Economic Recession 2020 and Cost Reduction

2020 stock market crash has already been compared to the start of the Great Depression. True, $2 trillion rescue package (the largest relief amount in the US history) is already signed, and after initial stock crash, the major indices are growing again. However, coronavirus business impact is tremendous. It might leave many companies paralyzed, and recession in this or that form is inevitable for majority of world economies. After all, not all of them can afford large rescue packages to cushion the aftermath of stock market crash today.
In times of economic growth and bull market runs businesses try to raise their profit margins through increasing their sales. In the nearest time, due to impact of coronavirus on economy, most of them will have to focus on cost reduction in an effort to keep things running, retain their profits, and minimize potential losses.

Transaction cost reduction strategy: steps to take

If some business’s net profit is, for example, 8%, then even 50 basis points’ cost reduction matters significantly. Keep in mind, that credit card processing fees, typically, range between 2% and 4% of transaction amount. If the business’s processing volumes are high, then every opportunity to reduce transaction cost does make a difference. And this is just one side of the coin, because beside processing fees, there are many indirect cost items related to payment processing.

Let us now briefly describe the major steps of a processing cost reduction strategy, allowing a company to mitigate economic recession.

• Reduce immediate processing costs. As we’ve mentioned before, every basis point of fees you manage to win back from your processor is a small but tangible victory, especially if your transaction volumes are large. If they are, you should consolidate all your processing volumes under a unified processing platform. It is always easier to negotiate better (“wholesale”) terms from the processor based on consolidated volumes.
• Get automated. Are any critical operations in your company (such as merchant onboarding and provisioning, balance reconciliation, transaction settlement, reporting, accounting, chargeback handling) still performed manually? You should try to automate as many of the processes as possible. Thus, you will save plenty of resources that you can redistribute among other tasks.
• Be transparent. Are you getting a lot of tech support calls? Try to organize your processes in a way that makes them transparent and understandable to customers. This will allow you to save time and money on servicing of tech support calls, and redirect the respective support and development personnel to other tasks.
• Be innovative. Above-listed steps might make you think of implementation of a new payment solution. Starting everything from scratch is not the best option, especially, in times of an economic recession. So, you might consider some ready-made technology available in a hosted and/or licensable open-source-code version. UniPay Gateway solution by United Thinkers is an example of such a technology. Its flexibility is its main advantage over standardized limited-functionality offerings of some major providers.

Conclusion

Economic recession is under way, so processing cost reduction is as relevant as ever. Implementation of an innovative and flexible payment solution might allow you to mitigate the economic impact of the pandemic and adequately respond to the present-day market challenges. Get in touch with our payment experts to get targeted advice on how UniPay Gateway payment technology can help your company reduce its costs and increase net profits.