The Payment Orchestration for Global Commerce report forecasts a robust annual growth rate of 20 percent in the global payment orchestration platforms (POPs) market. Payment orchestration is a valuable asset for businesses seeking to provide diverse payment choices to their global customer base. If you’re unfamiliar with the concept of payment orchestration, continue reading to discover what it entails, the advantages it offers, and its operational mechanisms for businesses.
Table of Contents
What is Payment Orchestration?
Payment orchestration is defined as the process of managing payment transactions through a centralized platform that connects merchants to multiple payment service providers (PSPs). Payment orchestration platforms offer online businesses the ability to manage payment processing in a streamlined and efficient manner. In today’s global economy, payment orchestration is becoming increasingly important as businesses look to expand their reach into new markets and offer multiple payment options to customers.
Such platforms help merchants to integrate with different payment providers, and payment methods, optimize payment routing, and manage transactions across multiple channels. These platforms use advanced technologies to provide real-time monitoring, reporting, and analytics to help businesses understand their payment operations better.
The history of payment orchestration can be traced back to the early 2000s when online e-commerce began to gain traction. The first payment gateways were created, allowing businesses to accept credit card payments online. As e-commerce grew, the need for more payment options and more streamlined payment processes became apparent. Payment orchestration emerged as a solution to this problem, providing businesses with a way to manage multiple payment options and payment processors through a single platform.
Mechanisms of Payment Orchestration
Payment orchestration platforms employ automated transaction routing to intelligently identify the optimal pathways for transmitting payments. By directing payments toward the most suitable payment service providers, the likelihood of erroneous declines is reduced, and the count of authorized transactions is amplified.
Here’s a breakdown of how payment orchestration operates:
- A customer selects a product or service and adds it to their online shopping cart on a merchant’s website. They then proceed to the checkout page to choose their preferred payment method from the available options.
- Once the customer completes the order, the payment details are transmitted to a payment gateway.
- The payment gateway secures the customer’s payment card information through encryption before forwarding it to the acquiring bank and payment processor.
- Upon receiving the data, the acquiring bank engages with the issuing bank to validate and authorize the payment.
- The acquiring bank sends the authorization or rejection response code to both the payment gateway and the merchant. However, payment orchestration platforms employ an alternative approach. In case of a payment failure, the platform automatically reroutes the same payment request to another payment processor, reducing the likelihood of false declines.
- If the alternative payment processor successfully processes the payment, it receives approval.
What Orchestration Platforms Can Solve
Payment processing is a complex and challenging, and businesses that operate globally face numerous challenges. One of the biggest challenges is managing payment processing across multiple payment providers, which can be time-consuming and costly. Payment orchestration platforms can help businesses overcome these challenges by providing a single, centralized platform to manage all payment processing operations.
Another challenge businesses face is managing payment processing across multiple payment methods. Different countries or regions have other payment habits and regulations, which can be a challenge for businesses looking to expand globally. Payment orchestration platforms can help businesses manage these complexities by providing access to multiple payment connectors via a single integration.
Just imagine a situation where your online business expands globally and targets customers from all over the world. Each country and region has its own payment preferences. Whether it’s cash, credit/debit cards, e-wallets, mobile payments, bank transfers, checks, or even cryptocurrency. Each of the target audiences wants to purchase in a way they are comfortable with. Your challenge as a business is to provide them with the best service while doing so efficiently and safely. This is where payment orchestration comes into play.
Benefits of Using a Payment Orchestration Platform
Payment orchestration platforms offer numerous benefits to businesses seeking streamlined and efficient payment processing. Here are some key advantages of incorporating such platforms into your payment ecosystem.
Access to Multiple Payment Connectors and Flexibility
Payment orchestration platforms should offer businesses access to multiple payment connectors and payment methods providers, which can bring a significant advantage for businesses looking to expand globally. Different payment connectors offer various features and benefits. Before choosing the payment orchestration platform, carefully analyze the list of connectors and how those connectors can help your business to address global ambitions.
Reduced Integration Cost
Integration with various payment providers can be challenging for merchants who lack technical expertise and human resources. Partnering with orchestration platforms can help you focus on product and client servicing instead of investing resources in maintaining multiple separate integrations. Due to internal observations, partnerships with orchestration platforms can decrease the time to go to market by 2x-2.5x.
Payment orchestration platforms can intelligently help to route transactions to the most suitable payment gateway or provider based on factors such as location, MCC, transaction type, and success rate. This ensures that transactions have a higher probability of being authenticated and approved, reducing the chances of false declines. Given Solidgate’s experience, the properly configured routing through the payment orchestration platform can increase the authorization rate by 20-30%.
Optimized Payment Flows
Payment orchestration platforms can also simplify and optimize payment flows by managing and consolidating multiple payment service providers, currencies, and channels. This can help businesses create a seamless payment experience for their customers, making it easier for transactions to be processed successfully.
Economy of Scale
The usage of the platform should be cost-effective for the business unit economy, with transparent pricing and no hidden fees. Choose the platform that can offer a tiered pricing. That will help you to gain pricing advantages once the volumes will grow. Some of the orchestration platforms can also apply a monthly minimum fee. That’s why it is extremely important to carefully forecast your processing volumes in order to cover all potential costs.
Improved Payment Analytics
Payment orchestration platforms can also offer businesses access to real-time payment analytics, which can help to understand payment operations deeply. By analyzing payment data, businesses can identify trends and patterns in payment processing, which can help them make better business decisions.
Increased Payment Security
Payment fraud is a significant concern for online businesses. Choose the payment orchestration platform that can help your businesses manage fraud by providing sophisticated fraud detection and prevention tools. These tools can help identify and block fraudulent transactions in real time, reducing the risk of financial losses due to fraud.
To sum up, it should be noted that payment orchestration is a powerful tool that can help businesses streamline their payment processing workflows, improve efficiency, and offer a better customer experience. While there are some potential drawbacks to using payment orchestration, such as dependence on third-party providers and complexity, the benefits outweigh the disadvantages in most cases. Ultimately, businesses should carefully evaluate their payment processing needs and choose a payment orchestration solution that best meets their requirements.
Payment Orchestration FAQ
What Exactly is Payment Orchestration?
Payment orchestration is a sophisticated payment processing strategy that involves using a centralized platform to manage and optimize various aspects of the payment journey. It includes routing transactions to the most suitable payment service providers, handling multiple payment methods, and ensuring seamless global payment acceptance. This approach streamlines payment operations for businesses, making it easier to adapt to evolving customer preferences and market trends.
How Can Merchants Benefit from Payment Orchestration?
Merchants can achieve significant advantages through payment orchestration. Firstly, it enhances transaction success rates, resulting in increased revenue. Additionally, it provides access to a global customer base by accommodating various payment methods preferred by international customers. Lastly, payment orchestration simplifies operational processes, reducing complexity and saving valuable time and resources for merchants.
Is Payment Orchestration Suitable for Small Businesses, or is It Primarily for Larger Enterprises?
Payment orchestration is not limited to large enterprises; it is beneficial for businesses of all sizes. Small businesses can gain from the efficiency, flexibility, and scalability that payment orchestration provides. It enables them to compete on a level playing field by offering a diverse range of payment options and expanding their customer base, which can be essential for growth and success in today’s global marketplace.