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Apr 18, 2017The landscape of business to business (B2B) payments is changing. From mobile wallets to payment security, digital transformation is putting pressure on both merchants and the financial technology industry to innovate, and innovate fast. As go-to-market strategies shift from products to anything-as-a-service, how can companies innovate beyond the payment to overcome today’s limits of existing payment models.
3 Strategies to Innovate Beyond the Payment
Instead of trying to displace entrenched outdated systems, it’s possible to innovate beyond the payment. By creatively looking at your business model (in small, iterative steps) you can reduce the impact of these potentially major challenges.
In a recent webinar, 3 Strategies to Innovate Beyond the Payment, I discussed three key strategies to help managers solve for the payment problems of today, while architecting processes and technology for tomorrow.
1. Intelligent Billing in an Old-School Business
Do you think your business to too “traditional” or too “old-school” to embrace innovative business models? Think again. Let’s look at an example of how one company uses intelligent billing, value-add service offerings and innovative pricing and payment options to revolutionize simple trucking to a new level of fleet management and optimization.
In the old days, a consumer would purchase a truck or tractor. They wrote a check and the payment was processed. Done. Now, instead of that lump sum payment, offerings can be priced as recurring payments, such as subscriptions or leases. This has the benefit of regular recurring revenue streams for the vendor. From there, add on services can be included based on consumption, such as brake service or oil changes based on mileage. At the next level, the trucking company can layer those offerings with tiered access to data and prescriptive analytics.
Connected fleet vehicles create an enormous amount of useful data for their clients. How fast is a vehicle going? What is the temperature in the cargo container? Is the refrigeration unit functioning properly? How many miles since the engine was last serviced? At the current rate of speed, how many days until it is next due? All the instrumentation provides valuable data which this company is monetizing with innovative solutions that their clients are embracing.
To monetize their data most effectively, they use a creative, tiered subscription model: data access only; notifications and select analytics; or premium analytics and prescriptive fleet optimization. Each tier offers an increasing level of added value that leverages their own industry expertise powered by an intelligent billing engine that can automate these services at scale.
Intelligent billing offer visibility into revenue streams, including one-time, recurring, and consumption-based payments. It also helps you better understand your customers, their credit and payment history and renewal process. Intelligent billing can also help manage payments to minimize transaction costs, including facilitating innovative offers that limit the number of transactions needed.
An agile intelligent billing system can also be used to dynamically adjust pricing for supply and demand. With the ability to implement price changes and launch new offerings quickly, an intelligent billing solution can quickly be used to create incentives or implement surge-demand pricing. Intelligent billing allows you to respond to market developments very quickly. Even in traditionally “old-school” businesses, like fleet management, you must be agile to compete. That’s the world we are in now.
2. Offering Outcome-based Value Proposition
By combining elements of subscription-based pricing and tiered data access with their own industry expertise in fleet management, this company is using innovative business models to bring additional value to their clients. That’s the second key to innovate beyond payments.
Ask yourself, what do your clients really want? Do they want certain safety features like smart braking?
Do they want to monitor their full fleet to understand how well it is being utilized? Do they want predictive analytics to identify potential maintenance needs before they become critical issues?
Imagine being able to notify your client that a refrigeration unit looks like it might break down, so we’re going to schedule a maintenance stop before that happens. By adding value and focusing on outcome-based models, you are going to drive more demand for your services and easily enable the transition to subscription and consumption-based models.
3. Frictionless Purchase Process
Innovative recurring revenue strategies such as these are shifting how companies manage payments with their customers. As we have transitioned from a transactional to relationship-based business model, it is important to create a frictionless purchase process for customers. Keeping payment on file, reinforcing security (PCI) standards, providing real-time payment processing, as well as automatic and recurring payment options to directly target customers’ preferences are the new customer expectation.
You also must give your clients an easy path to add on services. In addition to offering tiers across a variety of benefit levels to buy into up front, it is also key to provide clients the access to utilize events and/or benefits at higher level tiers on a single-use, consumption basis. This allows you to monetize those events and charge clients as they occur. So even if a client doesn’t subscribe to the top-tier level, you can combine subscription and consumption elements together to maximize your revenue opportunity.
Pricing and payments go hand in hand. You must collect payments, but how can you do it in a cost-effective way while still meeting the needs and wants of your customers? A consumption model, depending on how you set it up, could possibly lead to unnecessarily high transactions fees if it depends on a large volume of micro-transactions for payments.
To minimize this, consider pooling capabilities and offer creative packages that incentivize clients. Innovative pricing and packaging can be used to bundle services and create pooled family plans which can be paid for in a single transaction which then have balances that draw down as they are consumed. Ideally, you also cultivate a trusted relationship with a pull-payment system, where you can control when payment is collected, rather than depending on the customer to initiate payment to you.
The cornerstone of making this work is having a long-term established relationship with your client. By eliminating barriers to accepting payments and offering innovative packaging and pricing options, customers get flexibility, convenience and affordability while suppliers get financial predictability and stronger customer relationships.
Innovative Monetization with Packaging and Pricing
The B2B payments ecosystem has many challenges which can limit businesses, but there are strategies we can implement today to overcome them. Rather than taking on the payment processing elements themselves, focus on going further to innovate new business models that not only meet client demands, but also optimize the way payments are collected and managed. Whatever your business is today, whether fleet management or retail, it’s going to evolve. An intelligent billing solution that supports new monetization models is your answer.
Watch the webinar 3 Strategies to Innovate Beyond the Payment today!