The Conductor’s Medley — Payment Orchestration
Mark slammed his laptop shut!
Frustration etched on his face.
“Sales are going great”, he grumbled, “But way too many people are abandoning their carts at checkout!”
It’s like they get cold feet at the last minute!
Across the table, Emily smiled knowingly, and she said “I used to have that problem too until I discovered this amazing system that streamlines the whole checkout process. It’s like having a behind-the-scenes conductor making sure everything flows smoothly.”
Mark’s eyebrows shot up. A conductor?
“Yeah,” chuckled Emily!
Want to hear what it is and how it works?
Mark leaned in and said, “Absolutely!”
The conductor Emily referred to is none other than Payment Orchestration.
Let’s hear Emily’s words!
Payment Orchestration:
Payment orchestration is a comprehensive system that integrates and manages every aspect of the payment process, from authorization to settlement. It operates by connecting with various payment service providers, issuers, and acquirers through a unified software layer. Essentially, it streamlines the often-complex task of handling multiple payment methods by consolidating them into one platform.
This enables merchants to efficiently manage their entire payment stack in a centralized manner, rather than dealing with numerous integrations with different providers.
Why Payment Orchestration?
Payment orchestration exists to address the complexity of online payments. Here’s a breakdown of the key reasons:
Fragmented Ecosystem
The online payment involves a multitude of players — payment service providers (PSPs), acquirers, issuers, etc. Traditionally, merchants have to connect with each one individually, leading to a complex and cumbersome setup. Payment orchestration simplifies this by offering a single platform to manage all these connections.
Evolving Needs
As customer expectations are constantly evolving, they want a wider range of payment options (cards, digital wallets, etc) for a seamless checkout experience. Payment orchestration allows merchants to easily integrate new PSPs and cater to these diverse preferences.
Efficiency and Optimization
Multiple integrations with different PSPs can lead to inefficiencies. Payments may be routed through slower channels or incur higher fees. Payment orchestration optimizes the process by intelligently routing transactions and leveraging the most efficient pathways based on real-time data or pre-defined rules.
Reduced Risk
Payment orchestration can help mitigate fraud by offering features like real-time risk checks and the ability to integrate with fraud prevention tools. Additionally, by centralizing connections, it reduces the vulnerability of having isolated integrations with various providers.
Ahem!
We know that Mark (Merchant) is the owner of an online store, and he had noticed that a lot of customers are abandoning their shopping carts at checkout without completing their purchases.
Let us take this scenario of Mark, and witness what payment orchestration can do!
What does Payment Orchestration do?
Smart routing
With payment orchestration, Mark’s online store can offer a variety of payment methods to his customers, such as cards, digital wallets, bank transfers, pay later options etc. The platform ensures that each customer sees the payment option that’s most convenient for them based on factors like their location and previous purchasing behavior. This increases the likelihood of customers completing their transactions since they can choose the method they prefer.
Billing and settlement
Once a customer completes a purchase, the payment orchestration platform handles the billing and settlement process seamlessly. It ensures that Mark’s online store receives payment for the products sold and that any fees or charges associated with the transaction are accurately deducted. This streamlines the payment process for both Mark’s business and his customers, reducing the likelihood of abandoned carts due to payment complications.
Payouts
If Mark’s online store offers incentives such as discounts or rewards for completing purchases, payment orchestration can facilitate the distribution of these payouts to eligible customers. For example, if a customer earns loyalty points for making a purchase, the platform will automatically credit their account with the appropriate reward. This encourages customers to return to his store and complete their transactions, reducing cart abandonment rates in the long run.
Analytics
Payment orchestration provides valuable insights into payment performance, including metrics such as cart abandonment rates, conversion rates, and average order value. By analyzing this data, Mark’s store can identify patterns and trends that may be contributing to cart abandonment and take proactive steps to address them.
Awesome!
We’ve explored the conductor — what it is, why it’s important, and what it does.
Now, let’s dig deeper and see how this conductor makes the music happen in real time!
How does Payment Orchestration work?
The customer checks out with a product/service
1. Customer selects payment method and enters payment details
2. Payment gateway encrypts payment card info and sends it to the acquiring bank via processor
3. The acquiring bank communicates with the issuing bank to verify and authorize payment
4. Acquiring bank sends authorization/failure response code to payment gateway and merchant
5. Payment orchestration platform checks for failed payments
6. If payment fails, the platform automatically routes the payment request to another processor
7. Payment sent to the alternate processor for approval
8. If successful, payment is approved or else the transaction will be declined.
9. Appropriate notification will be sent to the customer.
Woohoo!
Let us know the perks that the conductor offers!
Benefits of Payment Orchestration:
Payment orchestration offers significant benefits to both customers and merchants.
For customers, it provides:
- Multiple payment options,
- Faster checkout processes,
- Enhanced security, and
- Minimized payment failures.
Ensuring a convenient shopping experience!
For merchants, it offers:
- Easier integration with various payment providers, leading to increased revenue,
- Reduced payment processing costs, and
- Optimized payment processing.
Additionally, it
- Enhances conversion rates by optimizing the checkout experience,
- Provides real-time insights for decision-making,
- Supports recurring billing for improved customer retention, and
- Offers improved fraud detection mechanisms for enhanced security and risk mitigation.
We’ve arrived!
And with Emily’s explanation, we’ve learned all about the payment conductor aka Payment Orchestrator!
P.S: What topic do you think we should explore next? Let us know in the comments.
