Partners are Friends, Not Food

While walking the dogs this afternoon, listening to Jeffrey Liker's The Toyota Way. They spoke about the partnerships model in the automotive industry—one in which the two businesses commit to learning from and teaching each other.

It reminded me of what I said in my recent appearance on the In the Know Podcast with the team from NomuPay. There are some good reasons to have multiple PSPs. "Treat 'em mean, and keep 'em keen", to get a cheap price, should not be one of them.

I believe that suppliers are partners—each benefits from the relationship beyond the commercial arrangement. If all I do is drive the prices down, the value of the contract to them is not worth it. You can not expect them to do more than the most basic support, let alone help you optimise costs and maximise transaction success rates.

In my career, I have worked hard to build relationships like this, even when not in the culture of the organisations I worked for. I've made some good friends this way.

Whether you have one, two, or more PSPs, you need a clear strategy for working with your partners. Here is how I suggest you start:

• Get the data. Understand the performance of your payment providers and the various payment methods.
• Understand your charges. With the different pricing models, this can be complex. However, understand what it costs to process a transaction (don't forget 3DS fees and chargebacks).
• Understand what a failed transaction costs. What is the cost if a customer's transaction is declined? Will they return to buy again? If you have a subscription product, this is likely more sensitive. You can get a sense of this by comparing the average transaction value or total spend across payment methods. Compare Apple Pay to card-on-file, for example. Apple Pay typically has higher transaction success rates than card-on-file. Yes, some of the higher spend will be down to the "Apple demographic", but some will be down to the greater transaction success. For example, in one of my previous roles, we observed a 0.5% increase in gross merchandise volume, which was attributed to a corresponding rise in transaction success.
• Visualise this data. Once you have this, discuss it with your partners and don't hesitate to compare it with others. Tell them where they are doing well and where they should improve. Ask them how they can work with you to achieve these goals.
• Be prepared to invest. Payment integrations are constantly evolving. You may need to update your integration to send more data or use a newer API version to ensure optimal performance.

If you need help mapping this out and building collaborative relationships with your payment providers, please don't hesitate to contact me, and I'll be happy to assist you.