The payments infrastructure for most businesses is rarely perfect. This is true for everyone: enterprises, hospitals, small retailers, SaaS startups, everyone.
In many of those businesses, the payments system consists of a patchwork of apps, spreadsheets and platforms that process millions — sometimes billions — of dollars each year.
For the business to thrive, that ecosystem of payment processors, payment gateways, facilitators, resellers and card networks needs to run smoothly at all times. But whether that ecosystem runs smoothly is outside of the business’ control. There are inefficiencies, security vulnerabilities, compliance issues and risks in general that come with third-party payments systems.
Below are four risks to be aware of (and how building your own payments infrastructure overcomes that problem).
It Significantly Increases Inefficiencies
The first challenge that anyone tasked with operating and managing such a convoluted payment infrastructure will encounter will be the huge inefficiencies and headaches it brings.
Managing all of the different vendors, their contracts and their relationships can be a real struggle, writes Manny Pansa, senior vice president for product and account management at BlueSnap. There’s a lot more work to do when you have to negotiate individual contracts with every single vendor in your system. Further, each of the apps in that system require some day-to-day management.
All of that administrative work may be easier if each app in an organization's network communicates effectively with each other. Unfortunately, in systems where problems are addressed one at a time rather than all at once, that’s rarely the case, says Stefan Merz, the managing director and chief strategy and growth officer at PPRO. “And that’s the opposite of what we need, if we want the digital payments sector to expand as fast as it has the potential to.”
There’s a High Risk of Error
When businesses rely on so many disparate systems that don’t necessarily talk to each other or integrate easily, the risk of error increases significantly.
Jennifer Lucas, head of payments for FSO Americas at EY, notes how inconsistencies in data and in customer experiences can arise from such systems. “This fragmented landscape can lead to issues such as a lack of data standardization,” she says, “which can make it challenging to track and trace transactions.”
Worse still is the risk of error from partners. In particular, the threat of downtime or unplanned outages looms large and can be painful.
Each of the many platforms that make up a business’ payment processing ecosystem is likely to experience downtime at some point, whether that’s planned for maintenance or not, the team at MONEI notes. When that happens during a transaction, payment failure is the most likely outcome.
It Inhibits Growth Opportunities
Making the most of potential growth opportunities requires a flexible payment infrastructure. When businesses suffer from a cumbersome ecosystem, those opportunities can pass them by.
Dani Mansfield, a senior content strategist at Paddle, describes a potential scenario:
Say there’s a sudden surge of interest from Germany, but most customers in that country wish to use PayPal. You don’t have that gateway integrated into your ecosystem yet, and it’s not flexible enough to adopt a new method fast. Integrating PayPal becomes a project itself that takes months to implement. Sales in Germany surge once it’s been integrated, but what about all those potential sales you missed out on in the meantime?
When businesses don’t have a payment ecosystem flexible enough to adopt a new payment method at will, the temptation is to switch payment gateways. But that causes issues, too, writes Bhaavika Joshi, a former product marketer at Chargebee. No single payment gateway is perfect, and new payment gateways will emerge, as will new business opportunities in new markets (with their own currencies, perhaps).
Switching payment gateways once is a time-consuming task. Constantly doing so isn’t a long-term strategy.
It Raises Security and Compliance Issues
There are several payment security issues that businesses must bear in mind, Kaleigh Moore at BigCommerce points out. These include data breaches, server issues and malware.
Unfortunately, disjointed payment ecosystems caused by bolted-on apps and plugins make security risks much more likely. There is also a compliance dimension to all of this. Depending on the jurisdiction in which your business operates, those payment tools may or may not help you meet your compliance requirements.
The costs of both security breaches or regulatory non-compliance can be high.
David King, former chief technology officer and co-founder of OnPlan Health, notes that regulatory bodies like the PCI Standards Council have already handed multimillion-dollar fines to retailers like Target and Home Depot and are increasingly turning their attention to other industries.
The Solution? Custom Payments Infrastructure
When the risks of relying on a convoluted network of third-party operators to handle payments is so high, businesses with sufficient resources are left with one choice: Build a payments system they control.
John Lunn, founder and CEO of Gr4vy, offers one such solution: a cloud-based payment orchestration system that gives businesses the scalable solution they need to standardize payment methods without taking on the burden of PCI compliance.
“Your serverless functions should remain dormant until a consumer needs that payment method. Unified reporting should be replicable and available wherever your accounting team sits – home or otherwise – and Edge computing should push user experiences closer to customers and their specific needs.” As a result, you can scale your infrastructure up and down in line with the peaks and troughs of your yearly sales cycle.
This is an effective strategy, but there are many other ways businesses can take control of their payments infrastructure. To find out more, connect with a custom software development studio with experience in developing complex fintech solutions for some of the biggest companies in the country.