Welcome to the PayFAQ: Embedded Payments Podcast brought to you by Payrix. As payments and software experts that eat, sleep, and breathe Embedded Payments we’re as passionate about you as you are about your customers. Each podcast episode will provide insights about Embedded Payments designed to help you feel the transformation and growth of your software business. You’ll learn from industry experts, Payrix customers, and leaders on the Payrix team about the latest trends, best practices, and real-world guidance from payments experts to help you take your software platform higher.
Ian Hillis
Hi, everyone. Welcome to the PayFAQ: Embedded Payments podcast brought to you by Payrix and Worldpay. I’m your host Ian Hillis and today I’m continuing my conversation with Andy Meadows, the Head of Partner Success at Payrix. We’re chatting about how to build a successful Embedded Payments strategy. Today we’re going to focus on how software companies can minimize attrition and why that’s important in the payment conversation. And sadly, this is the final episode of a four-part series. I’ve really come to join my time here with Andy. Andy, welcome back to the show.
Andy Meadows
Yeah, great to be back. I’ve enjoyed each of the sessions and I’m certainly excited albeit sad to wrap up our topic here today.
Ian Hillis
I appreciate all your time throughout this. I think we’ve really dove deeper into some meaningful topics. And I’m excited about this one today. As I mentioned, we’re going to talk a little bit about attrition. And I think on that topic, there’s probably two types of attrition we could discuss here, and I’d love to talk both. You could talk about the software platform attrition of just customers leaving the actual software platform as well as those who may have signed up for the payments element of a software platform. Why don’t we start with the former, in terms of software platform attrition, and that intersection with payments. So, Andy, what impact might payments have on software platform attrition?
Andy Meadows
Yeah, listen, I think across the board, almost in a uniform and consistent manner, we see payments attachment decrease software platform attrition. Not only do we see it, we hear from all of our partners when the subset of their software customer base that is utilizing an Embedded Payments solution has lower attrition rates on an annual basis than the subset of their software base not processing payments through their software platform. So, it is an immediate and discernible value-add for the software company to attach payments as a means of retention of SaaS revenue. And then also obviously the addition of payments revenue and the ongoing retention of that additional revenue as well.
Ian Hillis
Andy, I could hypothesize a number of reasons why payments is so crucial there. Lots of different value-added services (VAS), as we talked about, in fact, on the last episode that you could put in there. Payments seem to have an especially large impact on the attrition rate across those pieces. Why do you think? What is it about payments in particular that really impacts those rates?
Andy Meadows
Yeah, I think it was either the last session or the session prior to that. As I said, processing payments, the acceptance of digital forms of payments like credit card, debit card, electronic ACH, alternative forms of payments, is the lifeline, the lifeblood of any business. Their ability to function on a day-to-day basis is contingent upon their ability to process those digital payments. So now you attach payments via an embedded solution within the software platform and it makes software, as if it wasn’t already critical to their day-to-day business operations, it just enhances the criticality of the software platform to the business. And then you expand upon that. And this isn’t true for all verticals, or all businesses. But a lot of businesses these days have card on file, recurring payments, tokens. So that’s the vehicle for keeping your customers coming back and providing them with a seamless and automated experience to continue to use that electronic payment method that they had originally utilized. So now a business owner says, gosh, I’ve got payments running through my software platform. Oh, by the way, I’ve got recurring bills, I’ve got a card on file, I’ve got tokens with all of my customers that’s also attached not only to my payment processing solution, but to my software platform. And now you can imagine the stickiness that that Embedded Payment solution creates for overall customer retention.
Ian Hillis
That’s really helpful. If we shift more towards the payments attrition, which could probably also be a sign of the software platform attrition. Those two might go hand in hand, maybe not. We’ll explore that. But how do you think about attrition strategy specific to payments and how does that approach work itself into a software company’s overarching strategy as it relates to payments?
