Payment orchestration is a process that streamlines and manages payment transactions across multiple payment service providers (PSPs), gateways, and methods. This layer of infrastructure allows merchants to integrate various payment methods seamlessly, manage transaction routing, and automate retries in case of failures. This centralization is increasingly essential as the global Payment Orchestration market is projected to grow at a 25.2% CAGR, reaching an estimated $11.33 billion by 2030. By centralizing payment processes, merchants gain better control over payments while ensuring a smoother customer experience across different channels
How does payment orchestration work?
At its core, payment orchestration connects multiple PSPs, acquirers, and payment methods into a unified system. Merchants can use a single platform to manage all payment-related processes. This includes:
1. Smart Routing: Payments are automatically routed to the best available processor, ensuring higher approval rates and faster transaction times .
2. Retry Mechanisms: If a payment fails due to technical issues or other soft declines, the orchestration platform will automatically retry the transaction through alternative channels .
3. Simplified Integration: Merchants no longer need to integrate multiple PSPs manually. Payment orchestration enables them to connect to a wide range of payment services through one API .
Key benefits for digital merchants
1. Increased Conversion Rates
Payment orchestration boosts approval rates by routing payments through the most appropriate processor. Smart routing can reduce failed transactions and false declines, which are costly to businesses. 11% of eCommerce transactions failed last year, causing significant losses, but orchestration minimizes this by retrying payments through better routes.
2. Reduced Costs
By routing payments through the provider with the lowest fees for a given region or payment method, payment orchestration helps businesses reduce processing costs. This is particularly useful for global merchants operating in multiple countries.
3. Enhanced Fraud Prevention
Payment orchestration layers come with built-in fraud detection tools, such as tokenization and real-time risk assessment. These features help merchants meet compliance standards and secure customer data. They also reduce the scope of PCI compliance by centralizing payment management .
4. Faster Global Expansion
For merchants expanding internationally, payment orchestration allows for quick integration with local payment methods and PSPs. This flexibility makes it easier to enter new markets, without the need for extensive IT development. It offers multi-acquirer support, which can drastically reduce onboarding time .
5. Improved Customer Experience
A seamless checkout process is vital for customer retention. Payment orchestration ensures that customers can use their preferred payment methods, reducing cart abandonment. Additionally, fallback options ensure transactions are not lost due to minor technical failures .
Challenges and considerations
Despite the many benefits, implementing payment orchestration comes with some challenges:
1. Initial Costs: The integration of a payment orchestration layer can involve upfront costs. Merchants must weigh these costs against the long-term savings generated from reduced processing fees and higher approval rates.
2. Complexity of Multi-Provider Management: Managing relationships with multiple PSPs can increase operational complexity. Orchestration helps mitigate this, but a structured approach is still required to manage multiple integrations and optimize performance
Best practices for digital merchants
1. Leverage Smart Routing: Use smart routing algorithms to maximize approval rates by sending transactions through the most efficient and reliable PSPs.
2. Focus on Fraud Prevention: Ensure that your orchestration platform includes fraud detection and prevention tools, such as tokenization and encryption, to protect sensitive customer data .
3. Monitor Payment Performance: Continuously analyze transaction data to identify trends, optimize payment flows, and improve decision-making. A strong analytics component is essential to optimize operations and maintain high performance.
Conclusion: Why payment orchestration matters
For digital merchants, payment orchestration offers a solution to the growing complexity of managing multiple payment methods, gateways, and service providers. By improving conversion rates, reducing costs, and enhancing customer experience, payment orchestration is a critical tool in the modern eCommerce landscape. As online payments become increasingly diverse and global, businesses that adopt orchestration strategies will be well-positioned to succeed.
