Maestro of Transactions: How Payment Orchestration Transforms the Merchant Experience

Maestro of Transactions: How Payment Orchestration Transforms the Merchant Experience

Tom Robins
May 1, 2024

Maestro of Transactions: How Payment Orchestration Transforms the Merchant Experience

Given the growing complexity of modern online transactions it is no surprise that merchants and consumers alike are becoming increasingly frustrated by ecommerce payments. In fact, a recent survey by TrueLayer found that 87% of consumers are dissatisfied by the online payment experience that they currently receive. Payment Orchestration Platforms (POPs) exist to remove much of this complexity and offer improved flexibility, ultimately transforming the checkout experience for customers and payment management processes for merchants.  

Reduction in payment complexity

POPs strive to improve the merchant experience through several different methods, the first of which being through a reduction in payment complexity. Traditionally, merchants have had to establish their own integrations with acquirers and payment service providers, which can be an arduous process particularly for smaller merchants with more limited resources and expertise in payments. To make matters more complicated, several integrations are typically required to cover every payment method that needs to be accepted and every market that a retailer wants to operate in. POPs enable merchants to outsource all these integrations. A merchant simply needs to establish a single integration with the POP, to benefit from all their existing acquirer integrations and supported payment methods. Subsequently, a merchant’s often limited resources can be reallocated to core competencies and the complexity surrounding payment acceptance can be handled by the specialist POP.

Improved transaction conversion rates

POPs are also able to help merchants increase their conversion rates through optimized routing. More specifically, merchants can set their own rules, or use the rules defined by the POP, so that when a consumer tries to pay from a particular market, using a specific payment method and currency the transaction can be routed to the most appropriate acquirer, based upon its credentials. Alternatively, more advanced POPs can gather extensive data surrounding the characteristics of each transaction, automatically routing the transaction to the acquirer that is most likely to accept the payment at a low cost, based upon previous authorization rates. This subsequently results in higher conversion rates for merchants thus optimizing revenues – some providers claim as much as a 30% increase in conversion rates. We believe this claim must be carefully tested to fully understand the circumstances that a conversion rate can be improved by this much. Additionally, the reduction in card chargebacks associated with the rule based, and smart routing means less time needs to be spent dealing with costly and time-consuming chargebacks.

Greater scalability and agility

POPs can also help e-commerce merchants become more easily scalable and agile. Firstly, and most importantly POPs are able to facilitate rapid international expansion through their extensive network of acquirer, payment method, and payment service provider integrations, that exist across multiple markets. When attempting to penetrate a new market merchants need not worry about payment-related challenges if they are integrated with a POP. Instead, merchants can focus on the core elements of their go to market strategy. On the other hand, merchants using legacy acquirers may be restricted in their international expansion if their acquirer does not support payment acceptance in the market that they want to expand into. Additionally, POPs enable merchants to increase their transaction volumes at short notice through simply purchasing a different subscription plan. This allows retailers to quickly adapt to peak season sales and other external factors that may lead to significant fluctuations in transaction volumes. Finally, through partnering with a POP, merchants are able to respond quickly to changes in consumer preference. If, for example, a particular payment method rapidly increases in popularity, merchants can almost immediately offer the payment method, provided their POP has the necessary integration. Similarly, if the usage of a payment method becomes negligible it can be quickly removed from the checkout page.

Reduction in fraud management

Merchants are likely to spend a significant amount of time dealing with fraud and security related issues with global e-commerce transactional fraud growing to $48 billion in 2023, up $7 billion from 2022, according to Juniper Research. Therefore, the way in which a POP handles these issues is likely to have a significant impact on the merchant experience. The fraud related benefits that POPs can bring merchants are three-fold. Firstly, Payment orchestration platforms often integrate advanced fraud detection tools and machine learning algorithms to analyse transaction patterns and identify potentially fraudulent activity in real-time. These tools can help merchants automatically flag suspicious transactions and take appropriate action to mitigate fraud risk. Secondly, Payment orchestrators may facilitate data sharing and collaboration among merchants to collectively combat fraud. By aggregating transaction data across multiple merchants, payment orchestrators can identify broader patterns of fraudulent activity and proactively alert merchants to potential threats. By reducing fraud risk there is a lesser chance that merchants will have to spend time conducting lengthy post fraud impact mitigation and resolution activities. Finally, Payment orchestrators help merchants maintain compliance with industry regulations and security standards, such as PCI DSS (Payment Card Industry Data Security Standard), which are designed to protect against payment fraud and data breaches. Management of compliance on a merchant’s behalf frees up time and resources for the merchant, enabling them to focus on their core capabilities.

Consolidated view of payments offering increased oversight along with user friendly interfaces

Orchestrators can also transform the way in which merchants handle their payment data. Most POPs have consolidated reporting integrated into their offering, thus meaning regardless of which acquirer or payment service provider that has ultimately processed the transaction, all transaction data can be viewed in one place. Analytical tools are typically incorporated into an orchestrator’s offering, enabling merchants to track transaction success rates and chargebacks along with overall sales broken down by market and a specific time period. By analysing consolidated transaction data, merchants can identify trends, detect fraud, and make data-driven decisions to improve their overall payment performance. The payment management services offered by orchestrators stretch further to include financial reconciliation. This feature enables merchants to reconcile the difference between actual sales and what a payment service provider tells them they sell, ultimately generating a cost of payment acceptance (CoPA) figure.  

Finally, for merchants that have limited payment expertise, the associated processes can be daunting. Orchestrators provide merchants with easy-to-use interfaces thus making payment acceptance a far more tangible and easily customisable process. Historically, complex coding has meant that these changes cannot be made by the merchant themselves, making any small alterations time consuming and complicated.

To conclude, partnering with a payment orchestration platform has the potential to significantly transform the merchant experience. Through outsourcing payment related activities, merchants can simplify payment acceptance and spend more time focusing on their core competencies. Additionally, retailers can become more agile and scalable, enabling them to better respond to changing customer needs and expand into international markets more efficiently. Finally, having an orchestration partner is likely to allow merchants to better manage their risk and ensure that they are consistently compliant with changing regulation, without consistent internal monitoring. This along with consolidated reporting will reduce the administrative burden for merchants, thus conserving often precious resources. EDC are able to advise merchants and help select those orchestrators that are most suitable to an individual merchants’ specific needs.

The content of this article does not reflect the official opinion of Edgar, Dunn & Company.

The information and views expressed in this publication belong solely to the author(s).

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