Payment Orchestration: What it is and how it affects digital transactions

Statista estimates that in 2023, the total value of transactions in the digital payments segment will reach $9.46 trillion. By 2027, the market is expected to grow to $14.78 trillion. The growth of digital payments has led to an increase in payment methods. This trend has resulted in payment stacks ceasing to be simple. They are loaded with a large number of functions, components, and integrations with third-party providers and sometimes with disparate internal systems. Services become less efficient in processing transactions and more complex to manage. This leads to e-commerce businesses missing out on opportunities for revenue and competitive advantages due to a lack of human, technical, and financial resources. So, how can companies streamline their payment acceptance processes? It makes sense to use payment orchestration.

The specialists at PSPARK have prepared an article for you explaining what payment orchestration is, why it is needed, and its advantages. You will also learn how payment orchestration differs from traditional processing and how to implement it into your business.

What Is Payment Orchestration?

Payment orchestration is the process of managing and coordinating the lifecycle of transactions, simplifying the interface and internal integration between a company’s website and various payment service providers. Orchestration is carried out through a specialized platform known as a Payment Orchestration Platform (POP) or Payment Orchestration Layer (POL). This technological framework manages user and seller accounts, acquirers, payment service providers (PSPs), fraud detection services, and more. It initiates, verifies, routes, and processes transactions involving these parties.

Payments Orchestration Layer serves as the entry point and heart of the payment system, streamlining payment automation. With POL platforms, e-commerce businesses and online service providers don’t need to separately integrate each PSP and acquirer. Instead, they can use a unified payment orchestration API, benefiting from reduced integration complexity. This mechanism can help organizations become more flexible and scale faster. It also makes it easier for them to enter new markets, integrate payment providers from different regions, and use various currencies.

That’s why entrepreneurs see payment orchestration as a solution that not only allows them to retain control over their payment stack but also elevates their business to a new level.

How Does Payments Orchestration Work?

Payment orchestration platforms use automated transaction routing to automatically determine the optimal ways to send payments. Conducting operations through the best PSPs reduces the number of false declines and increases the number of authorized transactions.

The working principle of orchestration is as follows:

• The consumer adds items to the cart on the online store’s website and then selects the preferred payment method from the options on the checkout page.
• After the buyer places an order, payment data is transmitted to the payment gateway.
• The gateway encrypts the buyer’s payment card information and sends it to the bank acquirer and payment processor.
• Upon receiving the data, the bank acquirer contacts the issuing bank to verify and authorize the payment.
• The bank acquirer typically sends an authorization or decline response code to the payment gateway and the seller. However, in the payment orchestration platform, a different method is used. If the payment doesn’t go through, the platform automatically sends a request to another payment processor to reduce false declines.
• If the payment is successfully processed by another payment processor, it gets approved.

Thus, intelligent routing turns payment orchestration into a defence against false declines. This is not only about seamless transaction processing but also about improving the user experience, increasing revenue, and minimizing sales losses due to payment hiccups.

History and Evolution from Payment Processing to Orchestration

History and evolution from payment processing to orchestration reflect the changing landscape of financial technologies, driven by innovation, shifting consumer expectations, and the need for more efficient and flexible payment solutions. Before the advent of digital transactions, payment processing was relatively straightforward. Operations were mainly conducted through cards, with a focus on secure authorization and transaction settlement. With the development of e-commerce in the late 20th century, there arose a need for solutions to process online payments, giving rise to payment gateways.

The increasing popularity of digital payments led to the expansion of payment methods beyond traditional credit and debit cards. Alternative payment methods such as e-wallets, bank transfers, and cryptocurrencies have become more common. This, in turn, posed challenges related to integrating and managing payment solutions, making them complex and inefficient. This is where payment orchestration platforms came into play. They aim to simplify the integration of various payment services into a unified system, increase the success rate of transactions, and reduce the number of false declines. They quickly gained recognition and continue to gain popularity. According to a Grand View Research report, the global payment orchestration platform market was estimated at $1.13 billion in 2022. It is expected that the compound annual growth rate (CAGR) from 2023 to 2030 will be 24.7%.

Modern platforms are focused on flexibility and adaptability, allowing companies to quickly adopt new payment methods and adjust to a changing regulatory environment. Additionally, they enhance the usability of payment services, streamlining the payment process and ensuring a high level of security.

Distinction between Payment Orchestration and Traditional Payment Processing

Let’s consider a comparative table to understand the difference between orchestration and traditional processing.

Why Do You Need Payment Orchestration?

Orchestration is necessary to address complex challenges associated with managing various payment methods, numerous payment service providers, and the constantly changing landscape of the industry. Let’s delve into why using a payments orchestration platform is worthwhile.

Optimal Configuration Cost for Payment Methods

Connecting to payment gateways often requires significant effort and expenses. This involves configuring integration, managing risks, and fraud prevention, as well as ensuring seamless payment flows. Platforms facilitate integration for sellers and provide a set of tools for end-to-end payment optimization accessible from a single portal. This saves time and money, allowing you to invest resources in other directions.

Simplified Checkout Process

For successful sales, consumer willingness to purchase is not enough. Ensure that every purchase is successfully completed and the customer is satisfied with the process. However, complications in the checkout that hinder user interaction can lead to issues. POP streamlines payment by reducing the number of steps in the purchase process and providing a more attractive payment page. Regardless of the buyer’s location worldwide, POP offers an optimal mix of payment options.

