“To improve is to change, to be perfect is to change often” as Winston Churchill once said. In modern business, this concept is more generally understood as innovation – updating the way in which you do things or the capacity of your offering to simply be better.
That need to ‘be better’ couldn’t be more relevant than in competitive markets, where companies must have the best offering possible to survive. Innovation is continuously kept front-of-mind, with products and services seen as evolving entities as opposed to finished articles.
However, innovating is resource-intensive. People from all over the business are required in strategising and executing new features or product enhancements, when it can be challenging enough to keep the day-to-day operational.
It is therefore crucial that software providers think about how they should innovate, as opposed to attempting to innovate in any way they can. If innovation projects have certain characteristics, they are likely to have a greater impact on the software providers’ success.
The characteristics of successful innovation
Firstly, innovation needs to enhance customer experience, and in a way that’s tangible. Making slight improvements to design or enhancing a rarely used feature is not going to win business from rivals.
It needs to have a certain amount of longevity. Short term innovations won’t do much to influence long-term customer trends. Your innovation should either be longstanding, or with the potential to be innovated further.
It needs to be clear. If an innovation’s not immediately apparent or you don’t tell anyone about it, it’s arguably not worth doing. So, if you’ve made your software platform outstanding, let it be known – it’s the only way you’ll actually stand out in a saturated market.
Finally, it has to be something your customers are willing to pay for. They have the choice of lots of software providers. Is your innovation something that’s nice to have or is it solving a problem that will make them use your service above all others?
So, where do you innovate?
There is an area of accountancy and payroll where innovation is desperately needed. One which can transform customer experience, redefine process and allow software providers to solve common customer pain points.
While accountancy and payroll software offers much in terms of business financial management, making payments has usually been left to the client working with a banking partner. And, there are many pain points associated with this cumbersome approach. But through embedding payments infrastructure directly into your offering, all of these can be alleviated.
It’s an area in which customers are crying out for innovation, and it’s all very achievable. But before we get into that, let’s first examine the problem.
For many accounting and payroll software providers, the end customer journey looks something like this. They regularly log on to their accounting software to view finances, calculate payroll, estimate tax contributions, perform financial forecasting and more. The service is well-designed and easy to use.
They love it.
But then, there is the second part of the journey. When they want to make supplier or payroll payments, they need to manually download a CSV file, then upload this file to their bank. It’s frustrating for them to have to switch services to complete a key part of their accounting duties, and as the software provider, you lose control of user experience. Ultimately, no matter how brilliant you make your offering, if your customers have to rely on a third party or a traditional bank, their accounting experience still has the potential to be poor.
While having to switch between your platform and banking portals to make payments is frustrating enough for your customers, that’s not even the half of it.
The manual aspect of payment reconciliation, adding data to spreadsheets and ensuring information matches correctly, is a painstaking task. The lack of clarity results in errors being made, where payments are not sent on time or, worse still, sent to the wrong account. This can cost the business both financially and reputationally, while further increasing the workload for accounting teams.
With the traditional approach, payments are often still made using the Bacs payment scheme and these take at least three days to clear. This isn’t helpful for customer cashflow as payments need to be sent in advance to ensure they reach the recipient on time.
Some payroll and accounting software platforms may be using a payment provider that can offer Faster Payments. This is an improvement but unless that payment provider has direct access to the scheme, it’s still not ideal. There’ll be higher costs, if banks are involved, and payments will still need to be submitted by a particular cut off time, so if the business wants to make a payment on Friday afternoon and there is a bank holiday on the Monday, it can still take days to go through.
Considering such limitations, it’s easy to see why any software platform that relies on more traditional financial services or banks may struggle to offer innovative solutions.
Why there is now another way
Some years ago, the regulatory authorities in the UK moved to increase competition for payments providers. This resulted in non-banks being permitted, under appropriate legislation, to offer accounts and payment services to businesses and consumers. These payments powerhouses provide software driven services that are difficult to obtain from the banks. By that we mean API calls to create accounts, to initiate instant payments, and to obtain real time account data, to name but a few.
Modern FinTechs, like Modulr, have the advantage of not being bound to legacy technology. They are built around digital API infrastructure that lends itself to innovation in a way that traditional banks can’t. Banks find it difficult to transition to this approach as they are constrained by such high levels of bureaucracy, even small updates are a complicated and rigorous process.
Zeroing in on payments is one of the best ways you can innovate to differentiate, giving your customers everything they need to complete their payment requirements in one smooth experience.
This substantially increases the stickiness of your offering and allows you to build a closer relationship with your customers. This is why some of the biggest names in the accounting and payroll sector, including Sage, Xero, BrightPay and more, have chosen to innovate in this way.
Building for the future
While economic uncertainty can make you feel that now is not the time to be enhancing your offering, we argue that the opposite is true. Through tackling payments, you’re offering your customers a way to reduce operational headaches, enhance their service through real-time payments and spend more time focusing on value-add areas of their business.
It is precisely what they need in times of challenge, and being the service that offers this to them can help you attract new customers and retain those you have.
Now we’ve established the why, do you want the how?
Download our 'How to' guide here for more information on the benefits of embedded payments and what integrating with Modulr looks like.