Wirecard was once the darling of the German stock market and a leading global payments player—until it went bankrupt due to mismanagement and fraud. The collapse left many major organizations unable to accept payments, having become too reliant on Wirecard as their sole payment service provider (PSP).
While this may be an extreme case, overreliance on a single PSP remains a costly—and all too common—mistake.
As IXOPAY’s Jobe Harrison, Solutions Architect, and Adam Vissing, VP of Global Enterprise Sales at IXOPAY, and Don Apgar, Director of Merchant Payments at Javelin Strategy & Research, discussed in a recent PaymentsJournal webinar, it is just one of many missteps payments teams make that can leave revenue on the table.
The Build-or-Buy Conundrum
Most payment errors stem from a single theme—organizations often take a set-it-and-forget-it approach to payments. This could mean they simply want to select a PSP and move on, or even believe they can build their own payments infrastructure from scratch.
“Most companies are not payment companies, but everyone needs to take payments,” Vissing said. “What we often see is that merchants that have large technical teams set out on payments implementation projects, thinking that they have all of the engineering know-how in-house and all of the payments know-how in-house to build a platform that scales with their business across all of the markets that they operate in.”
While many teams may be able to cobble together a solution that is sufficient for the company’s current situation, they often come to realize they aren’t equipped to handle all aspects of the payments process.
As the business environment shifts or the company scales, the organization will likely face a hard decision: whether to keep pouring money into the in-house solution or scrap it entirely.
Oftentimes, the sunk costs from these projects would have been better invested in leveraging an existing platform. This makes the build-or-buy conundrum one of the most significant decisions a business faces.
“It’s not super challenging to get payments right, but the challenge is how do you deal with changes?” Apgar said. “Business changes open up new sales channels, geographies, and product mixes that change the risk profile. Then you have regulatory and compliance changes like PCI 4.0 that are coming out this year. At some point, after you’ve gone through a couple of iterations, most merchants sit down and say, ‘How do I make it easier to manage change?’”
A Silent Anchor
Merchants seeking help with payments often turn to a PSP. Although a payment service provider can take many burdens off a merchant’s hands, overreliance on a single PSP comes with its own set of challenges.
“It doesn’t show up as a fire on day one but over time, it becomes like a silent anchor for your business, holding you down,” Harrison said. “One of the first big signs is when your payments team starts saying things like: ‘We’d love to test another PSP, but there’s always a but.’ Or they say: ‘It’s too complex, it would require too much engineering effort.’ Or worse: ‘We can’t because all our data is siloed in our current PSP’s token vault.’”
Another red flag is when a merchant’s decline rates spike and they have no visibility into where the issue lies—or any recourse to make adjustments. At this point, the problem goes beyond technical issues and becomes a strategic constraint.
For example, a business may identify an opportunity to expand into Brazil. However, if their PSP doesn’t support Pix—the most popular payments platform in the country—the company will likely face bottlenecks, plummeting authorization rates, and be forced to implement workarounds.
Another issue with relying on a single PSP is that it puts the merchant at the provider’s mercy. The PSP could conceal their prices or restrict services, leaving the business without a benchmark for comparison.
Perhaps even worse, the organization is exposed to serious risk if the PSP stops processing payments altogether.
“In a situation where you cannot take payments anymore, in the majority of cases, these are resolved relatively fast and the impact may be limited,” Vissing said. “Or it could also be a disaster, conversely, if it happens on the wrong day of the year. If your PSP decides to sever their relationship to you, you suddenly find yourself in an absolute emergency situation.”
“Sometimes you get termination notices from PSPs on very short notice,” he said. “We have seen this happening time and time again across many different industries. Not only those that are commonly treated as high risk, but also more traditional ones across financial services and across travel have had these experiences.”
Data-Driven and Dynamic
The potential for a PSP outage is one of the main reasons many organizations have adopted payments orchestration platforms. However, a common mistake is not leveraging these platforms to their full potential.
Smart routing has become a cornerstone of orchestration platforms enabling businesses to optimize payment selection. For example, cascading—a strategy where failed payments are retried through alternate channels—can drive significant additional revenue.
Maximizing authorization rates is another way to boost top-line growth. A smart routing platform can use historical data to identify the processors most likely to authorize a transaction.
Cost optimization is also a key objective of smart routing, though it has become more complex due to emerging payment types and regional nuances.
