Revenue recognition standard in the payments industry has been saved
Revenue recognition standard in the payments industry
Navigating ASC 606 implementation
As digital payments grow in volume and complexity, companies are seeking value while rethinking payment processes. And payments processors, in a fast-evolving ecosystem, are challenged to answer key questions: Who is our end customer? What are our performance obligations? And who controls the services?
In the payments industry’s evolving ecosystem, a flood of new entrants is changing delivery models while providers transform payments from a commoditized solution to a value-added service. With the marketplace expanding to accommodate new players and offerings, providers are aiming to deepen customer relationships.
In addition, companies are grappling with the issue of revenue recognition—specifically, how to present revenue and fees in line with the ASC 606 accounting standard—and seeking guidance.
The shifting—and expanding—payments ecosystem
Long viewed as a generic back-office service, payment processing is becoming a potential source of value: revenue, data, improved customer experience, and more. Processing is playing an ever-larger role in operations and even business models, and companies have more options than ever, from setting up their own systems to contracting with an established payments processor to purchasing SaaS services. The best solution will differ for each company.
Revenue recognition, too, demands guidance, now that every financial transaction, no matter how small, involves multiple parties. It’s challenging to keep track of fees, who has risk, and how each transaction is settling out. The ASC 606 standard on revenue recognition demands that companies ask key questions: Who is my customer? What are the promised specified goods or services? Am I a principal or an agent? What are my performance obligations? The answers aren’t necessarily easy to determine.
The payments ecosystem is still evolving, with the landscape only beginning to settle after the upheavals of the ongoing digital-first shift. New technologies and guidance signal further changes to come. It’s critical for leaders in the payments industry to get a good sense of where they stand—and where they’re headed.
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