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What Is Payment Orchestration?

What Is Payment Orchestration?

Blog Article Published: 05/24/2022

This blog was originally published by TokenEx here.

Written by Valerie Hare, Content Marketing Specialist at TokenEx.

The Payment Orchestration for Global Commerce indicates that the global market for payment orchestration platforms (POPs) is expected to grow by 20 percent each year from 2021 to 2026. For any business that needs to offer multiple payment options for customers worldwide, payment orchestration is a valuable service. If you’re new to this payment topic, keep reading to learn what payment orchestration is, the benefits of using this service, and how it works for businesses.

What Is Payment Orchestration?

Payment orchestration refers to integrating and managing the entire payment process, including payment authorization, transaction routing, and settlement. This process involves connecting to different payment service providers (PSPs), acquirers, and banks on a single, unified software layer. A payment orchestration platform is a type of software used to manage the online payment process for ecommerce businesses. Indeed, these services help optimize and simplify merchants' typically complex payment process. Thus, a significant benefit of payment orchestration is efficiently managing your payment stack within one platform, rather than handling possibly dozens of integrations with different PSPs.

Benefits of Using Payment Orchestration

Whether you are looking for a custom-built or all-in-one solution, there are several benefits to consider when choosing a payment orchestration provider. Take a look at the top benefits below to help you make an informed decision for your business.

Enjoy Easier Payment Integrations

By using a payment orchestration layer, merchants can work with multiple local and global PSPs via a single integration. For example, a business that needs to offer an alternative payment method can easily connect with a PSP offering these customer payment preferences. This process is much easier than a merchant having to connect with third-party providers through different accounts or platforms. As a result, payment orchestration can streamline the integration process, saving businesses time and money to grow and reach new customers.

Offer Various Payment Preferences

A major advantage of payment orchestration platforms is that they give merchants access to a wide range of pre-approved PSPs. As business needs change, they can easily add numerous payment methods for their ecommerce website via a single API connection. This is ideal for companies with customers worldwide who have diverse payment preferences, such as credit or debit cards, mobile wallets, or “Buy Now, Pay Later.”

Boost Business Scalability

Businesses must find new ways to scale and adapt to the evolving payment industry. In payment orchestration, merchants will find it easier to achieve sustainable growth. For example, connecting to several payment service providers and payment methods via a single integration is significantly faster than connecting with each provider separately. With a wide range of payment options, merchants will create a positive checkout experience that leads to repeat, loyal customers. Indeed, this payment service allows business owners to accept region-specific payment types for domestic and international transactions easily. As a result, using a POP can help expand a merchant’s customer base globally.

Improve Customer Experience

A Baymard 2021 study found that 18 percent of U.S. adults abandoned their cart because the checkout process was too difficult or time-consuming. Payment orchestration platforms can help prevent cart abandonment by creating a streamlined checkout experience for customers. One way to simplify checkouts is to offer multiple payment options and providers, so customers can select their preferred method for purchasing products or services. By giving customers the freedom to choose how to pay, they will be less likely to leave an ecommerce site without completing a purchase. After all, customers do not want to waste time retrying their payment or using a new method. This service can reduce customer experience and lead to customers questioning a site's trustworthiness. Indeed, better checkout flows will increase conversion rates, which means more profits for merchants.

Decrease Payment Processing Costs

While it may make sense to use a single PSP for new businesses, growing organizations will likely need to connect to multiple providers as they expand. Unfortunately, the cost of implementing and maintaining these connections can quickly add up, but a payment orchestration platform can decrease payment processing costs. Specifically, POPs can do this by incurring fewer setup fees for using several integrations, avoiding hidden fees that some providers charge for automated transaction routing, and routing transactions to processors with the lowest costs.

Track and Report Data in a Centralized Location

Any business knows how quickly things can get out of hand regarding tracking data analytics. Aside from simplifying the payment process, payment orchestration platforms provide a central location to track and report on payment data. This data encompasses every PSP and payment gateway baked into the merchant’s payment stack. Businesses can easily view, access, and share this data — securely and compliantly — with relevant entities, such as financial organizations or fraud detection companies. With quick access to everything, merchants can determine how to improve their business operations with real-time analytic reports.

Maintain Payment Security and PCI Compliance

Payment service providers must meet PCI compliance and other security requirements for digital payments, including payment orchestration platforms. Luckily, POPs are typically built on PCI-compliant vaults. In turn, this will reduce compliance scope for businesses. Additionally, payment orchestration providers stay up-to-date on the latest security rules to assist merchants in maintaining compliance with any PSP they use. To secure and protect customers’ payment information, POPs may also offer tokenization and fraud prevention services.

How Does Payment Orchestration Work?

Businesses that accept online payments depend on payments being successfully processed. Indeed, this ensures that payments are received for their products or services, so they can continue to grow. A key benefit of using payment orchestration is finding the best payment route to send digital transactions. One example would be sending payments to several payment processors, which can result in more favorable processing fees and help reduce false declines and, thus, a loss of revenue. Indeed, sending transactions to ideal payment providers can increase the number of authorized payments and conversions.

The payment orchestration process:

  1. The customer adds a product or service to their cart on an ecommerce site. They select their preferred payment method from the merchant’s list of options at the checkout page.
  2. Once the customer places the order, their payment details are sent to a payment gateway.
  3. The gateway encrypts the cardholder’s payment information and then sends it to the acquiring bank and payment processor to secure this data.
  4. Once received, the acquiring and issuing banks communicate to verify and authorize the pending transaction.
  5. Typically, the acquiring bank will send the authorization response code to the payment gateway and the merchant. However, payment orchestration platforms use a different approach. If a payment fails, pending transactions are automatically routed to an additional payment processor to decrease the number of false declines.
  6. If sending the transaction to the alternative payment processor works, the payment is approved, the customer doesn’t get frustrated with failed payments, and the merchant gets paid. It’s a win-win situation for all parties.

Additionally, POPs can manage payment settlements and billing, and create real-time payment reports within a single dashboard. Indeed, this makes it convenient for merchants to handle the entire payment process without leaving the platform.

Online Shopping Is Here to Stay

Whether you own a small, medium, or enterprise business, it’s imperative to use payment technology to optimize your payment process. Statista reports that there were 2.14 billion digital shoppers in 2021, a number that will only increase due to the convenience, product diversity, and cost savings that online shopping offers customers globally. This statistic equates to more than one out of every four people being an online customer. As illustrated in this article, payment orchestration is a robust service that can streamline your payment flow. Instead of wasting time and money connecting to different PSPs separately, paying their fees, and managing various compliance regulations, you can handle the entire payment process from start to finish on a payment orchestration platform. Further, POPs help you increase the number of approved payments by automatically routing transactions to the best payment providers. For customers, payment orchestration can help provide a more frictionless, streamlined checkout experience that leads to repeat sales.

Data Protection and Payment Orchestration

While payment orchestration has numerous benefits, your organization may require a custom payment solution that is not readily available with most POPs. In this case, consider partnering with a reputable tokenization provider that offers payment orchestration and data protection all-in-one. Leading providers offer the flexibility and freedom to route cardholder data via a single point of integration to connect to any combination of processors and gateways. A tokenization platform can help maintain PCI compliance, maximize payment acceptance rates, and secure payment data. Specifically, this is done through tokenization, which involves replacing the sensitive data with randomly generated, unique tokens that do not contain any of the original data. If a breach occurs, cybercriminals will only find tokens that have no real value on their own.

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