What is Payments Orchestration?

Many US consumers report frustration with online payments, citing challenges such as remembering login information, security worries, and inconsistent experiences across different channels. Studies suggest that more than 85% of consumers have encountered these issues. Merchants who offer a variety of payment methods and a smooth user experience gain a clear competitive edge. Merchants require an effective solution to manage the entire payment process. This is where payments orchestration comes in.

Payment orchestration is a technology that simplifies merchants’ handling of different payment components. These platforms assist merchants by streamlining and optimizing the payment process, improving transaction facilitation, enhancing the overall customer experience, and boosting conversion rates.

This article will explain payment orchestration and how integrating this technology into your payment system can benefit your ecommerce business.

What Is Payments Orchestration?

So, what is payment orchestration? To put it simply, payment orchestration simplifies how online payments are managed by bringing together multiple payment service providers, gateways, and financial institutions onto a single platform. This platform enhances the payment process by strategically directing transactions through different channels to secure the highest approval rates, minimize costs, and increase transaction speed.

One significant feature of payment orchestration is its dynamic routing capability. The platform automatically chooses the best provider based on cost, success rates, or geographic location to process transactions more efficiently. Should a payment fail or a provider be unavailable, the system can swiftly switch to an alternative provider, reducing interruptions for the business and its customers.

Additionally, payment orchestration provides a centralized interface that eases the integration of various payment methods and reduces the burden on businesses to manage each processor separately. This consolidation leads to simpler maintenance, less operational complexity, and the flexibility to expand quickly as businesses grow or introduce new payment methods.

The platform also delivers detailed data analytics, which provide insights into transaction trends, performance metrics, and areas for improvement. These analytics can aid businesses in enhancing their payment strategies and incorporating robust security measures like tokenization and encryption to lower fraud risk.

Key Components of Payments Orchestration

Payment orchestration requires coordinating several key components to ensure the successful completion of a transaction. This includes keeping track of the payer and payee identities and details, orchestrating across multiple payment methods involved, routing the payment through relevant networks, and sequencing various activities the payment needs to pass through.

• Payers and payees: Orchestration needs a real-time view of the entities sending and receiving funds, including IDs, account information, contact details, addresses, and more. Any change in information must be updated instantly for uninterrupted payments.
• Payment methods: A single payment can traverse multiple methods, so orchestration needs to determine the correct sequence and handoffs. This could include credit/debit cards, wallets, bank transfers, checks, cash, and emerging methods. Orchestration routing needs to adapt quickly to available methods and changes in user preferences.
• Payment networks: Underlying each method are networks that facilitate the transfer of funds. Orchestration must ensure the payment is completed seamlessly across networks like Visa, Mastercard, ACH, wire transfers, etc. This requires network integration, interoperability, and network rules, fees, regulations, and protocol management.
• Payment activities: Funds need to move through a series of activities, including authorization to validate funds, clearing to settle the payment, and reconciliation to match records. Orchestration tracks these activities, ensures all are completed properly across components, and resolves any exceptions or errors to avoid payment failures or fraud.

While the components are integral to any payment, orchestration binds them together. Advanced frameworks are needed to catalog all elements, determine relationships and dependencies, map complex workflows, process events, and trigger automated responses—all in real-time. With effective orchestration, the individual parts can work as a seamless whole.

How Does the Whole Payment Orchestration Process Work?

Payment orchestration enhances the payment handling system by integrating multiple payment gateways, processors, and financial institutions into a single platform. Here’s an outline of the process:

• Customer Checkout: This begins when a customer fills their cart, moves to the checkout page, selects a payment method, and enters their payment details.
• Payment Data Security: The payment gateway secures the customer’s payment data through encryption before sending it to the acquiring bank via the payment processor, ensuring the transaction is protected.
• Authorization Request: The acquiring bank sends the payment information to the issuing bank to verify the transaction’s authorization, considering factors like fund availability and fraud prevention.
• Intelligent Routing: The platform assesses various criteria, including cost, speed, and reliability, to direct the payment through the most appropriate gateway or method, enhancing the likelihood of success and reducing expenses.
• Alternative Routing for Failures: Should the primary payment gateway become unavailable or fail, the platform automatically switches to a backup gateway, maintaining transaction continuity and reducing the chance of payment failure.
• Managing Payment Rejections: If a payment is rejected, the platform may reroute the transaction through another gateway or method to increase the probability of completion.
• Settlement and Analysis: After payment authorization, the transaction is finalized. The platform then manages the settlement and reconciliation among the merchant, gateways, and financial institutions. Automated reporting tracks and helps refine payment procedures.

This system helps businesses achieve higher transaction approval rates, lower fees, and fewer payment disruptions, enhancing operational effectiveness and customer satisfaction.

