Report: Heads of Payments Zero In on Customer Behavior in Uncertainty Debate

• 30% of heads of payments at middle-market businesses report high levels of uncertainty due to supply chain integrity, leading all areas.
• 42% of heads of payments reported missing opportunities over prevailing uncertainties resulting from errors and delays.
• For both heads of payments and CFOs, analyzing data to understand trends and gain insights is the favorite approach to mitigating uncertainty.

A firm’s CFO and head of payments are pivotal in its financial architecture and dealing with uncertainty. CFOs carry out the firm’s broader financial strategy and management tactics. These tactics include capital and risk strategies alongside broader investor and financial reporting. Heads of payments, on the other hand, usually oversee payment processing, technologies and regulatory compliance. Some also handle vendor management.

These differences influence these executives’ perspectives. CFOs are mainly concerned with macroeconomic factors in operational areas like staffing and inventory management. Heads of payments handle challenges of errors, delays and client turnover. This is evident in the data. Still, both roles are concerned about missed opportunities brought about by operational uncertainty.

• What’s at Stake
• Costs of Uncertainty
• Strategies to Mitigate Uncertainty
• Impacts of Strategies on Uncertainty Levels
• Conclusion
• Methodology

What’s at Stake

Gauging levels of uncertainty in the middle market

Most smaller revenue middle-market firms experience high levels of uncertainty. In firms with annual revenues between $100 million and $250 million, 55% of heads of payments report high uncertainty levels. This share compares to 47% of CFOs. Both groups of business leaders across the middle market identify similar levels of uncertainty, with 33% and 30%, respectively, reporting high levels of uncertainty.

The top areas of uncertainty that affect both roles are the same, however: supply chain integrity, customer behavior and competitive positioning.

This overlap shows a shared strategic focus for these two groups across nearly every key area of concern. Heads of payments report two chief areas of concern driving uncertainty, on average. CFOs report slightly more: 2.1, on average. That these two groups agree on the top uncertainty sources shows that while the degree of concern may vary between the roles — as it does in the case of fraud or risk management operations, for instance — executives generally pull in the same direction, albeit in different ways.

These are just some of the findings in “How Heads of Payment Approach Reducing Uncertainty in Middle-Market Enterprises,” the third edition of the PYMNTS Intelligence 2024 Certainty Project. This monthly project rotates through CFOs, heads of payment and heads of operation to monitor trends and views regarding operations of U.S. firms with revenues between $100 million and $1 billion in 2023. This edition looks at how heads of payments use tools to ease uncertainty. It draws on results from a survey of 60 heads of payments at middle-market companies. The survey was held from March 4 to March 8.

Costs of Uncertainty

Heads of payments say errors and delays are uncertainty’s most common adverse effect, followed by missed opportunities.

Uncertainty drags down operational efficiency, particularly for heads of payments. Fifty-two percent say errors and delays are impacts of uncertainty. On the other side, just 28% of CFOs report similar issues, highlighting the significant operational disparity between the roles. Errors and delays hinder daily operations in ways that likely catch heads of payments’ attention first. Thirty-five percent of CFOs and 42% of heads of payments say uncertainty leads to missed opportunities. All in all, these findings highlight the operational challenges in keeping effective payment systems.

Differences in responsibility between heads of payments and CFOs help explain their different perspectives. For example, errors and client turnover particularly affect heads of payments. Data shows that 32% note client turnover as a significant issue, yet just 13% of CFOs reported the same. Meanwhile, CFOs are more likely to be concerned with broader organizational challenges, such as excess inventory costs caused by uncertainty. This was noted by 22% of CFOs but just 13% of heads of payments.

Strategies to Mitigate Uncertainty

Heads of payments and CFOs share many of the same sources of uncertainty. Still, their propensity to act diverges in distinct ways that align with their roles.

Heads of payments and CFOs deploy uncertainty mitigation strategies that show their specific roles within middle-market organizations. The best example of this is addressing supply chain integrity, one of the primary areas of uncertainty. For CFOs, 37% acted by leveraging skill-based enhancement in training personnel and using process automation. Heads of payment acted in more technological ways to ease this uncertainty. In fact, one-third took the more abstract action of dedicating more human resources and the more data-intensive approach of using analytics.

