A clarinette laying on a sheet of music, representing payment orchestration

What Is Payment Orchestration (And Why Is It a Game Changer)?

Payment Orchestration describes the mechanism of integrating and handling different payment service providers, acquirers and banks on a single, unified software layer. The Payment Orchestration software executes and manages the complete end-to-end payment process. That includes payment authentication, multi-PSP transaction routing, settlement, and much more. Also, Payment Orchestration encompasses processes such as risk management, secure customer data storing, Know-Your-Customer and Anti-Money-Laundering procedures, and the like. 

A Payment Orchestration Platform (POP), or Payment Orchestration Layer (POL) is the technological framework that manages user and merchant accounts, acquirers, payment providers, fraud detection services, etc., initiating, validating, routing and processing transactions involving those parties. In addition, a Payment Orchestration Layer handles payment processes such as reconciliation, billing and settlement, payouts and reporting. 

A Payment Orchestration Layer (POL) is the entry point to and the heart of a payment system, streamlining payment automation. With POL, e-commerce platforms and online service providers don’t need to integrate every PSP and every acquirer separately. Instead, they can consume the unified API of the payment orchestration layer, benefiting from a reduced integration complexity. Moreover, a POL simplifies system maintenance and development for platform owners and merchants and streamlines interaction with third-party service providers.

A diagram showing the possible software architecture of a payment orchestration layer
How a Payment Orchestration Layer connects to external payment providers and third-party feature providers.

As a special benefit, Payment Orchestration comes with a number of advantages, which don’t occur in single-PSP or separated multi-PSP solutions, such as:   

  • Automated payment routing based on certain criteria (consumer’s risk level, transaction costs, customer preference, etc.) 
  • Cross-provider token vaults for credit card data
  • A common 3D secure engine across providers 
  • Unified data analytics and reporting, for improving and optimizing costs and processes
  • And many more, see the section about benefits of a POL below

Sounds good? Well, one question remains! 

Should you as a platform or service provider settle for Payment Orchestration as a general rule?  

This is what this article will dive into. It discusses: 

Payment Orchestration in the New Economy

Payment Orchestration is a relatively recent term, often describing what has formerly been called a Payment Gateway. Until a few years prior, it flew under the radar, even though it had effectively been implemented before.

Widespread adoption of Payment Orchestration has only been possible due to technological developments during the last decade. Larger e-commerce and BigTech companies have been at the forefront of adopting this approach. Early on, they built complex backend systems and unified APIs to be more agile and scale more rapidly. 

But by now smart and powerful automation is accessible even for small and medium enterprises. Ready-to-use cloud infrastructures like AWS, GCP, or Azure remove the need for elaborate, company-owned server networks. In addition, payment service providers have improved, too, regarding the variety, flexibility, and quality of their APIs. 

Projections suggest the global Payment Orchestration Platform market size will rise at a 22.4% CAGR until 2028.

Source: GlobeNewswire, 2022
A table ranking payment methods in e-commerce
Digital Wallets are especially prevalent in India and China, were less than 1/10 of users have not yet used one. In the US, a little less than half of the population has not yet used one.

Why Payment Orchestration Is Complicated to Pull Off 

The number of digital payment transactions keeps climbing to new heights each year. And so does the competitive pressure to present your customers with a wide selection of PSPs and payment methods. In addition, you will be confronted with conflicting customer expectations: 

  • Some customers want payments to happen cross-border.
  • Some want payments to happen locally with national, well-known payment providers.
  • Some want payments to happen fast, in real-time.
  • Some want payments not to happen right away: Buy Now, Pay Later is high on customer wishlists. 

Meeting all of those expectations requires your global e-commerce or service platform to integrate a comprehensive set of different PSPs, banks, and acquirers. Add regulations such as PCI DSS, PSD2, and GDPR to the mix and you will end up with complex dependencies any legacy payment systems would likely struggle with. Payment Orchestration shows disruptive potential here; this central aggregation layer has to be designed with keeping all current compliance challenges in mind. 

“If payments are the engine that is powering digital transformation, payment orchestration is how global enterprises can keep that engine running at peak performance.”

Source: Kristian Gjerding, CEO of CellPoint Digital, 2021

Payment orchestration combines various features to enhance targeting and boost e-commerce conversion rates. 

Learn more in our free whitepaper "Unlocking Your Marketplace Payment Gateway."