Payment Gateways vs. Payment Service Providers vs. Payment Orchestration Platforms: Understanding the Differences

Here’s a comparative overview between Payment Gateways, Payment Service Providers (PSPs), and Payment Orchestration Platforms, which illustrates their roles, functionalities, and suitability for different business needs:

Aspect	Payment Gateways	Payment Service Providers (PSPs)	Payment Orchestration Platforms
Functionality	Facilitate secure online payments by encrypting and transmitting data between the consumer and the merchant.	Highly scalable, supporting rapid expansion and complex requirements without continually integrating new systems.	Integrate multiple payment gateways and PSPs to manage and optimize payment processes from a single platform.
Role in E-commerce	Acts as a bridge for transaction processing.	Acts as an intermediary between merchants and financial systems, offering more comprehensive payment handling.	Serves as a centralized hub for managing diverse payment systems, enhancing flexibility in payment processing.
Key Features	High-volume or global businesses must manage multiple gateways and complex payment landscapes efficiently.	Streamline payment processes, regulatory compliance, and access to multiple payment methods.	Smart routing, fraud detection, currency conversion, and detailed analytics.
Integration Complexity	Due to integration with multiple systems, higher complexity offers more control and efficiency in payment processing.	May require deeper integration depending on the breadth of services offered.	Typically, it is lower complexity, with straightforward integration into e-commerce platforms.
Best Suited For	Businesses require a simple solution to accept online payments directly from customers.	Businesses need comprehensive payment solutions with minimal internal infrastructure.	High-volume or global businesses that need to manage multiple gateways and complex payment landscapes efficiently.
Security	High, with SSL and PCI-DSS compliance essential for protecting payment data.	Similar to gateways but also manages compliance and fraud prevention across multiple payment methods.	Includes all security measures of PSPs and gateways, with additional layers of security through centralized fraud management systems.
Cost	Costs vary; generally, there is a fee per transaction.	Costs can be higher but offset by the broader range of services and potentially lower per-transaction fees.	While potentially higher initial setup and operational costs, can reduce overall transaction fees through efficient routing.
Scalability	Suitable for businesses scaling at a moderate pace.	Scalable across different markets with robust support systems.	Highly scalable, supporting rapid expansion and complex requirements without the need to integrate new systems continually.
Flexibility	Limited to the functionalities of the individual gateway provider.	More flexible, handling a variety of payment methods and currencies.	Most flexible, allowing businesses to adapt quickly to new payment technologies and regional requirements.

Payment gateways play a crucial role in direct payment processing, emphasizing security and enabling transactions. PSPs contain these gateways while handling broader payment management aspects, including compliance and merchant services. Payment Orchestration Platforms offer a holistic approach for businesses with complex, high-volume, or global payment processing needs. These platforms not only facilitate but also optimize the entire payment infrastructure.

Benefits of Payment Orchestration

Payment orchestration provides several advantages for businesses that handle complex payment systems across various markets and providers.

• Cost Optimization:

Payment orchestration platforms help businesses reduce expenses by automating the routing of payments to the most cost-effective provider.

This automation particularly benefits companies with multiple global payment service providers (PSPs). Furthermore, using the platform’s bargaining power often helps secure lower processing fees and reduce operational costs.

• Faster Integration and Reduced Time to Market:

Traditional methods of integrating new payment processors or methods can be time-consuming and require significant resources.

Payments orchestration streamlines this process, enabling businesses to connect with new processors rapidly, sometimes in just a few hours. This efficiency not only conserves time for engineering teams but also speeds up the expansion of payment options available to companies.

• Global Reach and Customer Preferences:

Payment orchestration allows businesses to offer an expanded range of payment methods, including those preferred in international markets.

Research indicates that the availability of preferred payment methods significantly reduces the likelihood of customers abandoning their purchases. By accommodating multiple payment options, businesses can improve conversion rates and meet the needs of a diverse customer base.

• Fraud Reduction and Enhanced Security:

A unified platform for managing payment flows across various methods and providers improves a business’s ability to prevent fraud.

Payment orchestration incorporates tools like 3DS (Three-Domain Secure) to secure higher-risk transactions and enforce Strong Customer Authentication measures, reducing fraud and chargebacks.

• Improved Payment Authorization Rates:

Routing payments through the optimal provider based on factors like geographical region or bank authorization rates minimizes transaction declines.

This is especially beneficial for businesses with international operations, as it enhances the likelihood of payment approval and positively affects revenue.

Challenges in Payments Orchestration

Payment orchestration faces several key challenges that must be addressed to enable seamless commerce. This includes a lack of standardization across the payments landscape, continued fragmentation with too many payment options and systems, and the need for real-time orchestration to keep up with fast-paced payments.

