Payment orchestration is the process of centralizing payment gateways, processors, acquirers, and other financial service providers in a single platform. This unified approach simplifies payment management for businesses and is especially useful for businesses that operate across regions and serve diverse customer preferences.

The global payment orchestration platform market was valued at $1.1 billion USD in 2022 and is expected to grow at a compound annual growth rate of 24.7% from 2023 to 2030. Below, we’ll explain how payment orchestration works, the benefits of using a payment orchestration platform, and the financial impact and challenges associated with payment orchestration.

What’s in this article?

• How does payment orchestration work?
  
• Benefits of using a payment orchestration platform
  
• Financial impacts of payment orchestration
  
• Challenges associated with payment orchestration
  

How does payment orchestration work?

Payment orchestration involves integrating a business’s payment gateways, processors, acquirers, and other financial service providers with a single centralised platform – creating a unified interface to manage all payment operations. Here’s how an orchestration platform works.

• Transaction initiation: When a customer initiates a payment, the platform intelligently determines the optimal route for the transaction based on predefined rules and real-time data – taking into consideration factors such as cost, success rates, customer preferences, and regional regulations.

• Transaction processing and reconciliation: The transaction is securely processed through the selected payment provider in compliance with security standards and regulatory requirements, and the platform automatically reconciles these transactions.

• Data analysis: The platform collects and analyses transaction data to provide insights into payment trends, customer behaviour, and operational performance. This data can be used to optimise payment strategies and improve decision-making.

• Customisation: Businesses can customize the platform’s rules and workflows to fit their needs and preferences, allowing for more flexibility and control over payment operations.

Benefits of using a payment orchestration platform

Payment orchestration platforms can benefit businesses in several ways. These benefits can include:

• Simplified payment processes: Payment orchestration consolidates multiple payment service providers (PSPs) into one platform, reducing the need for managing relationships with multiple vendors for different systems.

• Operational efficiency: Payment orchestration automates manual tasks associated with payment processing such as routing, reconciliation, and reporting. This reduces the risk of errors, frees up valuable resources to focus on core activities, and accelerates transaction processing.

• Higher transaction success rates: With access to multiple PSPs, businesses can optimise payment routing to make sure transactions are processed through the most cost-effective and reliable channels. This increases transaction success rates and minimises failed payments.

• Lower costs: Orchestration can help businesses greatly reduce their payment processing fees by intelligently routing transactions. The platform analyses factors such as transaction size, currency, and provider fees to determine the optimal route. This can lead to substantial savings over time.

• Better customer experience: Payment orchestration creates faster, more reliable transactions, supports multiple payment methods, and provides a consistent checkout experience across markets.

• More revenue: This flexibility improves the checkout experience, reduces cart abandonment rates, and increases customer satisfaction. A better checkout experience reduces friction and encourages customers to complete purchases, leading to higher conversion rates and increased sales.

• Business continuity: In the event of a PSP outage or failure, payment orchestration provides the redundancy needed to maintain continuous payment processing. This ensures continuity and minimises the risk of revenue loss over payment disruptions.

• Fraud prevention and security: Payment orchestration platforms often come with advanced fraud detection and security features. By centralising payment data, businesses can leverage machine learning algorithms and comprehensive analytics to detect and prevent fraudulent activities more effectively.

• Scalability: Payment orchestration allows businesses to easily add or switch PSPs without extensive reconfiguration. This scalability helps businesses growing or expanding into new markets adapt to regional payment preferences and regulations.

• Data-driven insights: The platform collects and analyses transaction data, providing valuable insights into payment trends, customer behaviour, and operational performance. These insights can be used to make informed decisions about pricing, marketing, and overall strategy.

• Regulatory compliance: Payment orchestration helps businesses operate in compliance with global payment regulations and provides tools for compliance with local laws and standards – reducing the risk of penalties and legal issues.

• Reduced time to market: Implementing a new payment method or expanding into a new region can be time-consuming and resource-intensive. Payment orchestration platforms simplify these processes, allowing businesses to quickly launch new payment options and enter new markets with minimal effort.

• Competitive advantage: By offering an intuitive, secure, and convenient payment experience, businesses can differentiate themselves from competitors and gain an edge in the market.

Financial impacts of payment orchestration

Here’s how payment orchestration can directly impact and benefit a business’s finances.

• Reducing costs: Orchestration systems save money by using the most cost-effective PSPs, decreasing failed transactions, and reducing the costs of chargebacks and reprocessing. They also lower the administrative and operational expenses associated with managing multiple vendors.

• Revenue optimisation: Payment orchestration systems optimise revenue by reducing cart abandonment, boosting conversion rates, and supporting multiple payment methods and currencies to attract a wider customer base.

• Improved cash flow: Payment orchestration systems improve cash flow by simplifying payment processes, optimising routing for faster settlement, and automating reconciliation.

• Improved financial management: Payment orchestration systems boost financial management by employing advanced fraud detection mechanisms, ensuring compliance with global payment regulations, and creating a centralised payment database with detailed insights into transaction trends, customer behaviour, and financial performance.

• Customer retention and loyalty: These systems improve customer retention and loyalty by creating a reliable, secure payment experience and offering a variety of payment options to fit customer preferences.

• Operational efficiency: Payment orchestration systems improve operational efficiency by automating and optimising payment processes, and by providing uninterrupted payment processing during PSP outages or failures.

Challenges associated with payment orchestration

While payment orchestration’s unified approach can improve payment management for businesses, it can also present new difficulties. Here’s a look at some of the challenges with payment orchestration.

• Integration: Integrating multiple payment providers, gateways, and processors into a single platform can be a difficult and time-consuming process. It requires careful planning, technical expertise, and coordination among stakeholders. Compatibility issues and data inconsistencies can arise, potentially delaying implementation and causing disruptions.

• Data security: Payment orchestration platforms handle sensitive financial data, making them prime targets for cyberattacks. It’s important to have strong security measures including encryption, tokenisation, and fraud detection.

• Compliance: Payment orchestration platforms must operate in compliance with regulations such as the Payment Card Industry Data Security Standard (PCI DSS) and the EU’s General Data Protection Regulation (GDPR) to protect customer data and avoid penalties.

• Cost: The initial setup and ongoing maintenance of the platform can be expensive. Businesses need to carefully evaluate the costs and benefits to determine the return on investment (ROI).

• Technical expertise: Implementing and managing a payment orchestration platform requires technical expertise. Businesses might need to hire specialised staff or rely on external consultants to handle the technical aspects of the platform, adding to the overall cost and complexity.

• Change management: Implementing payment orchestration often involves substantial changes to existing workflows. A well-defined change management plan can help with a smooth transition, reduce disruptions, and gain buy-in from employees who will be using the new platform.

• Customization: There might be limitations on how much a business can customise the platform to its needs. This can be a challenge for businesses with unique requirements or complex payment flows.

• Dependence on third-party providers: Businesses that use payment orchestration platforms are inherently dependent on the reliability and performance of their chosen providers. Outages or technical issues with a provider can impact the entire payment process, leading to disruptions and potential revenue loss.