The Benefits of Payment Orchestration 

Improved Business Scalability, Easier Integration 

Expanding your services into new markets is typically a challenging task. Besides regulatory compliance, the integration of region-specific payment providers, local payment methods and currencies can be challenging. A Payment Orchestration Layer simplifies the process. It offers you a flexible, vendor-agnostic payment system architecture. This architecture unifies and simplifies the integration of third-party provider APIs, managing all PSP data within a single layer. Thus you can launch new payment options within a short timeframe and scale your business faster.

Smart, Dynamic Routing

One of the major benefits of Payment Orchestration Platforms lies in their ability to route transactions. You can set-up specific rules in your POP so that it will automatically choose the payment route with the best condition for every transaction, depending on several factors.

It could mean: 

  • Dynamically presenting customers only prefiltered available payment options (e.g. low-risk payment methods for high-risk customers) 
  • Choosing a channel with low transaction fees to reduce costs
  • Processing the payment through a specific high-speed provider to reduce latency
  • Automatically re-routing failed transactions to alternative acquirers / payment service providers to decrease failure rates

Thus, Payment Orchestration systems give your business more control over how payments are processed. It increases payment acceptance rates, circumvents downtimes and outages and reduces checkout abandonment. Your merchants and customers will appreciate smart routing, too. They can be sure their transactions are fail-safe, fast and secure. 

A customer granting a medal for good customer experience

Streamlined Customer Experience 

Studies show: Up to 50% of e-commerce customers abandoning their cart do it for reasons related to payment. Payment Orchestration Layer can prevent this by helping you harmonize your checkout flow. For example, you can easily set up an embedded checkout process, during which customers remain on your site or in your app, instead of being forwarded to external pages.

Additionally, you can give customers a broad choice of payment methods and providers (6% of customers quote the lack of payment options as a reason for abandoning their purchase). Thanks to the unified API of Payment Orchestration Layers, offering local payment methods on popular demand is very straightforward for e-commerce platform owners and merchants.

A merchant granting a medal for good merchant experience

Better Merchant Experience 

What’s true for consumers is also true for merchants. If you run an online marketplace, you can set up your Payment Orchestration Platform to cater to the specific needs of your merchants. POs offer a unified approach for triggering the payment, for payment splitting in mixed-cart purchases, reconciliation and also for refunds – one of the biggest challenges merchants face in e-commerce today.

Furthermore, merchants don’t have to handle distinct reconciliation file-formats that acquirers or PSPs present to them. They simply can trigger payments and refunds using the unified API of the POL. They don’t need to fumble with different APIs, implementations and processes. Lastly, the Payment Orchestration Layer can take care of merchant billing and settlement and automatically trigger payouts of available funds depending on individual configuration per merchant.

A jar of coins, representing lower costs

Lower Costs

Upon first gaze, traditional payment systems might seem cheaper to uphold. However, in the long term, Payment Orchestration Platforms will save you money. 

Aside from preventing integration expenses from exploding, the modern infrastructure of payment orchestration platforms helps you improve operations and thus reduce costs.

Add automated routing of transactions to least-cost payment providers and you get an idea of why Payment Orchestration is less expensive than conventional payment processing. 

A payment gateway with an open lock, representing absence of vendor lock-in

No Vendor Lock-In

Due to easy integration, Payment Orchestration Layers can incorporate a diverse range of PSPs and acquirers. This gives customers freedom of choice. And it also benefits you as a company: You are not dependent on a single payment partner, granting a safety net of alternative providers in case of payment outages, feature updates, or policy changes that don’t suit you.

Finally, having a choice puts you in a more favorable position when negotiating pricing with PSPs and acquirers.

A magnifying glass over folders, representing payment data analytics

Data Analytics and Reporting 

Payment Orchestration Platforms greatly simplify payment data evaluation, due to their consolidating nature: All PSPs in a PO system are maintained at the same place. Compiling data reports for multiple PSPs in real-time is easily possible. This data can be readily shared as well, with merchants, fraud detection services, or financial authorities, for example. 

Security and Risk Prevention

Payment Orchestration solutions typically put much emphasis on fraud monitoring and transaction security – just as international and national financial regulations demand. POPs commonly include multi-factor authentication and credit card data tokenization features right out-of-the-box. 

What’s more, Payment Orchestration’s high capabilities of analyzing data also help improve transaction security. Payment reports are valuable resources for detecting potential security risks. In addition, fraud detection and risk management tools can be integrated to alleviate potential risks and guarantee secure transactions.

