While innovative business solutions dominate headlines, the behind-the-scenes decisions that power these innovations, specifically in tech procurement, often go unexamined.
For organizations seeking to navigate the complexity of digital services procurement, a somewhat damning January report from the United Kingdom’s National Audit Office (NAO) could offer a blueprint that transcends borders and industries.
The question under discussion is this: How can organizations, particularly payments firms at the forefront of digital transformation, optimize their tech procurement strategies to deliver innovation without derailing their objectives?
The NAO found that the U.K. government’s procurement processes “do not work well for digital programs,” noting that “funding allocation … can be based on departments’ conceptual or simplistic high-level assumptions.”
One gap cited in the U.K. government’s approach to procurement was a lack of centralized data. Without accurate insights into spending, supplier performance and future demand, government procurement staff struggled to use their collective buying power. Payments firms, which rely on data for everything from fraud detection to customer personalization, can ill afford a similar blind spot.
The report said this gap “results in limited technical evaluation of contracts with technical risks downplayed. Complexities which emerge after contracts are signed can be too fundamental to be dealt with through a change control process.”
If this all rings a bell, your organization might be among the many firms still shackled by legacy procurement strategies that are potentially ill-suited to the digital era.
Read also: Digitizing the B2B Payments Landscape Starts With … Sales?
For payments innovators, the stakes in tech and B2B procurement are especially high. The demands of emerging innovations like real-time payments, embedded finance and blockchain-based systems require not only top-tier technological products, platforms and partnerships, but also strategic foresight.
The NAO found that the U.K.’s public sector spending and decisioning framework around fulfilling procurement requests and working with suppliers led to severe difficulties, including delays to modernization totaling “at least 29 years” and billions of pounds in cost increases up to 26% of original forecasts. The result on government operations? A reset of programs and the continued use of legacy systems for longer than planned.
For private sector firms, comparable impacts can be ruinous.
One of the report’s most salient lessons is the critical role of expertise. Successful procurement in the payments space isn’t just about securing the right tools; it’s about ensuring the right people are at the table. The U.K. government’s struggles with a generalist procurement workforce can in effect mirror certain challenges faced by payments firms where commercial and technical silos persist. This gap often leads to missed opportunities in supplier engagement and suboptimal contract terms.
Another key insight from the report is the importance of moving beyond transactional relationships with suppliers. Payments firms often rely on third-party vendors to power essential services like fraud detection, compliance and customer authentication. But too often, these relationships remain adversarial, focused on cost negotiations rather than collaborative innovation.
The solution lies in rethinking supplier relationships as strategic partnerships. Payments leaders must demand more from vendors — not just in terms of technology but also in the ability to co-create value. Whether it’s negotiating shared risk in product development or aligning on long-term innovation goals, the future of procurement is rooted in collaboration.
See also: 3 Reasons Now Is the Golden Age of B2B Procurement
In payments, where reliability and security are paramount, legacy systems can’t be discarded overnight, and transitioning from outdated infrastructure is neither simple nor cheap.
“A lot of clients are challenged by integration with legacy systems, and digital adoption isn’t always [consistent] across various geographies where companies operate,” Chris Jameson, head of product management for Global Payments Solutions (GPS) EMEA at Bank of America, told PYMNTS in November.
This conundrum can call for strategic procurement that prioritizes suppliers with a proven track record in modernization. Payments firms can seek to avoid the temptation to opt for the lowest-cost bidder, focusing instead on partners that are equipped to handle the intricacies of legacy transitions.
“Automate, automate, automate,” Lorenzo Soriano de Teresa, senior vice president of merchant services at American Express, told PYMNTS in August. “The right automation solution, or the right partner, can help businesses move past their current payments concerns to see tangible benefits.”
Additionally, firms can work to build internal capabilities to manage these projects effectively, ensuring they act as intelligent clients who can understand the technical and operational implications of procurement decisions.
Those that don’t may find themselves outpaced by competitors who understand that in the digital age, how you buy is as important as what you build.
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