Viewed primarily as a cost center, payments have long been relegated to the sidelines by most CFOs and Finance Teams. And when rarely discussed, the focus is too often on cost reduction and fraud prevention—with little consideration for the strategic potential of payments.
While this mindset has gradually shifted in recent years, entrenched beliefs take time to change. I speak with other CFOs and Finance Leads from different-sized companies spanning diverse industries every week. More often than not, the conversation is focused on driving the cost of payment processing down as much as possible.
On the one hand, I understand that perspective. I held a similar one a few years ago; I saw payments as this complex and opaque process at the end of the customer journey. Payments were costing the businesses I worked for a ton of money and eating into our margins. As a result, the most obvious question to ask was: ‘How can we cut the cost of accepting payments.”
What type of questions should finance executives ask on payments?
For those of us in finance roles, processing costs are (and will always be) at the top of our minds. But in 2024, that’s not the only question you should ask concerning payments.
Instead, the most ambitious and forward-thinking finance executives are asking: “How can we use payments to drive value creation or, in simpler terms, accelerate our growth and path to profitability, execute strategic priorities, fast-track international expansion, and build flexibility into our cost base?”
The answer to this question is typically the same: invest in an underlying payment infrastructure. Doing so will empower your business to use payments to boost revenue, reduce the overall cost of managing the payment stack, and drive operational excellence across the business.
How to drive payment success at scale
You achieve this by first getting access to the tools needed to drive payment success at scale and without complexity. This includes driving higher conversion rates by offering more payment methods and a more seamless customer experience at checkout. It also includes using tools that improve authorization rates, such as smart routing, retries and fallbacks, adaptive 3DS, and network tokenization.
You’ll also generate significant savings by eliminating gateways, fraud reduction, replacing cloud and security infrastructure, reducing the headcount necessary to build and maintain payments and automation integrations, and reducing the time spent managing payments data, resolving disputes, and reconciling transactions.
Payment infrastructure is the way to go
In short, using a payment infrastructure lowers the total cost of ownership tied to the direct and indirect costs of processing payments, which have increased markedly in many businesses over the past decade. As a result, it can provide substantial fixed cost savings, turn fixed costs into variable components of your P&L, and ensure that your business can scale at the right pace and with the right level of overheads.
Another often overlooked advantage of optimizing payments is the value it brings to investors and shareholders. For private businesses aiming to go public, investing in de-risking the payment stack and facilitating more effective and efficient treasury and account closing processes enhances governance and bolsters exit readiness. For public companies, an investment in payments can unlock additional shareholder value.
The definition of a cost center is a department or function within an organization that does not directly add to profit but still costs the organization money to operate. That’s not payments. Payments is a strategic asset to your business that can boost top and bottom lines and enable you to achieve your top priorities.
This opinion piece is written by Mr Pierre-Edouard Jumel, CFO of Primer, the unified infrastructure for global payments and commerce.
