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Forrester Total Economic Impact™ Of Worldpay from FIS
March 01, 2021
FIS commissioned Forrester Consulting to conduct a Total Economic Impact (TEI) study to examine the value that merchants could achieve by deploying Worldpay from FIS. We spoke with six global enterprise merchants about the benefits, costs, risks, and flexibility of Worldpay. We then aggregated the experiences of the interviewed merchants and combined the results into a single composite organization. This composite is a US-based company with global sales that sells physical products as well as digital services in both stores and online; the split between in-store/card-present and online/card-not-present is 50-50. Key assumptions about the organization include: 1) $250 million annual revenue, 2) 30% of revenues from overseas, and 3) $20 average transaction value.
Prior to using Worldpay, the merchants often had a mix of providers for payment-related services, especially if they sold internationally. However, these earlier attempts yielded limited success, leaving customers with high transaction and operating costs, lower approval rates, an overly complex payment infrastructure, and problems in specific areas such as excessive chargebacks or fraud.
After the investment in Worldpay, the customers increased conversion rates and revenues, reduced costs, and better supported emerging business models. They were also better positioned to enter new verticals and geographies by leveraging Worldpay’s expertise.
As applied to the composite organization with $250 million in revenues processed by Worldpay, Forrester found the following risk-adjusted present value (PV) quantified benefits of the solution:
Conversion rates improved by 5%. Using solutions such as AuthMax delivered improved authorization rates. In Year 1 of the study, the improvement was 2%. This increased to 5% by Year 3 of the study. The total revenue increase over the life of the study was $6.9 million.
Accepting more alternative payment methods resulted in a 2% increase in no cannibalized revenues. Many customers want to use payment methods other than the more standard ones such as credit and debit cards. Additionally, many countries have popular payment methods unique to that geography. Worldpay supports more than 300 different payment methods across geographies. In total, 10% of all payments were made with these other methods in our composite analysis. Of this, 20% was truly incremental, in that the customer would not have made the purchase or bought from a competitor if they could not use their preferred payment method. The revenue uplift over three years was $10.0 million.
Each new country entered increased sales by 1.5%. Worldpay can process transactions in 146 countries and 126 currencies. This makes it possible to enter more new countries and to do so faster at a lower cost. Over the life of the study, the composite entered five new countries, and the total incremental revenues increased to $13.5 million.
Chargeback rates decreased by 15%. Worldpay’s scale gives companies visibility into more than 40 billion transactions annually. This feeds into a range of solutions and services that help merchants reduce chargebacks and fraud. The 15% reduction was from a baseline of 50 basis points. The composite realized this benefit beginning in Year 2 of the study, and the total savings was $276,000.
Debit card fees decreased by 12%, using least-cost routing, and credit card fees decreased by 7 basis points. Debit card transactions in the US were routed to least-cost processors, which saved, on average, 12%. Merchants can also save money on credit card transactions because of Worldpay’s interchange-plus pricing model, which passes on negotiated savings to the customer. Forrester estimated this to be worth 7 basis points for the composite. Taken together, these reduced transaction fees totaled $452,000 over the life of the study.
Decreased time-to-remittance was worth 4 basis points. Merchants said that Worldpay makes funds available to them faster than many other providers, almost always on the next day. Although the cost of capital is very low now, the value of this was estimated to be worth 7 basis points. The actual value of this benefit can be worth more than the dollars included in the study if a merchant needs to make its own payouts very quickly. In that case, a delay in receiving money from the payment processor can result in liquidity issues. Additionally, Worldpay’s size meant that it could meet all payment service-level agreements (SLAs) during the COVID-19 pandemic. The three-year value of the narrowly defined aspects of this benefit was worth $69,000.
After accounting for initial and recurring costs, risk-adjusting for realistic and conservative estimates, and the future value and scalability of Worldpay, we found that the composite company experiences a 537% ROI, $26.24M net present value, and three-month payback period over a three-year model.
For more information on the full 2021 study, “The Total Economic Impact™ Of Worldpay from FIS,” please reach out to your FIS representative.