Research shows archaic processes cost each UK business per year a colossal £1.5m when dealing with payments, and more the bigger the company. Costs typically spiral due to manual processes, outdated systems, and productive inefficiencies that go unnoticed.
In the race to shore up operational efficiency, organisations, including those providing financial services, must navigate between investing in new technologies on the one hand and cutting costs on the other.
Organisations that are quick to adopt new technologies fare much better than those that cling to old legacy systems in an Instant Economy that demands speed, agility and efficiency.
Keep reading to learn more about how leveraging innovations in payment systems can help companies and financial services organisations improve business efficiency and stay competitive in this Instant Economy we all live in.
How Productive Inefficiency Separates Early Adopters from Laggards
Companies referred to as ‘early adopters’ are happy to take risks for a product or service they believe will help improve their business efficiency. One step behind the innovators themselves, early adopters constantly search for innovative ways to minimise productive inefficiency - i.e. when output occurs at a cost higher than the minimum average cost - and provide a more valuable service than their competition.
On the other side of the coin, companies categorised as ‘laggards’ are hesitant to implement new systems and fall behind other companies with reactive digital strategies. Laggards struggle to keep up with the rapidly evolving business landscape of the modern-day. The term denotes businesses that are stuck in a rut and failing to achieve the necessary speed in their service, which damages their performance and undermines their customer relationships.
According to the research, which surveyed nearly 300 UK payments professionals, laggards businesses follow an increasingly risky strategy by not shedding legacy methods and shoring up operational efficiency. In particular, laggards’ failure to act threatens their service quality when they don’t take the necessary steps to modernise the infrastructure sitting at the heart of their value propositions – payments.
In an environment where new technologies and innovation are constantly released to market, companies must be willing to adapt. The alternative is to risk losing out on valuable business opportunities, resulting in lower business credibility. Your clients may lose faith in your services and take their business to a competitor instead who's learned to adapt.
It’s imperative for laggards to focus on long-term competitiveness and understand the risk posed to their customer base should they play into their competitors' hands.
Why Laggards Must Improve Business Efficiency to Survive
According to the report: Customer Experience – The price of payment inefficiencies, 67% of payment decision-makers believe the way they process and service payments has directly impacted their customer experiences.
A poor payments strategy is something business leaders can no longer ignore. Adopting innovations in payment systems is key to staying competitive in a world where customers expect seamless experiences tailored to their needs and requirements.
In the face of escalating digital payments and a demanding economic environment, companies need a robust payments strategy that places new technology firmly at the centre of operations.
How Laggards Can Improve Operational Efficiency through Payment Innovation
To become a forward-thinking industry leader, business directors should look to drive end-to-end payment process efficiencies in five key areas:
1. Identify Hidden Inefficiencies in Payment Processes
Running a company involves hard costs like licensing fees and employee salaries. But outdated payment processes also come with hidden expenses from productive inefficiencies that slow down operations and even risk reputation and revenue. It's the butterfly effect of payments where an inefficient backend hamstrings the customer-facing frontend.
The top three hidden costs attached to inefficient payment processes were:
- impact on customer experience/satisfaction (38%)
- impact on relationships with other teams and departments (35%)
- impact on competitor differentiation (31%).
Lack of operational cost visibility is a top challenge for both large and smaller businesses. In fact, 62% of business leaders believe that the hidden impact of poor payments cost them more than the hard expenses do.
To position themselves as early adopters, businesses must locate these hidden inefficiencies and leverage innovations in payment systems to provide a faster, easier, and more reliable way to move money.
2. Make Payments Key to the Stakeholder Experience
While customer experience is unquestionably a central priority for creating a successful payment services strategy, enhancing the broader stakeholder experience is just as important. Customer, employee, and even supply chain partner experiences are becoming increasingly intertwined. A truly effective payment innovation benefits every category.
For example, supply chain relationships affect your employees, which, in turn, affect the customer experience they provide. So your payment services innovation must extend beyond customer touchpoints. Employees working with effective and efficient payment systems are in a better position to enhance the customer experience.
Frictionless payments will not only aid customer retention but also drive further adoption of digital payment services. In a world where instant transactions are crucial to a company’s survival, flexible and fast payment options are key to creating a positive stakeholder experience.
3. Integrate Systems to Support Payments Innovation
Addressing digital transformation and achieving payment service goals relies on automation and system integration. Yet, many organisations still use multiple disconnected systems that slow down payments, frustrating customers.
Integrating systems that support payment innovations enable businesses to maximise the opportunities of different financial models to provide robust, seamless and fast payment experiences.
Automation is key to driving operational efficiency by replacing manual error-prone and time-consuming processes with real-time, responsive digital ones.
4. Bring Business Leaders Together
Payments innovation drives systems integration, which helps create a more collaborative stakeholder ecosystem within an organisation.
Close collaboration between senior leaders is key to driving operational efficiency and enhancing the customer experience. Each business leader brings a unique perspective to the table, and combining them gives you a better chance at finding areas that are ripe for transformation.
Bringing business leaders together also allows you to uncover the most effective payment solution for your unique business goals. Laggards should harness this opportunity to provide a faster, more effective service.
5. Add Finance and Payments Innovation to Vertical Services
Companies in vertical sectors, such as banking or property, are particularly well-placed to innovate by offering new payment services. Embedding cutting-edge payment technology into their vertical services allows these companies to create a unique customer experience within their ecosystem.
Businesses already operating in the financial sector, such as lenders, could offer B2B payments-as-a-service. Clients can access software that enables them to provide unique payment functionalities to their customers. Companies specialising in other areas like employment or travel can revitalise their service by offering payment innovations to customers alongside their core business offering.
Innovations in Payment Systems Save Laggards From Lagging Behind
Leaders who seek out and eliminate hidden inefficiencies will reduce operational costs, improve stakeholder relationships, and enhance customer satisfaction.
The price of not investing in payment process improvements is a poor customer experience, especially compared to early fintech adopters who have put payments at the heart of their value proposition. Research shows that 90% of fintech companies cite enhanced customer experience as a key component to their competitive advantage.
Businesses who innovate with instant experiences for customers, employees and suppliers will become the winners in the emerging Instant Economy. Front-runners who delight their stakeholders with payment services that add value will leave their rivals behind.
It’s time for organisations, including those providing financial services, to abandon old legacy systems and seize every opportunity for innovation to get ahead in the race to modernise the payments infrastructure.
Future-proof your Payment Process with Modulr
Ready to maximise payments efficiency across your entire business operation to increase efficiency and reduce costs?
Modulr can help you identify the hidden inefficiencies in your payment services that are sapping customer experience, innovation and profit. Eliminate error-prone batch files and process transactions and leverage intelligent payment flows to get better control of working capital.
Take a look at our Payments Map to learn more.
Explore how improving operational efficiency affects your customer experience in our next blog.