You Launched Your New Payment Card Program – Congratulations or Condolences?
One of the posts on my LinkedIn feed this morning announced someone launching a new payment card program. The press release was full of marketing and sales lingo like “transforming business”, “strategic partnership”, and “managed end-to-end”.
I didn’t know whether to applaud or to send condolences. . .
Why?
I have just started producing a new video series called “Staying Between the Lines – Compliance and Vendor Management”. Delving into these topics has reminded me, again, how critically important these roles are – and how many issuers and acquirers manage these relationships badly.
Here are some of the fatal compliance and vendor management errors that will damage and even kill your newly launched business:
Delegate and Forget
I cannot think of any card issuer or acquirer who does not outsource some or all their card processing functions. Most of them use the “delegate and forget” strategy. Your outsource partner has promised “end-to-end” support and functionality. They don’t “need” (or want) your interference on how they run your business.
This is a terrible strategy. It is death by a million paper cuts from:
Incomplete compliance,
Short-sighted solutions, and
Misaligned priorities.
As you play out this strategy, you will also become increasingly disconnected and alienated from your outsource partners. This is a fertile environment for partner bashing, processor jumping ($$$), and growing animosity between business partners who don’t have a functioning work relationship.
“Low Level” Vendor Management
I’ve heard these lines far too many times:
“They’re just vendors and service providers. We can hire some entry-level staff to look at some of their reports each month.”
“If our staff see anything fishy, they can escalate their concerns to their team lead who may escalate to the manager who may escalate to the VP Operations who may escalate to the EVP who may escalate to someone in the C-Suite.”
Yeah, THAT is going to work, eh??!!
I have seen this setup too many times in my years in payments. In EVERY case, the hired staff are not trained in payments operations and technology. Because of that, they:
Miss glaring mistakes,
Accept “fluffy” answers from outsource partners, and
Have the misfortune of holding the lightning rod as the business takes impact after impact from mismanaged vendors.
Non-strategic Compliance Management
Every business strategy needs infrastructure to live. Your visionary payment card product will only be a gleam in your eye unless it is connected to:
A banking infrastructure,
A payment network,
An issuer processor,
A card manufacturer,
A back-office support provider,
A top-of-the-line fraud team,
Etc.
The success of your product DEPENDS on these partners executing YOUR STRATEGY with EXCELLENCE!
As well, payment networks are constantly imposing compliance mandates. Many of these mandates are issued to slowly build the required infrastructure for new innovative products three to five years down the road.
Does your C-Suite and Strategy Team have a direct line to these mandates and what they are building towards?
Are your outsource partners building strategically to maximize the upcoming opportunities – or are they just tactically “doing what the mandate says”.
It’s your future. It’s your cost. It’s your outsource partner. Are you managing them strategically?
In the Gunsights
When you signed up to issue or accept payment cards, you entered into an agreement with one or more payment networks. That contract included clauses stating you are completely responsible to be compliant with the payment network rules and mandates. They will not prosecute your outsource partners for non-compliance.
You, and you alone, are in the gunsights.
Any non-compliance by your outsource partners is your responsibility to fix. The non-compliance fines are yours to pay. Any fraud or data breach is your problem.
The press release I read this morning didn’t cover any of these points. So, I didn’t know whether to send congratulations or condolences.
So, how do you want to manage your outsource partners? Do you want to move your compliance program from tactical to strategic?