The pricing and cost analysis helps in deriving and forecasting the actual cost of products or services over the forecast period. It considers all the cost components and provides a competitive edge during supplier negotiations. Moreover, the outcome helps procurement leaders understand detailed and fact-based cost drivers for the category.
In this digital payment services procurement intelligence report, we have estimated the pricing of the key cost components. Technology cost, transaction cost, and labor form the largest cost component of the digital payment services category. Technology cost includes the expenses of developing and maintaining infrastructure and software for digital payments, including servers, data centers, and payment processing software. Transaction costs include processing individual payments, including credit card processing, interchange, and network fees, as well as fraud prevention and detection. Labor cost includes salaries and benefits for employees in the digital payment services category, including customer service representatives, software developers, and security engineers. For instance, The PayPal fee for a USD 100 transaction is USD 3.98, making the total money received after fees USD 96.02. The cost of implementing blockchain is USD 1,500 per month. These costs vary depending on the transaction type and provider.
Every organization and its procurement team look forward to negotiating the best deal while procuring a set of products or subscribing to services. Rate benchmarking involves price/cost comparison of more than one set of products/services to analyze the most efficient combination that can potentially help the procurement team in getting the optimum rate.
In comparison with China, which has a single set of regulations for digital payments, the U.S. has a diverse regulatory landscape for digital payments that makes it expensive for enterprises to comply, resulting in higher costs for digital payment providers to comply with regulations. The cost of labor in the U.S. is higher, causing providers to pay more to their employees, increasing costs. The U.S. has a more complex regulatory environment for digital payment services, resulting in higher fees for providers. Additionally, the U.S. has a more developed infrastructure for digital payments, requiring providers to pay more for processing networks and data centers. The U.K. has stricter regulations for digital payment services, resulting in higher costs for providers. The U.K.'s developed infrastructure costs more for payment gateways and processing networks, while less competition in the market allows providers to charge higher prices without losing customers. This leads to higher costs for services in the U.K. compared to India.
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Technology Cost is one of the major factors in the overall costs associated with providing a service is cost. Therefore, if a company is offering its services at reasonable pricing, it must decide if the focus category should be kept in-house or outsourced. Before choosing a supplier and creating a bargaining strategy, the firm that decides to outsource must comprehend the variations in the compensation structures of suppliers.
According to our research, the product manager at PayPal receives a 8% - 10% higher base salary compared to the salary received by product manager working in companies such as Mastercard and Visa. However, the year-on-year increment rate in all these companies majorly depends on the Key Result Areas (KRAs).
Organizations may find it cumbersome to continuously track all the latest developments in their supplier landscape. Outsourcing the activities related to gathering intelligence allows organizations to focus on their core offerings. At this juncture, our newsletter service can help organizations stay updated with the latest developments and innovations and subsequently assist in preventing disruptions in the supply chain. We have identified the following developments within the digital payment services category over the last two years:
In November 2022, Mastercard partnered with Vesta to offer a fraud management platform to merchants in Latin America and the Caribbean. The partnership aimed to improve the consumer's digital experience and bolster trust in e-commerce by addressing the increasing need for online shopping and addressing evolving fraud threats in real-time.
In May 2022, in order to transform its operations into digital payment solutions for small and medium-sized enterprises, Visa collaborated with working capital platform, Fundbox. The Pathward is a financial organization with federal registration that offers reliable banking infrastructure, issued Fundbox Flexible Visa Debit Card which is the initial step in the entire procedure.
In March 2022, LexisNexis Risk Solutions acquired BehavioSec, a Swedish company specializing in behavioral biometrics tech, to enhance its device and digital identity-focused offerings. BehavioSec's predictive biometrics solution uses behavior analysis for continuous authentication, establishing identity trust, and preventing fraud. The acquisition became part of LexisNexis Risk Solutions' Business Services group.
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Component wise cost break down for better negotiation for the client, highlights the key cost drivers in the market with future price fluctuation for different materials (e.g.: steel, aluminum, etc.) used in the production process
Offering cost transparency for different products / services procured by the client. A typical report involves 2-3 case scenarios helping clients to select the best suited engagement with the supplier
Determining and forecasting salaries for specific skill set labor to make decision on outsourcing vs in-house.
A typical newsletter study by capturing latest information for specific suppliers related to: M&As, technological innovations, expansion, litigations, bankruptcy etc.
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