By max May 30, 2023
With the eCommerce segment growing at an exponential rate, there’s a need for an optimized payment structure. Banks, acquirers, processors, payment gateways, and other financial institutions work together to process a transaction. To simplify the process, merchants consider payment orchestration, which aims to deliver a unified transaction experience to customers.
A vast majority of eCommerce stores have embraced multiple payment options to provide their customers with the convenience of transferring payment through their desired channel. Merchants accept card payments, mobile payments, transactions through retail POS, cash-on-delivery, and instant payments. There are many options. But this convenience presents the challenge of managing transactions from different channels and transferring this data to the ERP system.
This makes payment infrastructure complex, especially for small businesses that rely on multiple payment processors. Let’s see how payment orchestration can help reduce the complexity of the transactions and make the entire payment infrastructure smooth, cost-effective, and efficient for the merchant.
What Exactly is Payment Orchestration?
Working with multiple payment processors, gateways, and banks seems pretty overwhelming. For the customer, it’s just a one-step process. They click on the “buy” button, pay the amount, and get their order confirmed. However, the backend process involves several steps. Payment orchestration refers to the integration of payment processors, fraud detection services, banks, and other operators in eCommerce transactions into a single software layer.
In other words, payment orchestration is software that facilitates every stage of payment processing. From validating the payment to its settlement, it streamlines the entire process by bringing all parties involved in transactions into a single centralized platform. In addition to payment routing and settlement, this software can handle accounting, payment reconciliation, and billing.
With all stages of the transactions displayed on a single platform, it gets easier for the merchant to get a clear, consolidated view of every stage of payment processing. They can collect key metrics, stats, and data to make informed decisions. It’s also easier to scale the payment processing system as your business grows. You don’t have to upgrade your plans for each unit individually. The software works as a central payment hub, where you can collect data about your recent and previous transactions.
Why Consider Payment Orchestration?
The biggest challenge a business faces during payment processing is failed transactions. Sometimes, it happens because of the unavailability of the payment processor or a technical difficulty. With payment orchestration integrated into your eCommerce infrastructure, it’s possible to work with multiple acquiring banks. This is called smart payment routing.
Instead of relying on a single payment service provider, you can partner with multiple payment processing companies to ensure a low-cost, fast, and smooth transaction. If, for some reason, your payment processor fails to process transactions, you will have peace of mind knowing that the payment orchestration software will route these payments to another processing company.
It’s helpful for businesses operating globally. Payment orchestration streamlines this process by combining all payment processors and fraud detection service providers into a single unit. It doesn’t just make payment processing smoother for businesses, but payment orchestration offers greater flexibility to the customers and helps merchants achieve their satisfaction.
How Does It Work?
The process may vary from one payment provider to another. But, the basic steps are the same for most. Here’s how it operates.
Step 1: A customer adds a product to their cart and heads to the checkout page where they choose a suitable payment method. The options may vary depending on the customers’ location.
Step 2: They enter their card or other payment details on the checkout page and initiate a transaction. If you have enabled payment orchestration, the software will scan the available payment processors and route the transaction to the nearest and most affordable payment processing unit.
Step 3: If the payment processor is unavailable or there’s any technical issue at the moment, the orchestration system will re-route this transaction to the next best acquiring bank. The whole purpose of this re-routing system is to prevent declined transactions.
Step 4: Once the payment processor clears the payment, the merchant and customer will be notified about the successful transaction.
It may seem like a lengthy process, but the entire operation takes place so quickly that within seconds, you will receive the “Payment successful” notification. Not only for payment routing and settlement, but the right payment orchestration software can handle batch processing and billing at regular intervals. The entire process is automated. Additionally, merchants can check their dashboards to collect key metrics about their payment infrastructure.
Benefits of Payment Orchestration
As businesses are incorporating multiple payment options and expanding their operation on a global level, they are implementing payment orchestration. If you have not yet considered the system, here are some reasons why you should integrate payment orchestration into your payment infrastructure.
Lower Transaction Fee
Businesses running globally need multiple payment service providers to process global transactions smoothly and at lower costs. The biggest advantage of payment orchestration is that it scans payment processors that charge the lowest fee for international transactions. Even if you save a few cents for each transaction, you can save a lot in the long run. Payment orchestration is an excellent way to save money in transaction fees.
Intelligent Payment Routing
Gone are the days when direct routing was the only option for eCommerce stores to process online transactions. Today, intelligent routing has become a common practice and is embraced by most merchants operating globally. Smart routing chooses a payment provider based on predetermined protocols, such as speed of transaction, cost, and other factors.
It reduces the number of declined payments, thus reducing revenue loss from failed transactions. If the payment processor declines the payment for some reason, intelligent routing re-routes the transaction to another payment provider.
Assess and Track Data
Payment orchestration covers all payment processing platforms in one system, enabling merchants to get clear insights into important metrics on a unified system. Since everything is available in a centralized location, you can easily analyze and track data. This helps you get a consolidated view of your payment structure, business performance, and number of successful and failed transactions. These software applications generate automated reports.
Quick and Smooth Payment Integration
Generally, merchants are supposed to integrate their fraud detection programs with payment gateways to ensure that each transaction is verified before it’s processed. This process can be hectic and time-consuming. By installing payment orchestration, it becomes a whole lot easier to integrate different PSPs and facilitate quick payment for customers.
Satisfied Customers
A business is likely to lose a large number of its customers because of the limited payment options. With payment orchestration, you can let your customers choose from different payment choices. Since all payment processors are integrated into a single software layer, the transactions are processed quickly and effortlessly.
In addition to that, the payment rerouting increases the chances of a successful transaction, which results in more satisfied customers. Many people tend to abandon carts because of the lengthy checkout process. If the transaction is declined on the first attempt, the customer will most likely leave the cart and buy from another store.
Scale Your Business Easily
A merchant experiences many obstacles when conducting online transactions. The last thing they want is the customer abandoning a cart during checkout just because their transaction can’t be processed. This can slow down your business’ growth.
Payment orchestration doesn’t just provide multiple payment options, but this smart routing ensures that payments are processed instantly, irrespective of the sales volume. The biggest perk of payment orchestration is faster payment processing for overseas transactions. Now, you no longer need to worry about the exorbitant transaction fee or the PSP’s unavailability.
Compatible with the Latest Payment Methods
With the payment industries evolving rapidly, customers’ needs regarding payment methods are changing. People are on the lookout for payment options that are convenient for them. The Buy Now Pay Later (BNPL) scheme, for instance, has drawn the attention of most customers.
It has allowed people to buy expensive stuff and pay for it in installments instead of waiting for years to buy that. Fortunately, payment orchestration is compatible with the BNPL and other latest payment methods. So, there’s no need to rework the entire payment structure to integrate a new payment alternative.
Achieve Security Compliance
Merchants are supposed to follow PCI DSS compliance to protect customers’ data and provide them with fair services. Payment orchestration is PCI-compliant. Since the software is integrated with fraud detection programs, it scans each transaction for suspicious activities and validates the customers’ credentials before processing the payment. This ensures PCI compliance and safety for the customer.
Conclusion
Payment orchestration offers fast and cost-effective payment processing for international transactions. It connects different payment service providers with fraud detection services and payment gateways. All these parties are integrated into a single software layer, which offers clear visibility into the essential payment metrics. It shows you your business’ entire payment infrastructure. The demand for this software is not going to slow anytime soon, as merchants have been constantly looking for ways to optimize their payment processing for customers.