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, such as 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 settlement with the use of the latest technology and innovations in the field. They take care of all the complexities of payment processing, allowing merchants more time to focus on their core 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 realise 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 optimising 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 Outdated technologies can cause major damage to the business by lowering conversions and leaving many unexpected technological gaps unfilled.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 over the payments flow
Traditionally, merchants may choose to work with only one acquirer or PSP, posing 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 their 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 the 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 tools in place for their online transactions which makes 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 6 main payment orchestration layers are as follows:
- Intelligent Transaction Routing
- Flex 3DS & 3DS Routing
- Cascading and Retry
- In-Depth Reporting
- Risk & Chargeback Management
- Automated Reconciliation
Business continuity is incredibly important as it ensures a merchant’s core business functions are not severely impacted by unplanned events, such as 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 that each transaction goes to the acquiring bank that is most likely to approve it. This is extremely useful when one acquiring bank has declined a transaction, as the transaction is then routed to another acquirer for approval. Intelligent routing makes use of domain-specific rules made on the basis of BINs, currency, transaction amount, payment modes, region, fees, and other factors 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 regions improves these figures.
Flex 3DS is a payments authentication solution that is implemented on a gateway level. Transactions are checked to take into account exemptions while supporting both 3DS1 and 3DS2 versions. It saves merchants the cost of high 3DS acquirer fees. It also allows merchants to save on regular transaction fees when the transactions are declined due to 3DS authentication. Together with a frictionless experience for customers it also leads to higher success rates. With Flex 3DS, compliance does not have to come at the cost of a seamless payment experience!
3DS routing allows merchants to decide on and implement their own 3DS strategy. Namely, merchants can choose which transactions they want to pass on to 3DS2, 3DS1, or no 3DS. This feature routes transaction to the most efficient authentication protocol, taking into account exemptions and other valuable information.
Cascading, Second Chance and Retry.
Merchants with a high daily volume of transactions leave a lot of revenue on the table if they work with a simple gateway solution. There are many different reasons why a transaction is not completed. Distraction by the customer during the process, an internet outage, or a payment method that doesn’t work are just a few examples of reasons behind failed transactions. This is a disappointment for customers and the merchant alike. A payment orchestration platform offers ways to recoup potential lost revenue by offering new ways the customer can finish the transaction. When the acquirer has an outage making the transaction not possible, cascading capabilities make sure that the transaction is sent to and completed at another acquirer.
With the second chance functionality, the merchant can set up an automated email flow that reminds the customer that the transaction was abandoned. In the email, the merchant can include the product and the link to the payment page where the customer can complete the transaction.
Sometimes, the payment method of choice doesn’t work. Instead of accepting that the transaction will not go through, the merchant can present the payment page to the customer again, including alternative payment methods for them to choose from.
Experience has shown that with these methods a significant amount of revenue and future purchases from the customer can be saved.
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. The In-Depth Reporting 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 the PSPs’ performance. In turn, this allows merchants to better understand which areas their business may be lacking in and what they should focus their energy on.
Risk & Chargeback Management
Payment orchestration providers offer a variety of security measures that can reduce merchants’ overall risk. Payment innovations such as iFrame and Hosted Fields can minimise 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, which simplifies the process of fighting chargebacks.
Through partnerships with chargeback data providers payment orchestration platforms give merchants direct access to all the relevant and enriched chargeback data directly in their merchants portal. Merchants don’t need to slice and dice the data, nor do they need to collect information from multiple systems in managing the chargebacks. Thanks to machine learning technology, merchants can get advice, set rules, and execute refunds and blacklisting fully automated. The advantages for the merchants are clear: no human error, lower costs, and a higher risk appetite all lead to a higher return on investments.
The Automated Reconciliation and Settlement payment orchestration layer is spread across acquirers, saving merchants the time and 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 eCommerce 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.
Payment orchestration technology doesn’t need to be complicated
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 and 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.
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 under pressure 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 tools to compete with larger market players, while propelling their growth, aiding in their business expansion, and boosting their revenues.
Leave your questions
All you need to know about Tokenisation Tokenisation refers to replacing sensitive account and card information with an alternate code, i.e., a “token”, which shall be unique for a combination of card, token requestor, and device. What is a Token? To put it simply,...
An introduction to 3DS Exemptions Ease of use and better security are two of the most essential characteristics for an online payment transaction. Keeping this in mind, SCA i.e, the Strong Customer Authentication, which came into force from January 2021 in the EU and...
Payment priorities for the forex industry According to the Triennial Central Bank Survey of FX and OTC derivatives markets, The Forex industry is the biggest financial market globally – even larger than the stock market, with a daily transaction volume of $6.6...