Local and alternative payment methods — including digital wallets; online bank transfers; buy now, pay later (BNPL); and direct debit — are the most common means for consumers to buy goods online. Shoppers in Europe, for example, spend more than $388 billion online annually using local payments, which are projected to account for 82% of the global eCommerce spend by 2024.
eTailers would be wise to cater to this local and alternative payments demand, but enabling this for customers can be a tall order. This month, PYMNTS digs deep into how merchants are implementing local payments with the help of payments orchestration systems.
Seamless Integration Is Key to Offering Local and Alternative Payments
Payment routing is at the core of local payments integration. This feature works by optimally routing customers’ transactions through appropriate payment gateways specific to each region, offering a smooth payment process regardless of the payment method used at the point of sale. This seamless payment experience benefits both customer and seller, helping to build customer loyalty while maximizing merchants’ efficiency and resource allocation.
There are two different types of payment routing: static and dynamic. The former involves a manually configured system with ironclad routing rules and predetermined gateway service providers. The latter, meanwhile, leverages artificial intelligence (AI) to optimize the route spontaneously, rerouting payments as necessary based not only on the payment of choice but also on the current status of the various payment gateways. 
Dynamic payment routing is the superior choice for nearly all organizations, offering lower failure rates, faster payment processing and a payments experience so seamless that it is not evident to customers that anything went wrong with a gateway requiring a rerouted payment. Picking partners that offer dynamic routing is a virtual necessity for businesses looking to provide local or alternative payments for their international customers.
Payments Orchestration Providers Deploy Tokenization to Enable Dynamic Routing
Building in every possible combination of payment methods is virtually impossible to do, so payments orchestration systems tokenize payment data and pass it to different endpoints based on business requirements. These tokens are stored by the gateway provider rather than the merchant, enabling merchants to leverage network token transactions on supported gateways as well as make payments via payment service providers that do not yet have network token capabilities.
New payment gateways open all the time, each needing their own integration and maintenance to ensure that local payment methods are always compatible. Integrating these gateways with internal teams is exceptionally difficult, so working with payments orchestration providers is a more efficient and effective option for companies of all sizes.