In Payments, More Integration = Less Churn
As a consumer and also as a professional, there are products and services I use every single day, without which I would have a hard time accomplishing many daily tasks. For example, at Handpoint, as an international team, we utilize Slack quite heavily. From calls, to messages, to file sharing, etc., Slack is a tool that I would have difficulty functioning without at this point.
I think of Slack as a great example of a “super sticky product.” Greylock wrote a really fantastic article on product stickiness that talks about building sustainable growth in a company. Using Facebook as an example, they mention that there are two factors that have made Facebook so essential to many people’s daily digital activities. There’s “mounting loss” and “accruing benefits.” Essentially, they argue that the deeper you go into a product, there is greater value you extract, and at the same time, switching costs become higher and higher because of the amount of time and resources you’ve already invested.
I can’t imagine an industry that is better poised to take advantage of these two factors than payments, yet so few are doing it correctly. I don’t think it’s shocking news to anyone that the payments industry is a quite fragmented and complex industry. There is a huge focus on giving merchants a large amount of choice, but at a certain point, choice actually becomes a negative thing. Too many choices create an overwhelming feeling (not to quote too many things in one article, but if you are curious, see Barry Schwartz‘s book The Paradox of Choice). Many end merchants will throw up their hands and go with something “simple” like Square.
By framing your value not as “the best” (or cheapest) option for a single piece of the complex payments puzzle, but rather as an integrated business solution, you’re building stickiness. When a merchant invests time in things like customizing their point of sale, setting up rewards programs, or integrating their card present and e-commerce sales into an omni-channel inventory management solution, they are creating very real switching costs, as well as building accruing value. That implies more and deeper integration into their businesses. Suddenly it isn’t swapping your service for a competitor, but rather throwing out an entire management system and starting from scratch.
It seems like a bit of a paradox, but in this highly competitive marketplace the best way for us to win is to work together. When we utilize our unique skills and value adds in concert, we can create a better merchant experience, a better customer experience, and build stickier solutions that reduce churn and make everyone more successful.