• Lack of standardization: The payments industry operates on a diverse set of standards, protocols, rules, fees, and regulations depending on the network, method, and region. Integrating these varying components requires extensive orchestration, creating inefficiencies and inhibiting interoperability. Standardization efforts are underway, but progress is slow, posing a challenge.
• Fragmentation: With numerous payment methods, platforms, networks, solutions, and technologies now available, the orchestration problem has become more fragmented and complex. Consolidation could help but must also be delicately managed based on diversity needs. Integrating fragmented infrastructure and data continues to make effective orchestration difficult.
• Real-time requirements: Payments happen in real-time based on events, requiring real-time orchestration, workflows, notifications, approvals, exception handling, and more. Any latency can impact the user experience and payment flow, but building out real-time capabilities at scale remains a challenge, technological and operational. Real-time orchestration stacks must be robust, reactive, and responsive enough for fast-paced payments.

Additional challenges include managing regulation and compliance, ensuring security and fraud prevention, balancing centralized vs decentralized models, optimizing resource utilization, and keeping up with innovation. New capabilities like real-time payments, stablecoins, and decentralized finance also introduce further complexity, requiring adept orchestration.

While advances in technology, standards, and collaboration are helping to address these challenges, payment orchestration continues to face an uphill task. Sustained innovation is needed to make payments truly seamless, fast, inexpensive, transparent, and inclusive through effective orchestration solutions despite a complex and fast-evolving landscape. With proactive management of challenges, opportunities can emerge to reimagine user experiences and open up new possibilities.

Centralized vs. Decentralized Models

Centralized models consolidate orchestration within a single entity, whereas decentralized models distribute orchestration across multiple participants. Both have advantages; a hybrid model combining benefits may be optimal. Centralized orchestration offers oversight, integrations, and efficiencies, while decentralized orchestration increases flexibility, modularity, and resilience and incentivizes innovation. The right model or mix depends on the requirements, dynamics, and priorities.

No one entity controls the entire payments ecosystem, so collaboration is critical to driving progress on challenges payments orchestration faces. This includes all stakeholders, from networks to institutions, technology companies, and merchant and consumer groups. Open dialogue and joint problem-solving around standards, interoperability, innovation roadmaps, and best practices can significantly advance seamless commerce through improved orchestration.

With ongoing innovation and partnerships, technology can continue reducing friction while opening up possibilities. When the components of the payment experience work as a seamless whole through coordinated orchestration, new frontiers of convenience, speed, and inclusion can be achieved. The future of seamless commerce relies on weaving the many parts together while keeping user needs at the center. Effective solutions around orchestration will make that possible in the future.

Is a Payment Orchestration Platform Necessary for My Business?

The decision to adopt a payment orchestration platform depends on several factors, primarily the size and scope of your operations. Businesses with extensive market reach that utilize multiple payment methods and gateways often find such platforms beneficial.

As businesses expand, managing various payment gateways, multiple methods, and differing market regulations becomes more complicated. A payment orchestration platform can streamline these complexities by consolidating different payment aspects into one manageable system.

Things to Consider When Choosing a Payment Orchestration Platform

When choosing a Payments orchestration Platform (POP), it’s important to consider several key elements that enhance payment efficiency and process simplification. Here are five essential factors:

• Consistent User Interface: The platform should ensure a uniform checkout process for your customers, regardless of the number of payment processors used. Although different processors might require various authentication methods, an effective POP minimizes these differences and tailors payment options to suit geographical locations and customer preferences, thereby improving conversion rates.
• Enhanced Analytics and Reporting: Look for a POP that provides comprehensive analytics and detailed reports on payment metrics such as authorization rates and processor performance. Access to these analytics helps businesses refine their payment strategies and address issues swiftly. Monitoring this data in real-time across different PSPs can significantly enhance decision-making and boost operational effectiveness.
• Automatic Rerouting and Retry Capabilities: To minimize transaction failures and reduce downtime, a reliable POP should automatically switch to an alternate processor if the primary one fails. This feature ensures continuous payment processing and lessens the likelihood of losing sales due to payment issues.
• Compatibility with Third-Party Services: The platform should easily integrate with existing third-party services like fraud detection systems, accounting software, and various payment methods. This integration capability enables businesses to create efficient workflows that cut costs and improve transaction success rates by utilizing the most suitable services for each scenario.
• Robust Security Standards: Security is critical in payment processing. Choose a POP that adheres to PCI Level 1 compliance to meet the highest security standards. Tokenization is a crucial feature that helps businesses securely store and manage sensitive data, facilitating its use across different PSPs without compromising customer information. This makes adhering to security standards easier and builds trust with customers.

Conclusion

Payment orchestration is vital for modern businesses dealing with complex payment systems. Centralizing multiple payment gateways, providers, and methods into a single platform streamlines operations, enhances security, and improves the customer experience. Businesses benefit from optimized costs, higher authorization rates, and faster integration of new payment options. However, challenges such as standardization, fragmentation, and real-time processing must be carefully managed.

Choosing the right payment orchestration platform involves considering user interface consistency, analytics capabilities, and security features to ensure effective payment handling.

Frequently Asked Questions