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Customers' frustration with the payments process in today’s digital economy is palpable, with 87% of consumers expressing dissatisfaction. The discontent highlights the incessant need for more streamlined and efficient payment systems.
Payment gateways allow merchants to offer customers secure transactions with an array of choice – but is this enough?
Introducing payment orchestration, a revolutionary approach to payment processing that replaces outdated and cumbersome systems, consolidating efforts into a single, unified interface.
We’ll dive deeper into the world of payment gateways and payment orchestration, how they are transforming the way merchants handle payments, and which is more suited for your business.
What is payment orchestration?
Legacy payment orchestration software was used by business to manage disparate payment services. Companies, traditionally, had several relationships with multiple payment providers to meet their varying payment needs for different clients across countries.
However, modern payment orchestration platforms streamline the entire payment process, allowing businesses to have one relationship with a singular payment processor, rather than multiple payment processors. Modern payment orchestrators have relationships with banks across the globe and offer many valuable services, ensuring a merchant is getting the most out of its payments.
They now offer much more functionalities including payment selection, intelligent payment routing, fraud detection, currency conversion, and reconciliation.
Orchestration aids merchants in managing and optimising complex payments, whilst incorporating the above solutions.
They’re able to route payments to the best payment service provider based on transaction value, cost, currency, reliability, location – and most importantly, customer preference. It manages the entire payments flow from a single application programming interface.
Benefits of payment orchestration
Thanks to the broad offering of solutions that payment orchestration offers, merchants can reap many benefits from working with one.
● Increased conversion rates – 6% of customers state that the lack of payment options is a reason for abandoning a purchase at checkout. A payment orchestrator can offer alternative payment methods to merchants, such as by credit and debit cards, mobile payments, online payments, and bank transfers, all in aid of increasing conversions.
● Cost optimisation – It ensures that payments are routed to the most-effective payment provider in order to reduce payment processing costs, such as a transaction fee.
● Scalability– Provides merchants with the opportunity to scale as payment orchestrators have the infrastructure to handle a large transaction volume variably, seasonally, or consistently as a merchant grows.
● Improves payment success rates – The software monitors payment success rates in real time, ensuring merchants can quicky identify and rectify any payment issues.
● Flexibility –The robust application programming interface can integrate a variety of solutions, like payment routing and currency conversion, as part of the merchant’s efficient payment stack.
What is a payment gateway?
A payment gateway is an infrastructure that enables businesses to accept payments via debit cards or credit cards, whether that be online payments or in-person.
It bridges the gap between the point-of-sale system and a payment processor – transferring funds between the customer’s bank and merchant’s account. Authorising and processing payments by transmitting the sensitive payment details securely between the customer, merchant, and payment processor.
Once a transaction has been initiated by a customer, the payment gateway will securely collect the customer’s payment information, in order to protect sensitive customer data, and forward it to the payment processor to process and verify. When the payment is approved, the payment gateway will send confirmation back to the merchant and customer, and the transaction will be complete.
Benefits of payment gateways
Payment gateways are the key to a comprehensive payment ecosystem.
As well as being fundamental to the transaction process, they provide many other benefits to merchants:
● Payment’s choice– Most payment gateways offer and support a variety of payment options, from traditional methods like bank cards to new payment methods like e-wallets, catering to customers' preferred payment method.
● Secure transactions – In order to comply with PCI DSS and other security standards, gateways use encryption and tokenisation to protect the cardholder's payment data from fraud and cyberthreats. This is more important than ever before with payment fraud projections increasing to $40.62 billion by 2027.
● User experience –Payment authorisation pages in checkout can be customised to the merchant’s branding, allowing for an all-round better customer experience.
● Easy integration – Payment gateways are usually simple to integrate with most eCommerce platforms, meaning merchants can begin accepting payments quickly and with ease.
Payment orchestration and payment gateway similarities
The core similarity between payment gateways and payment orchestration is that they both effectively help merchants to process payments, but how they do that slightly varies.
Payment gateways process payments and transfer payment information between the payment provider, the issuing bank, and the acquiring bank.
More often than not, merchants will need multiple gateways to handle different payment methods and regions; larger eCommerce companies will need even more payment providers when moving into new markets and terrains.
Payment orchestration software unifies, manages, and optimises multiple payment service providers and payment gateways under one umbrella platform.
They both have the same goal in achieving the goal of processing a payment; payment orchestrators just process a transaction with amore streamlined approach, offering more functionality.
Payment orchestration and payment gateway differences
Although both payment gateways and payment orchestrators are crucial to the payments ecosystem, there are key differences in their functionalities.
Payment gateways tend to rely on a single payment processor, verifying the customer’s sensitive data when completing payment transactions. On the other hand, modern payment orchestration system elevates simple payment processing to payment optimisation.
A Payment orchestration platform is usually more flexible, enabling businesses to adapt their payments infrastructure for global expansion, new customers, consumer demands, and additional payment types. Gateways are unable to do this, only supporting a single payment use case.
Orchestrators are often more integrated and optimised, empowering merchants and their customers to have better outcomes.
How to decide which one to use?
Whether a merchant chooses a payment gateway or payment orchestration system should be dependent on the businesses needs, priorities, and operational requirements.
A merchant should ask themselves the following questions when making the critical decision.
Do you want a simple integration process?
Payment gateways can typically involve the integration of an application programming interface, as well as coding.
Whereas, payment orchestration platforms provide a much simpler integration process, allowing businesses to connect with multiple processors and gateways through a single interface.
What growth is anticipated?
Gateways are more suitable for small to medium-sized businesses with low to medium transaction volumes.
If a merchant is looking to scale payment operations, multiple payment gateways may be necessary. Lending itself to payments orchestration, which is ideal for rapidly scaling business with higher transaction volumes.
What payment options do your customers want?
A payment gateway supports a more limited number of traditional payment methods, such as credit card payments.
Meanwhile, payment orchestrators offer a broad range of payment options for customers, from mobile payments and electronic payments to bank transfers and e-wallets.
Are you a high-risk merchant account?
Basic security features, like SSL encryption and fraud detection, are offered by payment gateways.
However, payment orchestration systems often double as fraud management providers, offering advanced security features such as multi-factor authentication, tokenisation, and real-time fraud monitoring to help prevent risk to the merchant and customer.
Is customisation and flexibility important?
It’s important to note that front-end customisation offered by payment gateways can limited. They give merchants little control over the payment processors and features are often defined by the gateway themselves.
A payment orchestrator allows merchants to choose from multiple payment provides and tailor the payment payments flow completely to the business’s specific needs and requirements. Merchants are also able to create their own rules for routing transactions based on variables like cost and availability.
Are business decisions based on data and analytics?
Payment orchestration delivers advanced levels of reporting and analytics, aiding in optimising the merchant’s payment processes and improving financial performance.
Whereas, payment gateways have limited reporting and scarce analytics.
Conclusion
Understanding the differences between payment orchestration and payment gateways is crucial for optimising your payment strategy.
Payment orchestration offers a unified, efficient solution for managing complex payment processes, enhancing conversion rates, and reducing costs.
On the other hand, payment gateways provide secure, straightforward transaction processing but may lack the flexibility needed for scaling businesses.
Choosing between these options depends on your business needs, growth expectations, and customer preferences. By proactively integrating the right payment solutions, you can deliver seamless, first-class payment experiences, ensuring customer satisfaction and driving business success.
