Modo Founder and CEO Bruce Parker said there are many different drivers of that cost. Big online eCommerce, gig economy or other merchants “tend to have a lot of different payment services that they use,” he told PYMNTS in an interview. There also tend to be many different card processors and different kinds of payment methods.
The total cost of payment acceptance is a combination of the cost of the actual payment services, the different payment methods, the technology a company needs to connect to those payment services, and the operational elements, such as financing, accounting, customer service and department.
A large company tends to have a half dozen — maybe eight or even 10 — payment service providers even if they are not, say, heavily global. And Parker said having that many different connections, in a way, “drives those costs on all of those dimensions.”
In other words, everything has a cost, from the payment services to the maintenance of the connections themselves to wiring into all the different places a company wants to accept or make a payment. Companies then, of course, have the operational side of the costs and the associated headcount. It takes significant financial resources to maintain the entire payment contraption — and it also requires funding to add to that system from a capital improvement or innovation perspective in addition to the people costs.
Companies tend not to have a good handle around those costs partly because they oftentimes aren’t able to do the allocations of the invoices, the bills, or the fees as they are in a few different places for the payment services. The FinTech, however, is finding that companies want to know what the various payment services cost, and they want to optimize those fees.
They are also tired of adding elements to their payment stack at a high cost and time burden, whether those efforts are through a vendor or are internal. And they would rather not have to deal with the operational complexity that pops up, such as what happens when merchants need to do a refund.
FinTechs, such as Modo, handle the technology and the data security issues. Companies don’t have to build this technology out themselves — they can rent it through a software-as-a-service (SaaS) model instead. The arrangement helps reduce a company’s capital expense and its ongoing expense from a technology perspective.
FinTechs are aiming to help companies optimize payment services in such a way that they are using the best solution for the given moment. That ability lets companies optimize for factors such as, say, soft declines or simple costs for using one network over another with the help of financial technology.