Notably, these groups were exclusive: only CFOs or heads of payments took these specific tasks, with no crossover.

How heads of payment and CFOs tackle overall uncertainty

The gaps are closer but still evident when looking at actions to ease uncertainty overall. Heads of payments turn to their business networks for informal advice more than CFOs, for example. They are more likely to use human resources to reduce uncertainty, with 30% relying on this strategy. As with easing supply chain uncertainty, CFOs are more likely to focus on skill enhancement and technological advancement. Half of CFOs use training programs for existing personnel and 48% hire those with specific skills to help reduce uncertainty.

Just 38% of heads of payments turn to hiring. Executives in this role tend to take a technological approach to manage uncertainty. While 32% of this group favor developing or upgrading existing software or platforms, 47% have incorporated process automation to reduce uncertainty in the last 30 days. For both groups, analyzing data to understand trends and gain insights is the favorite approach to mitigating uncertainty.

Handling other top sources of uncertainty

For the second and third most common sources, customer demand behavior and competitive position, both heads of payments and CFOs agree on the top strategy: more data and insight. Analytics are employed by 63% of CFOs and 59% of heads of payments to reduce uncertainty from customer demand, showing a slightly higher chance for CFOs to use data for consumer insights.

To address competitive positioning, though, 82% of heads of payments employ analytics compared to 72% of CFOs. This shows the strong commitment across both roles to using data-driven strategies for easing uncertainty to maintain competitive advantage, with CFOs showing less use of analytics in their strategy.

Impacts of Strategies on Uncertainty Levels

Both heads of payments and CFOs who turned to analytics and process automation experienced very positive results.

Analytics has proven to be a highly effective tool to improve levels of uncertainty, with 96% of heads of payments finding that it was able to enhance predictability when used to gain insight and predict trends. This strategic use of data-driven insights not only aids in immediate decision-making but also improves long-term planning and response strategies. Moreover, process automation, used by 47% of heads of payments, also showed exceptional results, with a reported 100% success rate in improving predictability. This performance shows the significant impact that this group has seen when adding automated systems into operational workflows to fight uncertainty.

Financial executives also see the effectiveness of analytics and process automation to reduce uncertainty. A small share of heads of payments and CFOs believe conditions will worsen in the next 12 months. Just 5% of CFOs and 5% of heads of payments believe uncertainty related to workflows and operations will worsen in that time. The cautious optimism about future conditions shows a practical approach to uncertainty management shared by both groups, with executives in either role weighing effective tools with realistic expectations of market volatility and operational challenges.

Conclusion

Uncertainty can clip the wings of any organization and is hitting middle market companies hard, with 2 in 5 missing opportunities due to errors and delays. But technology can help. Heads of payments and CFOs employ analytics and process automation extensively, with 47% of heads of payments adding automation and 96% of executives in either role finding analytics to significantly enhance predictability. These tools help to not only handle the volatile business environment but also shore up the foundation for future growth and stability.

Such data-driven decision-making is paramount, as seen by the 30% of heads of payments who cite supply chain integrity as a significant source of uncertainty. By emphasizing operational agility and foresight, these practices not only equip executives to benefit from new opportunities but also help them wade through complexities effectively.

Methodology

“The 2024 Certainty Project: How Heads of Payment Approach Reducing Uncertainty in Middle-Market Enterprises” is the third edition of the PYMNTS Intelligence Certainty Project. This monthly project monitors trends and views across large and small companies (between $100 million and $1 billion). Each month, the project rotates through CFOs, heads of payment and operation to best capture the sources and costs of unpredictability and the strategies the C-suite relies on to help survive complex and dynamic business environments.

This issue looks at how heads of payment use tools to ease uncertainty. It draws on results from a survey of 60 heads of payments of companies with annual revenue between $100 million and $1 billion in 2023. Ninety-seven percent of the businesses have been active for 10 years or more, with 3% operating between five and 10 years. The survey was held from March 4 to March 8.

For more, read the April 2024 report, “Optimizing AR to Mitigate Uncertainty for Middle-Market Businesses.”