Fast Transactions

Optimizing the payment flow is crucial for efficient operations. A buyer might reject a purchase if your payment mechanism is not tuned. Imagine if the payment gateway suddenly malfunctions for technical reasons. Every payment would be unsuccessful without a backup service, resulting in revenue loss. You must ensure that your payment operations are secure and processed quickly. POP’s routing capabilities can ensure smooth transaction flows by directing them through the most advantageous systems.

Benefits of Payment Orchestration

Payment orchestration platforms can benefit all companies, from small online stores to large international corporations that want to remain competitive and thrive in the modern business environment. In what specific ways do they provide business benefits?

Increased Revenue

As platforms simplify the payment process and improve customer service quality, e-commerce companies can boost online sales and increase revenue. Furthermore, the opportunity to connect services such as loyalty cards and “buy now, pay later” (BNPL) is provided, enhancing conversion.

Reduced Payment Processing Costs

POPs automate the payment process, allowing sellers to reduce operational costs. They help decrease payment processing fees by directing transactions through channels offering the lowest rates.

Analysis and Monitoring

Payment orchestration enables companies to compare their payment metrics with those of competitors. This helps identify areas for improvement and understand how to address issues, increasing potential cost savings.

Access to Various Payment Methods

This means that as sellers’ needs change, they can easily add other methods to their sites through a single API connection. This is particularly relevant for companies with international customers with different payment preferences.

Increased Payment Acceptance Rate

Orchestration platforms allow online stores to connect with multiple payment service providers. They also offer intelligent payment routing, enhancing the transaction acceptance rate.

Key Features of Payment Orchestration Platforms

A payment orchestrator has a range of features that make it appealing to businesses.

Flexible Payment Management

By consolidating all payment processing on a single platform, you can manage and track transactions across cards from multiple issuers, card schemes, gateways, open banking systems, and acquirers.

Support for Different Currencies, Payment Methods, and Languages

Companies can quickly enter new markets by using multiple currencies, payment methods, and languages. This facilitates expanding coverage without significant changes to the infrastructure.

Optimization of Transaction Routing

The platform smartly directs transactions to the most suitable payment system based on cost, success metrics, and processing time. It optimizes overall performance, reducing transaction costs and increasing approval rates.

Data Protection and Regulatory Compliance

Security measures such as fraud detection and data encryption are used to enhance the confidentiality of customer information. By consolidating all payment processing, organizations can ensure consistent security measures and compliance with regulatory requirements.

Implementing Payment Orchestration in Business

POP provides businesses with a convenient and efficient way to manage all their payment processes in one place. It allows the integration of multiple payment methods and providers, giving customers the freedom to choose and improving service quality.

Using the platform helps optimize transaction routes, ensuring that each transaction is sent through the most economical and reliable channel. It also provides valuable insights and analytics. As a result, companies can make informed decisions to increase revenue and reduce costs.

Payment orchestration also enhances security by preserving the confidentiality of financial information and protecting against fraudulent activities.

How PSPARK Can Help You

PSPARK, a payment orchestration provider, offers a product that serves as a universal solution for companies operating in various sectors, including:

• Financial institutions
• Online stores
• Gaming industry and gambling projects
• Freelance specialists’ websites and freelance exchanges
• Ticket purchase services, etc.

By using our services, you can access all necessary information in your personal account and direct payments through different routes to minimize delays and rejections. We understand the importance of managing business processes. Therefore, we provide tools that allow you to keep records of all incoming payments, control their flow, and obtain analytical data. Additionally, our platform allows you to minimize risks and ensure maximum security for customers and merchants. We employ a sophisticated fraud protection system and end-to-end encryption, ensuring the secure transmission of payment data.

Use PSPARK orchestration platform and forget about payment acceptance issues!

Payment Orchestration FAQs

What is the difference between payment orchestration and payment gateway?

Both payment gateways and orchestrators unite and support various payment methods. However, the latter allows for significantly increased control and efficiency of the payment system.

What is the difference between payment orchestration and traditional payment processing?

Orchestration represents a modern centralized approach to transaction management through intelligent routing. Traditional processing typically involves a more fragmented method of integrating and managing each service separately.

What is the difference between PSP and payment orchestration?

A PSP is a company providing services for payment processing to merchants. Orchestration is a broader concept, encompassing the management of multiple PSPs, acquirers, and banks on a single platform.

What is the size of the payment orchestration market?

According to a Grand View Research report, the global payment orchestration platform market was estimated at $1.13 billion in 2022. It is expected to have a cumulative annual growth rate of 24.7% from 2023 to 2030.

What is an example of payment orchestration?

PSPARK is a payment orchestration platform that simplifies the management of modern payment ecosystems, providing real-time visibility and access to the entire payment environment. Using PSPARK solution optimizes operations and simplifies the payment management process.

Why has payment orchestration become important for online businesses?

Due to issues arising in the payment environment, orchestration has become crucial for online businesses. Companies can easily adapt to various payment methods, enhance customer service quality, and stay competitive in the global market.

How does payment orchestration contribute to fraud prevention?

POPs include security measures such as fraud detection and data encryption. Consolidating all transaction processes on a single platform allows companies to implement coordinated security measures and comply with regulatory requirements.

How long does it typically take to implement a payment orchestration solution?

The timeline depends on the specificities of the business, the chosen platform, and the number of integrations required.

Can payment orchestration help in reducing payment processing costs?

Yes. Optimizing transaction routes and the ability to choose payment service providers allow companies to reduce payment processing fees.