Payment and Banking Strategy – Why Asking a Few Simple Questions is Not Enough
Payment and Banking Strategy – Why Asking a Few Simple Questions is Not Enough
By Viktoria Soltesz
I recently came across various studies and recommendations (“12 questions to ask your payout provider” “Ask every online payment provider these questions” “10 Questions to Ask When Choosing a Payment Service Provider”) which are being widely shared online as the “holy grail” of strategies in payment and banking.
While I’m pleased to see increasing focus on this area and that people are trying to create frameworks to simplify the complexities around the subject, I still have serious concerns. Frameworks that are not comprehensive can cause more harm than good.
Differences in Approach
There are various approaches when it comes to strategizing payment and banking flows. Merchants have an abundance of options from different payment and banking service providers, offering a range of benefits, fees, risks, and payment methods globally. Although it may seem that the industry is becoming more straightforward and user-friendly, behind the scenes, the complexities around this issue are increasing, making it more difficult to navigate.
How do we know what approach is the right one? How can we be sure that our consultant is exerienced enough to recommend a holistic, long-term strategy that covers all aspects of a business’s payment and banking structure, instead of narrowly focusing only on choosing the right payment vendor? While all approaches that motivate merchants to strategize their payment and banking flows have their uses, it’s critical to evaluate the potential risks and damage that can arise from relying on “lightly” designed frameworks, especially for merchants with complex operations.
The Need for a Strong and Comprehensive Approach
To have an overall, extensive payment and banking strategy, you need a very strong framework, such as the Soltesz Payment Framework. Only detailed frameworks that address every aspect of the operation from a payment and banking perspective—such as compliance, technology, data security, risk, budgeting and costing, alternative payment methods, etc.—can reveal the real potential and risks around the operation.
Taking this task lightly and assuming that the simple task of choosing a vendor can be evaluated efficiently by asking a few questions is a mistake. Covering multiple dimensions of payment and banking strategies, including risk management, compliance, foreign exchange (FX) handling, operational efficiencies, and ongoing monitoring, is essential. Only robust payment and banking frameworks are built to address the entire financial ecosystem, offering a structure that is adaptable as a business evolves.
Simply asking a few questions about vendor selection might help raise attention to the importance of banking and payment strategy, but its focus remains narrow—primarily limited to price, geographic reach, payment methods, settlement currencies, and customer experience. This creates a superficial layer of decision-making that can easily miss the broader picture of payment and banking strategy.
Risk Management and Strategic Depth
The Soltesz Payment Framework includes a comprehensive risk management approach, addressing both operational and financial risks. It examines everything from the technological infrastructure of the payment providers to the compliance standards they meet and the security of transactions. Risk management in this framework also includes due diligence on providers, a detailed look into fees, foreign exchange hedging, and contingency planning for regulatory changes. This ensures that every angle is covered, protecting the merchant from costly mistakes that could arise from overlooked risks.
Simply asking a few questions around vendor selection and assuming that this covers operational risk assessment for payments and banking flows is a mistake. A few questions will not provide an integrated risk management framework and can lead to poor decisions, which can be extremely costly in the future. Diving deeply into the broader operational, compliance, and financial risks businesses face is absolutely vital when determining an overall payment and banking strategy. Surface-level solutions focusing on individual pain points like fees and vendor selection, while ignoring the long-term risks of banking and payment strategy mismanagement, can expose businesses to serious vulnerabilities.
Potential Damage from Incomplete Solutions
For merchants, relying on incomplete or superficial frameworks can lead to substantial financial risk, reputational damage, and operational inefficiencies.
