The Payment Services Directive (PSD2), which came into effect in September 2019, aimed to harmonize payment regulations within the European Union.
Its objective was to modernize payment services in Europe for the benefit of both consumers and businesses, to facilitate the use of payment instruments and to strengthen the security of corporate payment transactions.
Thus, PSD2 has allowed banks to open up to new innovative players, to new services and to new payment-related services.
Faced with this profusion of newcomers, it is not always easy for e-merchants to make the right choices, to understand the offer, to grasp what best suits their own market.
Hence the emergence of new players called “Orchestration Platforms“.
- Who are these platforms for?
- How do they work?
- What makes them different?
This was the subject of the webinar organized by FEVAD and MERCATEL on Tuesday, April 5, 2022 and co-hosted by Jacques-Arthur Clabé, consultant at Galitt and Bilal El Kouche, CCO at NORBr : “Orchestration platforms as a lever for optimizing the purchase path.
A quick retrospective of the history of e-commerce and PSP development
We have identified three main parts:
1 / The beginning (from the early to mid-2000s)
The market is still quite simple, e-commerce is rather basic and considered as risky.
The end customers mainly use a web browser, the trade is done at a mainly national level, the payments are done only by card.
The e-merchant contracts mainly with his bank, which itself deals exclusively with the acquisition.
PSPs are essentially technical acceptance gateways.
Amazon checkout page (2000) – Source: https://www.researchgate.net/
2 / The growth (from the 2000s to the mid-2010s)
E-commerce takes off, diversifies and becomes more complex: new use cases (P2P payment, marketplace, mobile sales), internationalization of sales, etc.
End customers are starting to use new payment methods: the digital version of their payment card, fractional payments, etc.
It is also the appearance of major international providers (like Stripe and Adyen) that offer more and more services (reinforced authentication, acceptance, fraud management, acquisition …).
E-retailers are increasingly contracting with PSPs.
Ebay checkout page (2015) – Source: https://community.ebay.com/
3 / New landscapes (from the mid-2010s to today)
E-commerce is multifaceted, physical and virtual sales experiences are multiplied (phygital strategy, BNPL, instant payment, e-wallet, etc.), and transaction flows are increasingly complex.
Growth is very strong (with a clear acceleration linked to the digitalization of exchanges during the global COVID19 pandemic) and sales are increasingly international with payment cultures that are very diverse from one country to another (habits, regulations, players, etc.).
PSPs are trying to become “one-stop shops”, but geographic location, payment inputs and outputs, integration of new systems, reconciliation, risk management, compliance, and increasingly diverse use cases introduce complexities that a single PSP cannot solve alone.
As a result, many merchants are starting to combine multiple PSPs, creating new challenges.
This is when orchestration platforms begin to make themselves known (even if some are already installed).
German H&M checkout page (2022)
The role of orchestration platforms
Before the implementation of orchestration platforms, large e-merchants set up in-house systems to manage 2, 3, or even 5 different PSPs in order to ensure their internationalization.
But with the PSD2 (…and the pandemic), the number of players in the payment industry is exploding, the volume of digital payments is increasing dramatically, data security is becoming a key issue (GDPR), integration times are getting longer, technical teams are difficult to recruit, data formatting varies from one service provider to another (especially to manage reconciliation), etc.
It is therefore increasingly difficult for these e-merchants to maintain their solution in-house.
In addition, PSD2 has forced European marketplaces to either become authorized payment institutions or to outsource payment flows to PSPs. But creating your own PCI-DSS platform can cost several million euros, and then several hundred thousand euros per year to maintain it. Here again, these marketplaces have had no choice but to open up to several PSPs.
Thus, this directive has opened the market to new players. Today, hundreds of new payment service providers in the EU and thousands worldwide are operating and offering innovative solutions. It is becoming increasingly difficult for businesses to sort through them and choose the best solution for their needs.
Extract from the powerpoint presented during the webinar
- So how do you become multi-local?
- To follow the multiplicity of payment scenarios?
- Not be dependent on internal roadmaps that are too restrictive?
- Be in compliance with local legislation? Controlling costs?
This is where orchestration platforms come in.
They serve as a guide, ensure the connection between the merchant and the PSPs, and route the transactions to the PAT/PSP chosen by the merchant himself.
They simplify the IS of e-merchants, consolidate their payment stack, but also facilitate the daily life of payment managers by making them more autonomous.
By using an orchestration platform, the return on investment is instantaneous and very tangible.
The platforms act on 5 different axes:
- Cost control:
- Enable integration automation.
- Controlling costs through competition and the multiplicity of PSPs used.
- Payment management:
- Facilitate access to payment ecosystems through a single API.
- Manage and monitor payment data.
- Reconcile from a single entry.
- Ensure provider resiliency with backup solutions.
- Time optimization:
- Simplify and accelerate your roadmap.
- Control the time-to-market.
- Be independent of internal resources.
- Easily and quickly test a new PSP.
- Fraud prevention:
- Control transaction fraud.
- Controlling chargeback fraud.
- DSP2 & RTS
- + equivalent rules according to geographies.
Services offered by the orchestration platform
Orchestration platforms allow the right to make mistakes.
The user can test a new payment method, measure its performance on a sample of transactions, make choices, make mistakes, and readjust almost instantly and in complete autonomy. Technical issues are replaced by data-driven business decisions.
To fight fraud, the user uses a single entry point to homogenize his rules. He is no longer obliged to duplicate his rules between his different PSPs. He defines his rules with a specialized partner, and they are then applied to all transactions regardless of the PSP.
