The dominant business theme among large U.S.-based and global enterprises have been an intense focus on slashing costs in 2024 . News story after news story has chronicled how businesses in a variety of industries have embraced a cost-cutting strategy in an attempt to boost their profit margins. 

While a cost-conscious mindset can be worthwhile, it also has its limits. Focusing only on price when selecting a payment provider, for instance, can stunt a company’s ability to engage and retain customers and drive revenue growth. In fact, seemingly low transaction fees that are appealing in the short-term can mask both a high total cost of payments and conceal opportunities to lower total payment expenses.

Put more simply, businesses should broaden how they view their choice of payment provider to simultaneously contain costs while also leveraging innovation – including artificial intelligence – to improve efficiency and better engage and serve customers. 

Businesses also need to be adaptable to changing regulations and business imperatives. For example, 2010’s Durbin Amendment limited transaction fees imposed on businesses. In 2023, the Durbin Amendment was revised in a way that impacts U.S. debit networks. Designed to create more competition for Signature networks like Visa, Mastercard, and Discover, the updated legislation mandated that all U.S.-issued debit cards be branded by at least one other unaffiliated network, such as NYCE, STAR, PULSE, and Accel. While this change has lowered costs for businesses, it has also introduced more complexity.  

Businesses need payment technology to help manage emerging pressures, such as subscription churn. Recent estimates put the value of the subscription economy at $650 billion, with forecasts that it will more than double to $1.5 trillion in 2025. As more companies have embraced a subscription model to increase revenues, they are also struggling to contain voluntary and involuntary churn. 

Research demonstrates revenue and cost benefits of payment technology

A recent Adyen report, “Strategies to Reduce Your Total Cost of Payments,” quantifies the ways a strategic choice of payment provider can reduce costs and elevate revenues for companies in virtually any industry. The report’s findings include three key takeaways. 

Local processing reduces transaction fees by an average of 59%

There’s a big difference in the fees for processing a transaction domestically and those that are deemed cross-border. A U.S.-based company, for example, will pay 59% more to process payments in the European Union (EU) and experience more bank declines. 

The answer to higher cross-border fees is to establish a local acquirer to process payments in-market. But many companies have an understandable reluctance to do this on their own because it is complex to manage acquirers in many markets. 

Partnering with a global payment provider with a local presence and the necessary licenses across the world can slash high transaction fees. For example, FlixBUS is a Germany-based intercity bus operator that services 5,000 destinations across Europe, North and South America, and Asia. 

FlixBUS partnered with Adyen to make local acquiring a reality in the U.S., and their partnership had “a positive effect,” said Dennis Friemerding, team lead payment for FlixBUS. 

“We were able to reduce our bank declines by 21%,” he said.

Smart solutions leveraging payment data increase incremental revenue by $7.55 billion

Efficient and secure payment authorization reduces payment costs and increases company revenues. For example, encrypted network tokens can be used to authenticate customer information after an initial transaction. Card schemes charge less to process tokens, which translates into both savings and improved authorization rates. 

Indeed, using network tokens resulted in $7.55 billion in incremental revenue over 12 months for the top 100 companies using Adyen’s platform. 

Network tokens have other advantages because they are routinely updated by the card scheme or network. All too often, revenue is lost because lost, stolen, or expired costs result in payment failures, chargebacks, and involuntary churn. These problems are removed by using network tokens that automatically update account information every 12 months. 

In fact, the top 100 businesses using Adyen’s platform saved over $1 billion over one year by taking advantage of network tokens, which are still in their infancy.

Leveraging novel technologies can provide businesses an advantage

“One of the great things about working with Adyen is that technologically advanced services like network tokens are offered at a much earlier phase,” said Michelle Xue, associate director, payment solutions, for the Hong Kong-based travel company Klook. 

Smart solutions can also help companies manage the complexity introduced by regulations, such as the recent revision of the Durbin Amendment. For example, Adyen’s Intelligent Payment Routing for U.S. debit cards use AI to maximize company profit margins. In a pilot of over 20 enterprise businesses such as Microsoft and eBay, the product leveraged Least Cost Routing to lower costs an average of 26% and increase authorization rates by 0.22%. 

Tokenization can also mitigate subscription churn. Adyen’s Auto Rescue tool, for example, automates and applies intelligence to the retry payment process. This helps reduce the incidence of common causes of subscription churn, such as insufficient funds and server timeouts. 

Advanced payment technologies can salvage in-person transactions

Lost connectivity is more than just a frustration for businesses that process in-person payments. At best, faltering Wi-Fi leads to backed up lines of frustrated customers waiting for their transaction to go through. At worst, potential revenue walks out the door with customers who can’t or won’t wait for connectivity to return. 

Fortunately, there are other options than simply waiting for Wi-Fi to return. Point of Sale (POS) devices that use mobile data work when Wi-Fi doesn’t and terminals with a Store-and-Forward function capture payment details and forward them along for backend processing once connectivity is restored. Payment solutions that keep transactions always running smoothly can make a big difference. According to the report, Adyen customers saved two million in-person transactions and over $42 million by using Store and Forward terminals. 

Confidence that payments could be processed without disrupting or delaying customers has been invaluable for True Alliance, an Australian fashion and sport retailer. 

“We’ve had stability and reliability with Adyen, receiving all payment types quickly and efficiently regardless of payment types,” said Noel David, general manager of finance for True Alliance. 

For many companies, reducing costs is an important business imperative. But when it comes to selecting a payment provider, it’s critical to take a holistic view of costs and capabilities. The good news is that it is possible to both lower total cost of payments while also taking advantage of advanced technologies that boost revenue.