How an Orchestrated Payment Works 

One of the most essential features of Payment Orchestration is finding the ideal digital route for a transaction to pass through. In many typical cases, the process will go down as follows: 

  1. At checkout, customers select a payment method from available options, pre-filtered by the platform based on their country, risk score, and other criteria laid down in the Payment Orchestration system.
  2. The Payment Orchestration system will route the payment to the best suitable payment provider according to criteria like response times, transaction costs, acceptance rate etc. 
  3. The payment is processed by the PSP or acquirer and may be approved or fail due to outages, errors, declines of authorization etc.
  4. If the payment fails, automatic routing fallback may kick in – the Payment Orchestration platform will re-route the payment then to an alternative gateway/acquirer.
  5. Once the payment is approved, the purchase is confirmed and completed. 
  6. The clearing/reconciliation phase starts. The funds will be transferred between PSP/acquirers and the Payment Orchestration Platform. 

Moreover, the Payment Orchestration Solution periodically runs billing and settlement processing and can automatically start payouts of the earned funds to its merchants. And finally, reports for different purposes can be automatically generated on a regular basis. 

To wrap it up, let’s recap the benefits of Payment Orchestration Systems.

Getting Started with Payment Orchestration 

The payment orchestration platform you integrate must fit your business strategy. There are plenty of factors that play into this decision: From budget to regulations to markets to software frameworks. So, before you commit yourself to a specific tech approach, it might make sense to bring in payment business consultation first, if strategic questions remain.

From a technical standpoint, there are two opposite ways to get Payment Orchestration up and running:

1. Turn-Key Payment Orchestration Layers

This variant comes closest to a low-code approach. As Payment Orchestration is gaining traction in the platform economy, the choice of white-label or as-a-service Payment Orchestration solutions is broadening. 

Companies like IXOPAY or GR4VY provide ready-to-use middleware solutions that streamline transactions between platforms and payment providers. These third-party solutions usually support a range of partners (PSPs, acquirers, etc.). They also may have preset payment routing preferences. Pricing often involves pay-per-payment or pay-per-API-call rates, which can potentially increase costs over time. 

Another downside to this approach is, that, while your company is not dependent on external PSPs, it is still dependent on the Payment Orchestration company and their vision on how to expand their PO product in the future. And if you decide to sever your ties to a Payment Orchestration provider, it can be difficult to migrate your system to another one in due time. 

2. Self-Built Payment Orchestration Layers

This approach is ideal for companies with a profound do-it-yourself attitude in place. Instead of relying on an external Payment Orchestration Layer, you build a payment system from scratch that can orchestrate transactions independently. Yes, it’s initially costly and needs expertise, time and effort. 

But the flexibility of self-built solutions will work to your advantage. It’s your own product, so you can adjust it to meet your every need – and even apply it in your subsidiaries or license it to third parties. What’s more, maintenance and further development costs will reduce over time, and all innovations are solely driven by your business vision, not third-party changes.

Implementing your Custom Payment Orchestration Layer with a Software Partner

Did we say “two approaches”? 

Well, it is perfectly possible to aim for the middle ground. 

That means: You construct your own custom solution. But, you build it on top of a payment framework that already features the most important functionalities of Payment Orchestration. In addition, you can bring in a technological partner, who assumes a great deal of the development work. They’d back up your team, so you can cater to your bread-and-butter business first and foremost. 

May we introduce…

The logo of CoreWallet, an adaptable software foundation for ewallet, payment and virtual account management applications.

CoreWallet is an API-based software framework for payment, e-wallet, and virtual account management solutions. It was created by software engineers with decades of experience in the payment and banking industry. 

With CoreWallet you get…

  • A proven payment framework, made by developers with many years of experience.
  • support for a broad range of transaction types –  from purchases to purchases to refunds.
  • A system with flexible extension points, making it easy to integrate new PSPs, payment methods and other third party providers.
  • A streamlined payment routing, automatically selecting the fitting processing option for your payment.
  • And much more

You want to learn more about building your own payment gateway with orchestration capabilities? Feel free to check out our free whitepaper Unlocking Your Marketplace Payment Gateway for more insights. 

Download Our Free Whitepaper

Christoph Laurer

Christoph Laurer is the Content Editor at trimplement, taking care of Social Media, SEO and analytics as an added bonus. With his storytelling, graphic and video editing skills, honed by working for different industries, he distils fintech and banking topics down to legible form. If you don’t find Christoph at his writing desk, you will probably meet him at the cinema.

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