He can also choose to use specialized providers according to geographical areas to treat fraud in an even more refined way.
The user has access to a single dashboard and centralized and standardized reports to facilitate a real-time reading of the global situation of his payment activity.
The user can perform his bank reconciliation (reconciliation between incoming and outgoing payments) in a unified, simplified, and sometimes automated way (regardless of the payment means or the PSP).
The strengths of the PSPs are also becoming more visible: one local PSP is more efficient in Italy than a cross-border PSP, another offers an optimal omnichannel service compatible with my already installed POS fleet, and a third offers a local payment method in Brazil, etc.
Merchants can contract with 10 different PSPs while controlling their costs and avoiding long and tedious integrations. The orchestrator takes care of the integration of the merchant’s PSPs for him and the connection is done in a few clicks.
NORBr’s specific positioning in orchestrators
NORBr qualifies itself as a distributor of payment solutions.
NORBr acts as an orchestration platform but also as a marketplace for various payment solutions.
NORBr’s objective is to allow merchants, from a single integration, to be able to manage a whole payment stack (strong authentication, anti-fraud, payment, bank reconciliation, VAT management, etc.).
Today, we mainly target large merchants with verticals around fashion, luxury, beauty, travel in general, and air travel in particular.
But we regularly have projects in other areas.
We are a small team, but we are fully invested in our customer relationships. We have automated our entire system to make our support our trademark.
Functionally, NORBr offers a payment page with a simplified management thanks to the automatic checkout: a new payment method is activated on a PSP, it is immediately available for the end customer. Without any human action.
This dynamic presentation of payment methods is tailored to the merchant’s choices and to scenarios (order amount, country, customer loyalty, etc.).
Many traditional PSPs rely on a proprietary token that belongs to the PSP, and can only be processed by that PSP. NORBr offers e-merchants the ability to modify their payment infrastructure while keeping their tokens thanks to its own vault-agnostic vault. This tokenization service allows merchants to use the same token on multiple processors/collectors: once the customer’s card is registered, and as long as it does not expire, it is valid at all PSPs, even if a new PSP comes along.
This ensures a smooth journey for the end-user. His saved cards are always available, no matter what changes the merchant makes in his routing choices.
Example of NORBr checkout page
The payment page is therefore intimately linked to smart routing. The user defines his own routing criteria without any line of code.
He can easily compare a provider, add or remove a connection to get a better conversion, or define fallback routes in case of a partner malfunction.
The intelligent routing also proposes to rely on machine learning to help the merchant in his choices and to favor redirection in case of failure.
NORBr ultimately acts as a messaging system. A route is taken, and if it is not accessible, it redirects to another route to ensure the success of the transaction within a second.
Describes, in a schematic way, how the NORBr smart-routing works.
Once the routing is done, the orders are displayed on the NORBr console. Each order consists of one or more transactions (e.g. inbound and outbound transactions) and displays all retrieved data (e.g. trade data, delivery data, payment data).
NORBr is not itself a payment institution but it connects the merchant to payment institutions. If we take the example of the travel sector, in the same order we will find a plane ticket, a hotel room (with a payment once the night is over, on the spot in POS), a car rental, and insurance. This can represent 4 different cash flows (4 transactions) with very different logic.
NORBr will redirect the flows to each of the “payout” partners and show the merchant the breakdown of the funds.
As NORBr’s partners do not stop at payment, the data displayed can be very varied. One of our partners allows, for example, depending on the country of destination of a package, to automatically calculate the VAT rate and the shipping costs in a dynamic way. And of course, all this information goes back into the data.
Extract from an order in NORBr
NORBr also provides a true BI tool with its fully customizable dashboards that gather all data from partners and allow merchants to define their own indicators. The KPIs can be focused on payment as well as more global marketing data for example.
The user can easily compare the performance of providers in terms of conversion, risk, and costs.
Describes, in a schematic way, how the NORBr dashboard customization works.
There are several types of orchestration platforms:
- platforms that originate from or are backed by a PSP or an e-merchant,
- agnostic platforms that charge fees on transactions and/or connections (in addition to PSP fees),
- or NORBr which offers a platform that is both agnostic and free for e-merchants.
Indeed, as a payment solution distributor, NORBr gets paid thanks to these partnerships. A bit like a store that gets paid for the applications it offers.
Because NORBr also answers to the pain points of PSPs. It allows them to better control their roadmap, make streamlined choices thanks to the application’s dashboards, to open up to new markets, and save time on integration: a signed customer can start its flows within the same week.
Various questions asked during the webinar
- Does Norbr have the vocation to propose to its customers the acceptance of meal vouchers?
- NORBr: Yes, by integrating service providers who offer it as any other payment method.
- On which data are based your “performance” KPIs allowing you to value the contribution of a PSP or another one?
- NORBr: On the data reported by the partners, whatever the partner. NORBr puts these data in a flat format, standardizes them, and displays them for easy reading.
- Is it necessary for the merchant to sign acceptance contracts individually or does NORBr do this?
- NORBr: NORBr does not interfere in the negotiation between the merchant and the service provider. The contracting is done directly between the merchant and the service provider.
- You said that orchestration concerns from your point of view mainly Tier 1 and high Tier 2 => what volume / annual turnover do you put behind it?
- NORBr: For us, the main prescriber is the complexity of the payment stack and scenarios. A merchant making €200M/year in turnover but on more than 3 geographies, needs an Orchestration platform as much as a French merchant making €500M or €1B in turnover.
🎥 Replay available on YouTube (in French): https://lnkd.in/dY8QvVBU