payment orchestration

All you need to know about payment orchestration


Payment orchestration platforms are not an entirely new topic. However, with the Covid-19 pandemic proving the importance of digital payments and the need for agility, Payment orchestration has become more relevant than ever. Nowadays, within strategic planning, merchants align payments with corporate strategy, making sure payments deliver value as a function. 

What is a Payment Orchestration Platform?

Payment orchestration platforms (POPs) aim to merge the many fragmented layers of payments like payment service providers (PSPs), acquirers, banks, risk management, analytics and regulatory compliances into a single ecosystem. To put this in simpler words, payment orchestration platforms are essentially in charge of executing every part of the payment processing cycle from validation to routing to the settlement with the use of the latest technology and innovations in the field. They take care of all the complexities of payments processing, allowing merchants more time to focus on other aspects of their business. 

Before diving further into payment orchestration providers and platforms let’s first understand why there is a need for them, by looking at…..

Challenges with the traditional approach to payments

A lot of people might find themselves asking “‘Why do we have to change something that has worked for so many years?’’ What they do not realize is that we are now entering the era of online payments. Now more than ever there is a need to keep up with payment trends if merchants plan on optimizing their profits and providing a better experience for both their customers as well as their employees. 

Outdated technologies can cause major damage to the business by lowering conversions and leaving many unexpected technological gaps unfilled. 

Lack of control on the payments flow

Traditionally payment providers may choose to work with only one acquirer or PSP, this could pose a risk to business continuity, as seen with the Wirecard meltdown. Some acquirers are not equipped to handle heavy transaction loads, resulting in outages and servers being down. Moreover, a traditional payment provider may favour routing transactions to a certain acquirer that is suboptimal for the merchant. In turn, this can lead to merchants losing out on business or accepting unfavourable pricing. Thus, it is always smarter for merchants to partner with an acquirer-agnostic payment orchestration provider that spreads risk across multiple acquirers. 

Money- and time-intensive

If merchants do decide to integrate with multiple acquirers without the help of a payment orchestration provider, this poses a new set of challenges as development and maintenance become more time- and money-intensive. Moreover, in a traditional payment model, daily accounting and reconciliation can take an enormous chunk of a merchant’s time. Especially when connecting to more than one acquirer, different rules and procedures must be taken into account. 

The traditional process of manual reconciliation is also prone to human errors that are expensive to fix in the long run. Relying on manual reconciliation forces merchants to try and strike a difficult balance between delivering timely reports and being 100% accurate. If this balance is not maintained this could affect the efficiency of the company and, in turn, its ability to generate good profits. 

Lack of fraud management

With the current pandemic taking a lot of offline business transactions online, customers and merchants are at a higher risk for online fraud. With the introduction of EMV chips, fraud rates in Card Present transactions have seen a significant drop. As a result, fraudsters are focusing more on Card Not Present transactions, increasing the merchants’ need for protection against them. Most merchants do not have fraud management set up for their online transactions which make them an easy target. 

Integration complexities are a competitive disadvantage

Larger companies like Amazon, Netflix, Uber, etc. heavily invest in enhancing their payment infrastructure and payment innovations, resulting in faster checkouts, less friction and just an overall customer-friendly experience. It can be tough for smaller merchants to keep up and stay competitive in such markets. In order to do so, they must consistently stay innovative and agile in terms of their business functioning.

Payments are not quite so simple anymore as adding or offering multiple new innovative payment methods is a slow and tedious process that needs to be done by a team of experts. For example, in order to integrate a new payment method, such as Apple Pay or PayPal, a company needs to integrate the APIs, modify the check-out process, update acquirer connections and manage compliance. Overall, all these steps take a lot of time and make the process complicated.

Payment Orchestration layers that solve these Challenges

The 5 main payment orchestration layers are as follows: 

  • Intelligent Transaction Routing
  • Real-time Analytics
  • Automated reconciliation
  • Risk Management
  • Plug-n-Play API

Intelligent transaction routing 

Business continuity is incredibly important as it ensures a merchant’s core business functions are not severely impacted by unplanned acquirer outages. When partnered with an acquirer-agnostic payment orchestration provider the merchant regains control over their transaction flow and can set up real-time rules for intelligent transaction routing. The payment orchestration layer of intelligent transaction routing ensures each transaction goes to the acquiring bank that is most likely to approve it. This helps when an acquiring bank has declined a transaction, as the transaction is routed to another acquirer for approval. Intelligent routing makes use of domain-specific rules made on the basis of BINs, currency, amount, payment modes, region, fees and other factors in an attempt to increase approval rates. 

The routing takes place automatically and uses machine learning technology that gathers billions of events captured from a wide variety of data across acquirers to make decisions and improve approval rates. It also implements like-for-like settlements to avoid paying double FX conversion costs. Another important factor to consider is that no single acquirer has the best success rates and costs for all countries hence having multiple acquirers across various countries improves these figures.

Real-time Analytics 

For most merchants, the issue with having their transactions spread over multiple PSPs and gateways is that it becomes difficult to track actionable and insightful data. This payment orchestration layer gives merchants access to real-time data of their payment flows. The data tracked can include the acquirer’s success rate, the origin of all transactions, how many times the customer retried the payment, and why it failed. Along with this, routing information enables easy detection of issues and helps merchants set strategic routing rules for future planning. Having detailed transaction information across all channels and geographies also allows merchants to recognise and predict payment trends while expanding overseas. Furthermore, consolidated reporting across acquirers helps them compare and evaluate PSPs’ performance. In turn, allowing merchants to better understand which areas their business may be lacking in and what they should focus their energy on. 

Automated Reconciliation 

The Automated Reconciliation and Settlement payment orchestration layer is spread across acquirers, saving merchants the time and the cost of day-to-day accounting. This saves sellers the headache of having to manually reconcile everything on a spreadsheet, increases efficiency and gives merchants better insight into their financial data. A typical e-commerce payment reconciliation system is able to track various payments and deductions of the business, such as shipping overcharged, commission overcharged, inventory missing without reimbursement, pick-pack overcharges, etc.

Risk Management

Payment orchestration providers offer a variety of security measures that can reduce merchants’ overall risk. Payment innovations such as iFrame and Hosted fields could minimize their PCI exposure while providing a smooth checkout experience for their customers. As a way to make one-click payments secure, Token vaults are used to let customers pay using the same token across multiple acquirers. This system also offers Fraud auto-detection and management tools that aid merchants with fraud prevention while also sending them Chargeback notifications and reports across acquirers, simplifying fighting chargebacks.

Plug-n-Play API

Payment orchestration platforms leverage plug-n-play technology which allows merchants to add new payment methods at lightning-fast speed, leading to a shorter time to market. A single API gives merchants access to all the payment orchestration layers from routing, risk management to analytics. Merchants can now offer local payment methods with no additional development cost. Indeed, with plug-n-play APIs, integrations can take as little as 15 minutes. This lifts the integration burden off the technology team and allows merchants to go live within the same day. 

In Conclusion

By now we are all aware of the various payment innovations that have swept over the industry in the last few years. We predict this list of innovations will continue to expand leaving merchants with pressures to keep up. Having outlined the key features of payment orchestration platforms, one must now realise how advantageous integrating with one can prove to be. This solution simplifies and resolves all the hassles merchants currently face, in a time- and cost-efficient manner. Most importantly, it arms them with the tools to compete with larger market players, while propelling their growth, aiding in their business expansion, and boosting their revenues.

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