability, and truly maximize possible results. Spending wisely and saving is indeed important, but it is also important to do it correctly. Sometimes, it's better to invest fro the start and avoid long-term losses in even bigger final amount.
