Statistics show that over 80% of business failures are due to cash flow problems, with 20% of small businesses failing within a year and a half within five years. This high failure rate highlights the critical need for education in not only financial management but also payments and banking. Through my work, I noticed a recurring issue: businesses often neglect payment and banking planning, leading to miscalculated risks and under-budgeted costs.
We frequently focus on visible aspects such as marketing and product design, neglecting the essential task of developing a solid banking and payment plan. This oversight can lead to significant problems, including cash flow shortages and unexpected costs. Educating business owners and accountants about the importance of payment and banking strategy and planning can prevent these common errors and improve their chances of success. Online banking and payment have become industries on their own, yet many people do not understand the pitfalls and difficulties around sourcing and managing relationships with providers, and how this affects all other business areas. For example, if an international company aims to target a new country, we first need to discuss with the payment and banking team to establish the cost and risk of collecting funds from local customers and only then release the marketing budget. Spending the marketing budget first can lead to a situation where customers are acquired successfully but cannot pay on the website using their preferred payment methods, or worse, the company cannot find reliable, cost-effective local banking or payment provider partners to assist in collecting these funds.
Recent regulatory changes and stricter compliance requirements for payment and banking providers are also pushing businesses to pay closer attention to their fund flows. If a company is involved in international payments, different banks and payment providers operate under different regulatory requirements, which can lead to stuck or frozen funds abroad. Understanding how compliance affects operational cash flow is more important than ever to make the right decisions and plan accordingly. Although there are more payment and banking service providers to choose from, the vast number of options also adds challenges to every online business. New fintech innovations come and go, and this trend forces companies to regularly review their banking and payment providers, set up relevant strategies, including payment operations, cash flow management, choosing the right payment methods, and asset keeping. By understanding the payment and banking flows within an operation, businesses can uncover valuable insights into risks and ensure they are prepared for any challenges.
A robust payment and banking strategy does not cost much to set up, but it can cost a lot not to have one, potentially resulting in frozen or lost funds during operation. An overall and well-thought-out strategy helps businesses manage cash flow efficiently and can reveal structural issues that may be hindering growth. It also highlights new opportunities that might not have been considered otherwise. Educating business owners about these aspects ensures they can make informed decisions and maintain financial and operational health.
Choosing the right payment method is not just a question of convenience. There is no one-size-fits-all solution—different areas use different payment methods for a reason. Some consumers prioritize speed and convenience, opting for methods like contactless payments or quick checkout options. Others may prioritize security and choose methods offering robust fraud protection. In several countries, certain payment instruments are unavailable due to geographic or financial limitations, religion, or regulatory restrictions. When people lack access to traditional financial means, such as a bank account, options like cash-on-delivery or prepaid cards become essential for conducting online business. Companies need to understand, evaluate, and implement the most relevant payment methods to maximize their sales. By offering multiple ways to transact, businesses can accommodate a broader spectrum of customers, increasing satisfaction and profits.
For instance, credit and debit cards are widely accepted and convenient but may not be the best option for an online yacht rental company dealing with high-value transactions due to fees and fraud risks. Digital wallets like PayPal or Apple Pay offer an added layer of security and are quick to use but require both parties to support the specific platform. Cryptocurrencies enable anonymous, cross-border transactions without an intermediary but are not universally accepted and can be volatile in value.
The digital payments revolution will challenge the classic banking sector’s central role in payments, and the rise of alternative payment methods is something every business needs to consider. Today, the banking sector is saturated in the EU and the U.S., where regulators have comprehensive coverage, raising the entry bar high for new players. However, emerging markets such as India, China, Africa, and LATAM are full of opportunities. The economic influence of these areas has increased massively in the last decade, giving birth to various fintech innovations locally and globally. When markets operate under looser financial regulations, it offers easier penetration and market share grab for startups, which then create new technologies, applications, and systems.
Businesses and users win too. With new methods, payment providers, and more secure ways of banking, online transactions can flow through the safest, quickest, and cheapest channels possible. But change is not always easy. With more options, companies without professional help might face ‘decision paralysis,’ as the abundance of choices can lead to anxiety, confusion, and an inability to make the right decision. Getting familiar with current options and educating ourselves about new developments is essential for staying up to date with the latest trends and advancements. Knowledge helps us pick the right mix of payment options, which is not just beneficial but also necessary for the interconnected world of online commerce.
Prioritizing education about banking and payments is an investment in a business’s future. It prepares businesses to handle technological innovations, comply with regulatory changes, and implement effective strategies. This knowledge not only helps prevent failures but also opens up opportunities for growth and competitive advantage, ensuring long-term success in a rapidly changing world.
We at PSP Angels are leading innovations in education. Our partner, the Soltesz Institute, is the only independent and unbiased institution focusing on all aspects of payments and banking education. This includes the history of banks, current compliance, basic accounting, company setup, technological innovations, different payment methods, data security, integration challenges, and much more. Our institute uniquely provides relevant qualifications and certification for anyone responsible for handling third-party funds, ensuring businesses stay up-to-date with the latest challenges. This comprehensive approach goes beyond just card payments, offering a wider and deeper understanding of the entire industry.
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