Topic TBD: Channeling The Right Channel Partner Strategy

How to channel the right channel partner strategy?

After all, the right relationship is everything, especially in business.

The fact was underscored this past week when Dropbox came to market, went public and filed paperwork with the Securities and Exchange Commission.

As part of that paperwork, the company disclosed certain risk factors that may impact operations, among them: channel partner risk. Any growth strategy that is partly reliant on third parties carries with it risk — and reward.

After all, it’s all about scale, but also strategy, the kind of strategy that makes for loyal relationships up and down the channel.

In an interview with PYMNTS’ Karen Webster, in the latest Topic TBD, Paya COO Mike Vaughn said risk is real in the payments ecosystem, and channel partnerships must be about far more than distribution.

It makes sense for companies — even smaller, younger ones in the payments space — to, as Webster put it, spend the bulk of their time knocking on doors in an effort to grow the top line.

But, eventually, efficiency becomes top of mind, and broadening reach becomes a function of broadening channels.

Thus, some of the larger-scale (no pun intended!) questions, as posed by Paya internally (when it rebranded from Sage), which may be instructive in a go-to market (or in this case go-to channel) strategy for other companies and as relayed by Vaughn: “What are the right capabilities? What’s the right channel for us to attack? And who are those partners that we should be talking to that will help us get to a place where we can start building relationships … [for] collected success?”

One caveat: Declare what, as a firm, you are not willing to do. That explicit strategic line in the sand, dictated as a matter of choice (i.e. what to do vs. not do) can make it easier to carve out where partners are needed to fill in the blanks.

As Vaughn told Webster, existing channel partners can be viable sounding boards on what is going well and what is not. Often, he said, a firm can be guilty of asking a question, but “you’re validating your own thought about what that answer is.”

He recounted a time from Paya’s own past when merchants were abandoning the company’s merchant application offerings. A survey approach relied on questions and responses that had become stale. The revamp of those very same questions — into probing ones — solved the dropoff problem and increased adoption of those merchant applications.

“The point there is really about that connection with your partner,” said Vaughn. The same questions relayed above are ones that companies can pose and should mull when considering expanding their channel partner ecosystem.

“During those conversations, you’re seeking out those partners or you’re looking for folks that are connecting to payments … [tied to the fact that] they’ve got a back-office solution that they need to integrate payments or they’re trying to solve a reconciliation issue,” he stated.

Channel partnerships, agreed Webster and Vaughn, are increasingly important in the payments space, as the industry is becoming more complex, and use cases are showing new levels of complexity as well.

The rules of the game — when thinking about strategy amid competition and collaboration up and down the channel — should be clearly laid out too, said the executive.

“I’d say that … declaring that you’re not going to be in the face-to-face point-of-sale market or you’re not going to be in the back-office market — that should help align [your] prospects and … go-to market approach and commercialization of those products with those individuals [in the channel]. In the marketplace of payments … we may only want to be one part of that transaction or one small piece, and that might be okay. But, again, it also comes back to your strategy and what you do.”

The drive to become an attractive channel partner is especially important in an age where, as Vaughn said, in payments, technological capabilities are more and more commoditized. That’s especially true in the aftermath of EMV, he said.

“Everybody has a lot of the same core capabilities and go-to market approaches. It’s table stakes,” said Vaughn.  “You have to have a cloud-based, face-to-face implementation. You have to have an account updater; you have to have the capability to enrich payment data as it comes through the processor and help that customer get the benefit of a lower interchange.”

“Those capabilities,” he continued, “are so fundamental that everybody has them. But it’s how you solve those problems in a unique way that get those channel partners to choose to do business with you versus the other guy. You have to demonstrate to them that your API and your documentation and all the support behind it is better than somebody else,” he said.

That push toward support services and value-add takes shape and can be effective even against competitors, he said.

“If you have a channel partner with your competitor and they’re really unable to tap into the success of the marketing plan that they had presented their board or their leadership team and they’re not getting the adoption of that payment capability and that software or in some sort of integration, and you walk in and you are able to say, ‘Listen, I’ve got all the same capabilities that our competitor has. However, I’m thinking about how you’re going to attack the market and how you’re going to attract customers and get them on and the speed of transactions faster than anyone else’ … That’s a conversation those folks will entertain and want to have all day,” said Vaughn.

New developments in channel strategy? They’ve come in the wake of EMV.

“You had to learn a little bit more about the technologies that you were going to sell into and understand those customers,” he said.

With concentrated effort, a company can create price differentiation — a strategy which was once considered a commodity. Vaughn noted that — by way of example with cloud-based integrated processes — accountants in the past would have had to take payments outside their interface. They would have had to do things in a certain area and then bring the payment back in and manually feed it. Now, of course, once customers see the value in the integrated workflow, the old ways fall by the wayside.

The advent of a single point of contact, through which many services flow, sparks a conversation that has to be at the forefront of all channel partner discussions, Vaughn emphasized.