Andy Meadows
Yeah. Ian, this is near and dear to my heart. So, you know being a lifer in the payments space, merchant retention has always been top-of-mind for any organization, and you look at it in proactive versus reactive. And I’ll break those two things down. And actually, we’ll start with reactive. From a reactive perspective, you’ve got a call center, you got customer service, customer support, you got technical support, where your merchants, your end users are calling in. And if they’re calling in specifically with payments questions, you need to understand what we call attrition flags. They may not overtly say, hey, I’m thinking about canceling my payments account with you today. But they may say, can you give me a statement that shows how much I’m paying. They may call in with an issue, I’ve been having trouble with getting my deposits, I don’t understand my statements, my rates, and fees. I’ve got a technical support issue. You know, any of those questions, they’re attrition flags. It’s a customer who is not experiencing a smooth kind of day-to-day experience with their payments solution. And so, on top of kind of recognizing those attrition flags, you want to immediately try to solve the issue at hand to answer the question at hand. But then you want to put those customers into a retention motion. That may be a follow up two or three days later to say, hey, we knew you called in you had this issue. Did we get a resolve? How are you feeling? That may be a drip campaign via email with a survey to say, hey, you know, how’s your experience we saw you called in. The other thing and this is slightly reactive, but then can turn into proactive is, gosh, is that the first time that customer called in with a payment service and support issue? Is it the fifth time? Is it the third time they’ve called in in the past month? So, you need to start to be able to understand those KPIs, those key performance indicators from a service and support perspective, to identify attrition candidates that you need to proactively start engaging with. I’ll pause for a second, then I’ll segway over to the proactive piece. On the proactive piece, its some of the analytics I just referenced, but it’s also about throughput of processing volume through your platform. So, if you look at your customer base, you can ascertain whether they have a relatively consistent amount of processing volume on a daily, weekly, or monthly basis, or whether they’re seasonal. And let’s take the end user who has a consistent amount of processing volume on a daily, weekly, monthly basis. Then you want to be able to start to measure kind of the ebbs and flows or the peaks and valleys. If they’re within 20% plus or minus any given day or week, but then all of a sudden, you see a subset of your customer base whose processing volume dipped by 50% last week, that’s probably an attrition candidate. So that’s a proactive way, using data and analytics to get in front of attrition by then engaging that customer. We noticed your processing volume was down there anything we can do to help you out? So those are ways, again, you’re going to have inbound calls, you also need to have an outbound strategy that’s based upon kind of the data and analytics you have at your disposal.
Ian Hillis
That’s helpful, Andy. As you think about some of the actual actions you could take to retain those customers. So, let’s say we followed your advice. We’re doing some pretty sophisticated analytics, both from a touch point into our call center or tickets being raised or taking a look at our payments volume, marrying those two together and creating some predictive analytics. Let’s say some outbounding is called for across those pieces. What are some of those actions that a software company could take to retain their customers specific to payments?
Andy Meadows
Yeah, I mean, once you’ve identified who you need to be speaking with i.e. attrition candidates, then you’re kind of identifying what their pain point may be. I had mentioned earlier, maybe they call into your call center and say, can you send me a statement? Or what am I paying, I don’t understand my fees? So, you want to get down into that particular conversation and understand is it a cost concern? Do they feel like they’re paying too much? So, we all know the lever there. Then let’s talk about, you know, what you think you’re paying versus what you’re actually paying. Those two things may not be the same, you know, what you think versus actuals. But if you actually think you’re paying too much, or you’re getting competitive quotes then your lever to pull as a software provider is a potential reduction in rates and fees, and maybe a meet-or-beat type offer is very consistent in the industry. Separately, if you identify an attrition candidate, it’s not price, it’s more so platform, maybe it’s feature functionality. Maybe it’s feature functionality your platform has that they weren’t aware of that was driving frustration or friction, but without a proactive retention strategy without a proactive outreach to understand why they’ve called into your service center five times in the past month or to understand why their processing volume went down by 50% last week. Without that proactive outreach, you’re not going to realize that they were looking for a feature or functionality on your platform that you could actually offer. Maybe you can’t offer it, but maybe you give them a roadmap, you know a timeline to say we understand what you’re looking for this. We actually have it on our product roadmap for a delivery in Q3 or Q4. Now you’re educating on availability or future state availability on the things they may need. The last thing that always, and actually draws the most attrition, is payments or software services and support. Are they getting responsiveness from your service and support centers? And that could be inbound calls. That could be emails, that could be support tickets, that could be in-app messaging. Are they getting the responsiveness they need? And then on top of responsiveness is resolution. It’s one thing to respond, you actually got to resolve the issue. So those are, you think price, you think platform capability, and you think service and support, your levers to pull across those can be different from a cost reduction to a deployment of a feature or functionality, or to just stepping up your game in the way you support your customer.
Ian Hillis
Andy, you’ve led teams like this before. You’ve talked about, it could be a variety of factors here, whether it’s the actual price coming through, it could be feature functionality, a whole host of different things. Any advice for leaders of these types of teams at software platforms, to how you go about having discovery calls, so you’re not leading with price, and all of a sudden, you’re lowering the price on that without truly understanding the problems? What are the types of discovery questions you’ve coached your teams in the past to get to the root of the issue, rather than a leading with price right off the bat?
