The Emerging Need For Payment Orchestration: (Part I)

 September 10th, 2019

Timing, luck and impeccable execution — merchants are often painfully reminded of how vital these ingredients are in their search for sustainable profits in online payments.

In this article, we outline how payment solutions evolved to help merchants “leap-frog” the growing pains of expansion and introduce the Payment Orchestration Provider as a way to meet the payment demands of today and the future.

Early Stage: Legacy Payments

Remember the early days of payments? Back then, it was common to see online businesses vertically connecting to several acquirers or pioneering alternative payment methods like Paypal or OBeP (Online Banking e-Payments). At first, this was enough to cover basic payment needs, especially since customers’ demands for online payments were not as high as they are now.

 

The legacy payment structure

In an abrupt change of events, the influx of online payments caused merchants to grow and subsequently spend lots of time managing integrations, contracts, and pricing. They had enough and realized that an impromptu approach to payments was no longer feasible.

The Beginning of a Simplified Solution

Following this period, online merchants learned that tapping into the capabilities of a Payment Service Provider (PSP) wasn’t such a bad idea. PSPs could be convenient middlemen between a merchant and the payment world, offering vertical connections with acquirers and alternative payment methods (APMs).

Not only do they promise an easy start and fast market entry, but they can also provide businesses with a decent suite of tools to easily steer payments. These solutions allow merchants to become hands-free in their relationships with the payment partners they need.

However, the unfortunate truth is that pairing up with a single PSP leaves merchants vulnerable to potential provider downtimes.

In addition, even if a PSP can offer a strong selection of payment connections, merchants will often struggle to balance between offering local specialization and global coverage.

Developing In-House Payment Expertise

Some merchants began to see that connecting to a single PSP would not address all their payment challenges, especially when they had expansion plans. Thus, they sought to take control of their payments setup, building connections to two or more additional, back-up PSPs.

At first, this strategy seemed to provide some hope via the reduction of downtimes, more ways to pay for international customers, and more provider independence.

1st Gen payments

Yet even after being afforded temporary relief from in-house payment solutions, merchants today still find several deal breakers with this solution.

The weight of technical integrations can snowball, distracting companies from their core competencies.

On top of this, a growing number of connections can create a fragmented network of independent entities, leading to a bigger mess, pushing businesses to grow their team of payment professionals. The result is obvious: rather than investing in business growth, merchants today spend too much of their time and money on the maintenance of their payment engine.

Regardless of which option they choose, online merchants will face these challenges:

 

The solution to these complex questions is the Payment Orchestration Provider (POP): a cloud-based software granting businesses the control they need over their payment experience.

Payment Orchestration Providers

POPs were created to help merchants flexibly expand to new markets and optimize their payment experience while reducing technical and operational costs.

They provide a holistic payment infrastructure as a service by delivering a horizontal aggregation of the complete payment market along with user-friendly payment orchestration applications. Payment Orchestration Providers serve as a modular middleware on top of existing payment infrastructures to help merchants streamline and scale their payment setups.

POP payment set up

The POP provides merchants with full, cloud-based control and flexibility in designing a payment setup, routing specific transactions, managing risk, analyzing payment performance and more.

So, what are the goals of Payment Orchestration Providers? What are the requirements imposed on a POP? What functions do they consist of and what promises should they hold? Read POP Part II to learn about the ins and outs of this new approach to payments.

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