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The Risks of Managing Multiple Financial Services Providers

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As companies grow, both in terms of size and complexity, their need for comprehensive financial services follows suit, resulting in an often long and arduous process of looking for suitable providers.

Lucky for them, however, finance is now becoming a highly innovative field, where countless startups, online banks, and traditional companies offer products and services developed with ever-changing market requirements in mind.

That being said, businesses often struggle with settling on a balanced approach with several financial service providers (FSPs), while avoiding common pitfalls. In this article, we’ll go over some of the key problems associated with this delicate balancing act in some detail and make the case for choosing a one-stop-shop platform to cover all your financial needs.

What’s the problem with using more than one FSP?

Dealing with more than one financial service provider can affect your business across every domain, causing issues like disjointed processes, discrepancies in data, suboptimal customer service, increased risk of human error, and high administrative burden.

Let’s take a look at each more closely.

Navigating relationships and complexity 

The first, most obvious, difficulty is that every financial service provider requires a unique style of management. In all likelihood, you’ll be dealing with different terms of service, pricing structures, reporting formats, and operating procedures. Given how critical financial transactions are to business performance, excessive complexity in this area tends to increase administrative burden and detract from core functions.

Much of the difficulty hinges on the fact that outsourcing services to different contractors brings in a mix of incompatible or partly overlapping data formats, software solutions, and communication protocols. Unsurprisingly, this incoherent patchwork often ends up throttling overall business performance and needlessly exposing companies to financial risk.

Risk of human error and data discrepancies

The greater the number of moving parts your financial setup acquires, the more opportunities there will be for something going wrong.

For instance, having multiple data touchpoints operated by service providers who aren’t coordinating with each other, may facilitate manual data input errors, such as incorrect or incomplete entries, to creep in unnoticed. Additionally, this can lead to individual data points being incorrectly matched or lost due to accidental overwriting during their exchange between conflicting systems or during consolidation for reporting.

Seemingly innocuous, these impediments can have a ripple effect that extends to every facet of financial management. Case in point, erroneous data inevitably gives rise to faulty reports and analytics which, in turn, lead to ill-informed planning, forecasting, and resource allocation.

Impact on customer experience

A seamless checkout process is key to ensuring customer loyalty – and this is especially relevant nowadays, when people’s expectations in terms of convenience are higher than ever before.  

With multiple financial service providers, however, users may experience issues like buggy UIs or inconsistent response time. For instance, payment, refund, and dispute resolution procedures may vary depending on which provider is involved in the transaction.

Furthermore, errors that stem from the presence of multiple providers can also cause issues like incorrect billing, delayed transactions, or inaccurate charges. Not only do these errors pose an immediate inconvenience, but also require time and effort to resolve, which can lead to frustration.

All of this is further complicated by each provider having its own support and resolution protocol, which adds to procedural discontinuity and harms the company’s reputation.

The case for a single financial service provider

Many of the problems sketched out above can be solved by switching to a one-stop-shop financial service provider.

Integrated payment solutions

Using a single provider for multiple payment methods streamlines the payment management infrastructure by removing the need for handling multiple payment gateways and processors, which simplifies the setup, maintenance, and troubleshooting processes.

In addition, it enables more consistent workflows and real-time visibility of what’s going on in every part of the company, improves customer experience, and allows for unified reporting and reconciliation.

Enhanced security and fraud protection

With financial fraud on the rise around the world, having a robust security system is a must. One-stop-shop providers ensure this by offering encryption, tokenization, and other relevant measures. 

As trusted and reputable companies with in-depth knowledge of industry standards and the regulatory landscape, they’re able to mount a strong response to the latest fraud and security risks, as well as help guide businesses to achieve and maintain compliance.

No less importantly, the best one-stop-shoppers out there offer advanced fraud detection and prevention mechanisms based on two-factor authentication, machine learning, and behavioral analysis.

Scalability and future-proofing

Another important benefit of relying on a single payment provider is scalability, enabling businesses to handle growing transaction volumes, which may also fluctuate depending on the season, without compromising on performance or causing delays. 

Related to the above, one-stop-shop FSPs can facilitate expansion into new markets by supporting their clients in accepting different currencies and payments from abroad without running afoul of local regulations.

By choosing a one-stop-shop with extensive future-proofing experience and ongoing investment in R&D, companies no longer have to worry about switching providers or undergoing complex integrations with every growth spurt.

Things to consider when choosing a payment provider

To start with, you should define your business needs with as much clarity as possible and then do a thorough side-by-side comparison of the offerings and capabilities of different providers to find the one that best matches them.

Next, consider the reliability and scalability of your top contenders. Do they have a proven track record of security, fraud-prevention, and regulatory compliance? Are they able to accommodate multiple payment methods and integrate with your existing business systems? Will their capacities be able to deal with growing transaction volumes in the future?

Finally, look for the best customer service you can find. You don’t want to be stuck with a quality financial offering, but terrible support that consistently throws the wrench into the works by forcing you to hang on the phone line for hours or deal with reduced business performance as you wait for that appointment next week.

In conclusion, while managing multiple financial services providers may seem like a good idea due to the broad spectrum of services it may offer, the associated risks can easily often outweigh the benefits.

So, save yourself the headache and go with a one-stop-shop provider able to cover all your needs – both present and future.

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