Andy Meadows
You’ve got to avoid assumptive, leading questions. Do you think your price is too high? Well, that’s not the question you want to ask. Well, yeah, my price was too high. So, let’s go ahead and start there. And you know and all kidding aside, you got to have open-ended questions. You got to have your customer service and/or retention teams asking open-ended questions about the facts at hand. I see that you’ve called in five times over the past month. Can you tell me what those calls have been about? And then listen. You may say, I see your processing volume went down here recently. Can you tell me, you know, any reason why that activity has changed? We want to be here to support you in any way we can to help your business continue to thrive on our platform. So, A.) open-ended questions. And that’s kind of table stakes, anybody would tell you that. The other thing I’d mentioned earlier is surveys. Gosh, surveys are the best way to find out without leading the witness. So, you get inbound support calls. How about a survey, asked some, again, some broad, open-ended questions, open text, you know, give somebody an opportunity to text what’s going on. And take that intel and then start to address, start to treat the symptom, so to speak, that you’ve identified versus, you know, assuming you already know why they’re sick.
Ian Hillis
Andy, I’m assuming the ultimate goal is always to keep the customer. I have to imagine your years and years of experience here, you’ve come across instances where it might make sense to let a customer go, are there specific reasons and just irrationality that you’ve seen across your career where someone’s asking for free processing? Or what are some of those harder conversations where you start to get a sense of, I don’t know that there’s a path here for this particular challenge?
Andy Meadows
Yeah, listen, you never want to lose a customer because you work so darn hard to get them. That said, profitability is always going to come into play, you know, how much are you putting into the relationship in return for the return on that investment. So, if you have a customer who’s demanding a rate and fee reduction below a certain, you have to decide your threshold. So, as a business, you need to establish kind of your minimum threshold for profit margin for both your software platform and your payment solution. And when you find yourself being pushed below that threshold, you need to ask yourself why you would go down there, and sometimes you may have a good answer. The one thing I don’t agree with is setting these kinds of hard and fast rules. Like we won’t go a penny below this. Well, yeah, you will, you know, in fact, if it’s the first time that customers called in three years, and they said they got a competitive quote from their neighbor, and you know, they’re going to switch if you can’t match it, then go a penny below your threshold. So, I think the hard and fast rule you stay away from, but you have got to have benchmarks that help you. You know the inflection point of a decision. So, profitability is one. The second reason why you need to let a customer go is if you truly can’t meet their needs, because talking around it, avoiding it, it’s not going to prevent them from continuing to be frustrated, they’re going to continue to call in, they’re going to continue to have issues, you’re going to continue to burn calories. So, if your platform just truly can’t meet the needs of your end user from a payments or a software perspective, sometimes it’s just in the best interest of everyone involved to acknowledge that and partway on good terms.
Ian Hillis
Exceptional insights, as always, Andy. Sadly, this concludes our four-episode series on how to build a successful Embedded Payments strategy. And listeners, if you missed parts one to three, be sure to check them out wherever you listen to podcasts, or on the Payrix blog. We covered a wide range of topics with Andy including staffing and resource considerations, selling payments, and the impacts of payments-related value-added services. And really, I just have to say, he put on an absolute master class here. Combined, this really does create an exceptional playbook for software platforms formulating and refining their Embedded Payments strategy. Andy, I can’t thank you enough for being on the show again today and for such an informative series. I have no doubt that the listeners are going to walk away with a clearer sense of what needs to be considered when building this type of a strategy. But thank you so much for the time here.
Andy Meadows
Awesome, Ian, I’ve enjoyed it. Hopeful that some or even all of the information was beneficial to many of the folks out there listening. The one thing I would leave you and our audience with is, listen, this is what we do on a daily basis here at Payrix from a Partner Success Management perspective is provide consultation and guidance across this wide array of topics. So, not only through myself, but through a team and a collection of people who really care, have a ton of experience, and can bring a lot of value to the table. So really, really appreciate hanging out with you the past couple of times.
Ian Hillis
Thank you so much, Andy. Listeners, we want to be a trusted resource for software providers who are out there trying to make sense of Embedded Payments and Finance and to help them get the education they need to make the business decisions their customers and investors are going to thank them for. Thank you to everyone joining our conversation today. I look forward to continuing the conversation.
Thank you for joining us today on the PayFAQ: Embedded Payments podcast brought to you by Payrix. For more information about Embedded Payments, subscribe to our show at payrix.com/podcasts.
