What is payment orchestration?


girl paying with a card on the phone and the inscription What is payment orchestration

In recent years, we have witnessed a significant growth in the sale of products and services over the Internet. Many of these sellers have expanded their reach beyond the local market to target overseas customers. However, they encountered various challenges related to online payments in international markets. This is where the concept of payment orchestration emerged to tackle these issues.

Unlocking the Potential of Multiple Payment Orchestrators

When you reach a certain size in your online business, you realize that working with a single payment provider is not optimal. If you rely entirely on one provider, you’ll be dependent on their systems, rates, fraud prevention measures and payment methods. This begs the question: What about bringing in a second provider and having some payments go through one and others through the other? Or how about diversifying your payments?

Payment Orchestration is the ideal solution for managing diverse payment methods used across various countries, dealing with multiple currencies, navigating payment systems with distinct operational procedures, addressing fluctuating acceptance ratios at different times, and more.

In summary, the complexity of these factors grows substantially. Simply integrating with all of these elements can pose a significant challenge, not to mention the ongoing tasks of maintenance, adjustments, and optimization. Payment orchestration stands out as the highly effective solution to tackle these challenges.

What is payment orchestration?

Payment Orchestration Platforms are IT solutions that provide a central hub for payment processing. By integrating with various payment service providers (PSPs, acquirers, providers of specific payment methods), these platforms give merchants/retailers the ability to offer their customers a variety of payment options while simplifying all operations related to the payment process (on IT and on the operational side).

When someone asks us why payment orchestration, we answer that implementing such solutions does two things:

  1. optimizes and often reduces the costs associated with payment processing
  2. increases the chances of successful transactions, and thus increases revenue in the company

Let’s illustrate perhaps all this to make it easier to understand. This is what the traditional payment model looks like, where merchants are often required to make separate integrations with individual providers for payments, accounting, data analytics, and more. In contrast, this is what the payment model looks like when utilizing payment orchestration solutions.

payment orchestration

How does payment orchestration work?

Payment orchestration platforms are IT solutions that often manage the entire payment process of customers, from offering them the best payment methods, through the purchase and payment itself, to the final settlement of the transaction.

These platforms typically have two basic components/layers: front-end and back-end orchestration.

Front-end orchestration is the process of combining the offerings of different payment providers to ultimately give the user a choice among those payment methods that are best suited to them. This usually happens based on several factors, including transaction fees, geolocation and customer preferences for payment methods, among others. By integrating with multiple payment providers, payment orchestration platforms give merchants the flexibility to offer customers a variety of payment options at the lowest possible price for them and for themselves.

The back-end orchestration layer is all about the process of managing and processing payments by different payment service providers from the backend side, which is where a human does not see it. This includes choosing the best acquirer to reprocess a given transaction, trying to collect a recurring transaction at a time that increases the probability of success of such a collection, etc. Most importantly, these types of platforms simplify these processes by providing a centralized system related to handling all activities around payments.

What are the benefits of payment orchestration?

Payment orchestration provides several benefits to merchants, including but not limited to

  • Increased efficiency and minimized risk. By integrating with multiple payment providers, merchants reduce operational risk (when one provider has technical problems, another can take over its role and process transactions further), while increasing the efficiency of their systems (transactions are spread across several IT systems).
  • Increased revenue. By providing a smoother payment experience, merchants can boost online sales and, consequently, their overall revenues. This solution allows merchants to offer payment methods that were previously unavailable or enhance the chances of success for specific transactions.
  • Reduced costs. By automating the payment process, payment orchestration platforms can help merchants reduce operating costs, particularly IT costs. In addition, by integrating with multiple payment providers, these platforms can help merchants optimize transaction rates.
  • More data. Payment orchestration platforms provide merchants with real-time data analytics. This includes data on customer behavior, payment trends and fraud information. This data can be used to further optimize the payment experience and identify new business opportunities.
  • Reduced compliance burden. To stay compliant with regulations and security standards, merchants are responsible for ensuring security within their payment processes. Payment orchestration platforms can help reduce these responsibilities by taking on some of the payment processes as well as integrating with various security solutions, and by providing additional data analytics that can help identify potential risks.

Risks associated with implementing payment orchestration

There are no perfect solutions. Hence, it is also worth keeping in mind the potential downsides and risks associated with implementing a payment orchestration platform. These are primarily:

Operational risks associated with connecting to a single centralized hub. The whole idea of payment orchestration is that the merchant connects to one system/one API that manages all subsequent connections with different payment providers. This approach results in the potential risk that if this payment orchestration platform API does not work – payments will not work anywhere either.

Additional costs. While it is true that payment orchestration platforms optimize payment processing costs, it is important to remember that they are not free systems. Most often, they operate on a SaaS model and charge a fixed monthly fee and an additional transaction fee.

The merchant further needs contracts with payment providers. These platforms often operate on the merchant’s dedicated merchant accounts. Which means that this merchant first needs to sign agreements with specific payment providers and receive accounts from them, and only then can these accounts be hooked up to the platform.

The implementation of payment orchestration does not always yield equally favorable results across all businesses. We can suggest that payment orchestration tends to excel in SaaS businesses (Software as a Service), e-commerce businesses with high turnovers looking to optimize transaction costs, and businesses engaged in online sales across various marketplaces. However, its effectiveness in other types of businesses may or may not work.

Does your company need a payment orchestration platform?

Yes, if – as above – you represent a SaaS company, an e-commerce business with a higher turnover or an online seller in various marketplaces. In other cases – it will be a very individual matter and worth more analysis.

The most important thing to do before choosing a payment orchestration platform is to assess the current state of your business, how you accept payments from customers and – above all – look at your long-term goals, taking into account your budget and any organizational, and technical limitations.

For more information on this subject, go ahead and contact our tech marketing agency. We will be happy to add more and find the perfect solution to suit your needs.

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