“There are stark differences when you’re working with debit cards in Europe or in the U.S.,” Vissing said. “In environments where interchange is regulated, routing has perhaps less of an impact on the bottom line, as in other markets such as the U.S., where the routing of a debit card transaction can have a massive impact on the cost that you have for a payment.”
Another key element of smart routing platforms is they give merchants a fallback if their preferred processor is unavailable or a transaction fails.
“For me, smart really means that it’s data-driven and dynamic,” Harrison said. “It’s not just about randomly splitting traffic across PSPs, it’s about those intelligent decisions based on what’s happening in your payment flows. Routing should take those performance metrics like authorization rates and rates by issuers, region, and card type, into account.”
“For example, if PSP A performs better with cards from a certain bank, while PSP B handles cross-border transactions more reliably, a truly smart routing strategy takes all of this data into account,” he said. “Your routing solution shouldn’t be hard-set rules, it should be dynamically altered based on that data that you’ve iterated on and learned from, just like you would with any other product.”
An Innovation Springboard
Many organizations also take a narrow view of tokenization, treating the technology as a checkbox to maintain PCI DSS compliance. In and of itself, PCI compliance is an important process that protects cardholders, lowers the chances of data breaches, and eases the audit burden.
However, fully leveraging tokenization can unlock benefits beyond compliance. For example, issuers largely trust the network tokens issued by Visa and Mastercard more than the primary account numbers that are tied to specific merchants.
This is because the credit card companies’ tokens are dynamic. If a card is reissued or its details change, the network token is automatically updated. This means issuers are more likely to approve these transactions, and incremental improvements in authorization rates can compound into significant revenue gains.
For consumers, tokenization powers aspects like one-click checkout, card-on-file, and in-app payments—all of which have become standard expectations. Yet, the technology holds even greater potential.
“It’s much more than just a security checkbox,” Vissing said. “Of course, as a PCI DSS level one compliant provider, tokenization is also a security checkbox for us. But it has really been an innovation springboard, something that has allowed us to build a fantastic platform. With those merchants that choose to build a larger part of their payments infrastructure themselves, that’s typically one of the first things that they have to implement before they can get anywhere.”
Real Business Impacts
Because of the rapid shifts in technology and regulations, one of the most important considerations for merchants is to build flexibility into their systems from the beginning. Although it may be tempting for an organization to choose the PSP that offers the fastest integration or the flashiest products, this often leads to bottlenecks down the line.
“You should instead think about how are you going to stay portable?” Harrison said. “Things like setting up your stack in a way that makes it easy to plug in new PSPs are important nowadays. The moment you have multiple PSPs, multiple routes, the ability to shift traffic, that’s when you gain that negotiating leverage. I’ve seen merchants drop basis points off their processing fees just by introducing a secondary provider, so the business impacts are real.”
In addition to partnering with more PSPs, an organization should leverage smart routing to reduce fees and increase authorization rates. This functionality becomes critical as businesses scale or enter markets dominated by specific payment methods, such as in Southeast Asia.
Another way to ensure flexibility is by creating an agnostic vault. If a company’s tokens are owned and stored by a single PSP, switching providers can be difficult. The organization would either need to recollect card data from all its customers or undergo a lengthy migration process.
“Either way, you’re locked in with your PSP, and that’s more than a technical limitation, that’s a risk,” Harrison said. “Contrast that with agnostic tokenization or even network tokenization, where the tokens are portable and they’re not tied to one processor or PSP. Now, you own that customer relationship.”
“You can route transactions based on performance, and you can failover during an outage,” he said. “You can run A/B tests across PSPs, which allows you to scale globally without re-architecting everything. It puts you back in control.”
Moving to a Growth Lever
To reclaim control, merchants who have previously treated payments as an afterthought must now make them a priority.
“If you still think, ‘I’m going to go with the largest PSP I can find or the first PSP that answers my request, and that will be enough to set me up for success for the next few years,’ I think you’re going to have a bad time,” Vissing said. “The mindset you should be at includes a layer of abstraction—call it an orchestration layer—that is the basic blueprint for payments infrastructure today.”
As more organizations adopt this approach, one of their highest priorities should be payments optionality.
“It’s really about a shift from thinking of payments as plumbing to thinking of it as a product,” Harrison said. “Something you can iterate on, optimize, and even use as a competitive advantage. When teams start to think that way, everything else follows. Better architecture, better data, better customer experience, that’s truly when payments move from a cost center to a growth lever.”
[contact-form-7]
The post The Greatest Payments Mistakes, and How to Solve Them appeared first on PaymentsJournal.
