Deep Dive: How Payments Orchestration Can Support Payment Integrations

Using multiple payment service providers (PSPs) has become par for the course in the eCommerce space. Merchants must be able to perform a wide variety of payment functions not only to meet their customers’ expectations that their payments will be processed quickly and seamlessly but also to ensure that their transaction success rates remain high.

Keeping up with the pace of technological innovation can be challenging, however. Many businesses do not have the funds and technical resources to build new integrations from scratch and maintain more than one payment gateway without enlisting third-party assistance. Many are instead limited to using a single gateway to cut costs and keep their operations simple, restricting the number of payments methods they accept and potentially reducing their chances for conversion.

Integration presents businesses with a cost-effective alternative to redesigning their payments systems from the ground up, however. This process entails integrating new payment gateways into merchants’ existing IT infrastructures, often by using tools such as application programming interfaces (APIs). This can reduce costs and make multiple-gateway infrastructure more accessible to businesses of all sizes and sectors, but payments integrations can become financial and operational burdens if not properly managed. This month’s Deep Dive provides an overview of the costs involved in maintaining a payments system with multiple payment integrations as well as how adding a payments orchestration layer can streamline the process.

Managing Costs: Payment For Payment Gateways

Businesses’ ideal payments strategies hinge on adding value by providing multiple payment services suited to consumers’ wide-ranging needs, but implementing and maintaining the payment integrations to support these options can create numerous financial difficulties. The process can be expensive, and there is no standard business rate for such integrations because processing fees are often up for negotiation. Companies thus often end up paying payment processing fees that differ from their initial research estimates.

Merchants must also frequently pay fees for additional services that supplement basic processing. These could include the costs of fraud prevention and compliance services to ensure that payments are processed safely, securely and in compliance with Payment Card Industry (PCI) requirements.

Fees and other operational costs are not the only factors businesses need to consider when crafting their payment integration plans — they must also weigh operational efficiencies. This involves examining payment gateways’ transaction success rates, chargebacks and fraud instances. Merchants that implement payment integrations with low transaction success rates may wind up paying transaction fees for sales that never go through, which can ultimately cut into their revenues. Gateways that fail to adequately spot and prevent illegitimate transactions can also quickly eat into firms’ margins. Studies suggest that merchants wind up paying $3.13 for every dollar lost to fraud, illustrating that even small costs can eventually add up and translate into serious financial consequences.

The final, equally crucial component to payment integrations is factoring in the time and labor required to manage these processes. Merchants must have insight into how much they are spending on processing fees at any given time and whether those costs are yielding adequate returns — a challenging task, given the many factors in play.

Accounting for these myriad intertwined operational factors when designing a payments strategy can be a tall order, but there are ways for merchants to simplify the process.

Removing Guesswork, Busywork With Payments Orchestration

A payments orchestration strategy can enable businesses to smooth out operational complexities and minimize transactional uncertainties. This technology can provide analytical tools that automatically track the various costs associated with payment gateway integrations, and they can also allow merchants to view this information via smartphones, computers or tablets to better determine how to budget their time and resources.

Payments orchestration layers that use artificial intelligence (AI)- and machine learning (ML)-based analytical methods can provide even more value by enabling businesses to monitor how factors such as transaction success rates, chargebacks and instances of fraud change in real time and how payments should be processed to allow for maximum operational efficiency. This technique, called smart routing, sees payments orchestration layers use all data available to determine which payments are best suited to process through certain payment gateways, resulting in higher transaction success rates and lower fees.

Reducing operational costs and maximizing revenues can also make it logistically possible for merchants to support multiple payment gateways, thereby increasing the likelihood that customers can use the payment methods they prefer and potentially leading to higher conversion rates. These added functionalities can make a world of difference for merchants’ bottom lines, too, as studies suggest that 6 percent of eCommerce shoppers abandon their carts if they cannot pay using their preferred payment method.

Payments orchestration’s most significant benefit is that it affords small- to medium-sized businesses (SMBs) a level of customization that might otherwise be unobtainable. There is no one-size-fits-all payments strategy to suit the millions of businesses selling products on the web, but having a single, common payments orchestration layer can help merchants design and implement the customized strategies they need to make their businesses grow.