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by PCI Booking – April 22, 2021
The world of payments relies on certain planets to align for optimal performance: Merchants need fast payments, fraud must be reduced, and a great customer experience with little or no friction is a must. Where payments in the past were steeped in complex interactions, requiring support for multiple payment providers, and where cart dropouts were common, the future of payments resides in fast orchestration, improved trust, and a seamless shopping experience: To facilitate this, the era of the Payment Orchestration Platform (POP) has arrived.
Payment orchestration has its foundations in the API economy. The advancement of the Application Programming Interface (API) has led to a growth in flexible and easier communications across services, applications, data sources, machine-to-machine communications, and cloud and edge computing environments. It is fair to say that the API(sation) of services has created new paradigms in the digital landscape. Regulations such as PDS2 have also encouraged the development of trusted networks that can handle online payments, the Open Banking initiative borne of the regulation being an example.
Payments is an area crying out for digital facilitation. The payment landscape is seeing increasingly digitized and online payment systems, with the Covid-19 pandemic shaping the use of online payments into a new normal. ACI Worldwide has seen real-time payment transactions increase by 41% during the pandemic with the online payment market seeing a surge because of restrictions such as social distancing.
Out of this growing need comes a technological approach that utilizes data to build trusted networks that can meet the rigorous demands of global digital payments. A Payment Orchestration Platform (POP) is typically middleware, sitting between the merchant and payment processing and handling. The platform is an API-enabled service that links each part of the payment lifecycle, including payment service providers (PSPs), anti-fraud/AML technology, merchants, and banks, including making calls to Open Banking platforms, often using a Third Party Provider (TPP). The POP ‘orchestrates’ the transaction to ensure that the most relevant and appropriate payment channel is used, to reduce fraud whilst improving money conversion. Transactions are monitored in real-time. This is all done using smart rules that ensure the customer experience is not negatively affected by all the routing and checks; a little like the swan seamlessly gliding over the water with its legs frantically doing all the work out of sight.
Payment Orchestration platforms have come about because they offer significant advantages over the less flexible legacy payment systems:
Control over the flow of a transaction is reduced if a company must rely on a sole PSP/acquirer. The WireCard accounting scandal in 2020 highlighted this issue, with 3.5 billion euros owed to creditors being unlikely to ever be paid. This translates into an increased potential of payment outages, the use of suboptimal payment routing, leading to lost business, lost competitive edge, and unhappy customers. Payment Orchestration Platforms allow for multiple payment options using a single API.
The dynamic and agile nature of Payment Orchestration Platforms means that a transaction can be routed to optimize for both the customer journey and the retailer. Failed transactions do not result in customer dropouts as the transaction is rerouted, on-the-fly.
Keeping the user in the loop and preventing user journey dropouts is vital to the success of merchants. Following on from the agile and flexible design inherent in Payment Orchestration Platforms (POP), friction-free user experiences are one of the main advantages of the POP. Having a customizable interface that optimizes, on-the-fly, to deliver friction-free customer journeys is achievable through the smart routing offered by many orchestration platforms. An optimized payment routing system that can call upon state-of-the-art AML and anti-fraud checks, ensures that false positives are reduced too – again reducing friction for a customer.
Many merchants offer global services, but meeting the payment needs of a global operation is complex. However, Payment Orchestration Platforms provide the middleware, designed to handle multiple PSPs and the appropriate jurisdiction-based compliance checks. This joined-up way of handing payments is ideal for online payments.
An advanced Payment Orchestration Platform will provide PCI-DSS compliance using tokenization of sensitive payment and personal data. This helps the merchant to ensure that they are compliant and reduces the merchant’s compliance costs.
Payment orchestration is a sophisticated model to handle complex payment systems, however, this doesn’t mean that it is complicated to implement. The importance of managing cross-border payments means that a merchant needs fast onboarding of new payment providers. A POP offers this out-of-the-box, with no merchant involvement. It becomes much easier for an eRetailer to add on new PSPs as they come along, fitting with customer expectations and allowing the merchant to remain competitive. Payment orchestration unifies the payment process making it seamless, not just for the customer, but for the merchant too. The design of POPs is such that resilience and redundancy are built-in, with best-of-breed platforms offering always-on functionality to ensure that merchants don’t lose orders.
Payments are streamlined to optimize against several factors including declined transactions. The result is a more streamlined process that keeps a transaction moving. Other areas such as payment reconciliation are also addressed by Payment Orchestration Platforms. Refunds and chargebacks can be complicated to reconcile and even offer new channels for fraud. Payment Orchestration Platforms automate reconciliation, removing this painful aspect of payment handling.
Payment orchestration heralds in a new era for payments. One that will allow merchants to stay competitive, even against the larger players in the market. Payment Orchestration Platforms are also flexible enough to handle customer expectations across multiple channels of interaction and to ensure that customer journeys are slick and uninterrupted by false-positive checks. Payment orchestration gives merchants the control needed to meet ever-stringent regulations around money handling too. As fraud continues to make online retail risky and complex, an agile way to control payments is a must have for any online business that takes payments.
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