- Financial Risk:
Without a detailed examination of hidden fees, FX risks, and tax implications, businesses can end up overpaying for services, especially when operating internationally. If a banking and payment strategy does not provide tools for evaluating complex fee structures or negotiating better terms with banks and payment providers, this lack of insight can result in unexpected costs, draining the company’s resources over time. Furthermore, if currency fluctuations are not adequately hedged, a business may face losses due to exchange rate volatility, which is often ignored in simplistic vendor selection processes. - Compliance and Legal Risk:
Payment and banking operations are governed by strict regulations related to anti-money laundering (AML), Know Your Customer (KYC), and data protection laws. Failure to meet these compliance standards can result in severe legal penalties or even the loss of banking relationships. Having an extensive focus on compliance ensures businesses maintain legal alignment across all jurisdictions. It is absolutely vital to have an overall understanding of compliance risk, as businesses may otherwise be exposed to regulatory breaches and financial penalties. - Reputation Risk:
Poor payment and banking strategies can also have a significant impact on a business’s reputation. Payment delays, failed transactions, or security breaches can erode customer trust and lead to negative reviews or public backlash. In today’s competitive environment, businesses cannot afford reputation loss due to inadequate payment processes. Creating a smooth and reliable payment experience is essential, as overlooking important risks can lead to gaps that cause transaction failures and poor customer satisfaction. - Operational Risk:
Selecting vendors without a thorough assessment of their operational capacity—such as uptime, response times, and disaster recovery plans—can cause significant downtime and revenue loss. It is absolutely vital to fully address the operational intricacies of working with multiple payment vendors. Businesses that adopt a fragmented or lightly vetted vendor network risk operational inefficiencies and payment interruptions that can slow down growth and damage customer relationships. - Technological Risks:
It is crucial to have the technological connectivity in mind when building payment strategies, as poor integration with existing systems can create security vulnerabilities and inefficiencies. If a vendor’s system cannot be smoothly connected with the merchant’s internal CRM or financial systems, this can create extra work for the finance department, increasing costs and delaying processes Moreover, modifying or reworking platforms later to integrate with new developments can turn into lengthy and expensive projects, adding to overall costs and complicating operations in the long run. - Security and Fraud Risk:
Businesses need a comprehensive strategy to mitigate security risks across the entire payment system. Fraudulent transactions, data breaches, and chargeback fraud can cause financial losses and reputational harm if not properly addressed. A robust framework, which integrates security and fraud prevention measures into its overall risk management can ensure that transactions are safeguarded at every step.
Not Understanding the Risks Fully Can Have Serious Consequences
Without a deeper understanding of the financial and operational complexities, incomplete frameworks can cause serious damage to merchants. When businesses use frameworks that lack depth, they are often unaware of the underlying risks involved in all operational areas that depend on payments and banking operations and make bad decisions. This lack of expertise can result in poorly executed payment and banking strategies, which create more problems than they solve.
- Financial Mismanagement: A superficial focus on cost-cutting (without understanding long-term financial implications) can lead to budget blowouts due to hidden costs, compliance fines, or operational inefficiencies.
- Reputational Damage: Payment issues can lead to customer dissatisfaction and, in extreme cases, negative press. This is particularly true if data breaches or fraud incidents occur due to inadequate payment systems.
- Technical Connectivity Issues: Inadequate technological integration can cause serious operational and financial disruptions, as businesses may struggle to connect new vendor systems with existing infrastructure. Poor connectivity can also create security risks and slow down internal processes, adding to the overall cost of operations in the long run.
- Operational Disruptions: Payment failures or downtime can halt operations entirely, leading to revenue loss and damaging business continuity.
- Legal Consequences: Non-compliance with regulatory frameworks can expose businesses to lawsuits, fines, and even blacklisting by financial institutions.
Underestimating the complexities involved in payment and banking can result in long-term damage to merchants in all areas of operations, in terms of finances, effectiveness, profitability and reputation.
The Soltesz Payment Framework: A Professional, Risk-Aware Approach
The Soltesz Payment Framework offers the level of professional expertise and detail that is essential for any business to managing their payment and banking flows effectively. It is built to mitigate risks proactively, ensure compliance, and optimize the cost structure of payment and banking solutions, making it the superior choice for any business seeking a robust and sustainable payment and banking strategy.
The Framework prevents the damaging consequences that come with adopting lighter, incomplete strategies, making it the superior choice for any business seeking a robust and sustainable payment and banking strategy.