The coronavirus is a chance to bring payments in-house
The butterfly effect is the idea that a small and seemingly isolated incident can have an outsized impact elsewhere in the world. It highlights the degree to which many things that impact us, both as a business or an individual, lie far beyond our control.
The world is particularly unstable in the modern era, with change happening more rapidly than ever. Every business, regardless of size and industry, can be affected by a variety of external factors: political, social, economic, and so on. Coronavirus is the most obvious illustration of this.
We’ve witnessed the mass closure of companies and a near-universal transition to remote work as the coronavirus outbreak has engulfed the world. According to the Office for National Statistics, one quarter of companies in the U.K. have temporarily closed because of the coronavirus lockdown, while the majority of those still operating have reported lower turnover. The virus has interfered with the strategies of companies around the world: Coca-Cola sales have suffered and continue to sink while Amazon suspended distribution activity in France after a court ruled it had to stop all nonessential deliveries during the pandemic.
Already, according to Dealroom, tech and internet companies in Europe have lost almost €400 billion since the end of January alone. Now, everyone must urgently review their plans and do everything possible to stay afloat during these tough and unprecedented times. One way to secure your company from external factors, though, is to decrease outsourcing. The Atlantic recently noted the pandemic has laid bare “the fragility of an economy” built on outsourcing.
When companies grow and scale, they often face the question of whether to outsource or not. Usually outsourcing of noncore activities is considered an effective solution, as it frees up internal resources and allows the company to go all-in on core activities. The downside, though, is that outsourcing makes a company fully or partially dependent on a subcontractor, creating yet another external factor in the business plan.
In the wake of this crisis, many companies will likely think about giving up outsourcing, so their fate will be more in their own hands. At Dating.com Group, we didn’t realize the importance of such independence immediately. Now, though, we are working to become secure from all external factors. We are expanding horizontally by creating our own payment system, for instance.
The payments industry is challenging and highly regulated, which makes outsourcing especially tempting. Last year, though, we realized that we had become very familiar with the payments space in the process of developing our business. Because the e-commerce industry, and the world of online social and dating services, is so dynamic and competitive, we have highly qualified staff able to execute difficult tasks related to financial services. We also hold both commercial and services companies in our portfolio, increasing our exposure and experience.
We have the expertise to start processing incoming online payments from customers, and will eventually provide the same services for other businesses in the online social and dating space.
There are myriad benefits to having our own system, too. It will not only protect us in the current crisis, but will increase the efficiency of cash flows and to save up to 1% of revenue for our European holdings.
Internal changes like this increase margins—something that is especially important for tech businesses, many of which are not profitable at all—and offer an added buffer against instability. External factors will always play a role in business, and the current crisis is going to have a long-term economic impact for companies around the world. Minimizing outsourcing, though, is one way to minimize uncertainty, making sure you’re the one in the driver’s seat of your plans.