Adoption of Payments Orchestration has accelerated in the past five years, as merchants and aggregators recognize the impact of a flexible payment strategy on their customer experience. But as a market develops, different definitions start to emerge. I thought it would be helpful to apply some definitions to help merchants, merchant aggregators, and payment services better understand the layout of the market.
At its root, Payments Orchestration is about leveraging the right mix of services to support your unique business strategy. For instance,
- A massive media company must expand into Europe and Latin America quickly to hit board-level goals. It adopts an array of payment services across geographies to get to market fast and achieve subscriber targets
- A major restaurant management platform must give its brand name prospects the option of using their preferred payment technologies. It offers a basket of payment services, giving its sales team the flexibility to close more deals faster
- A major retailer struggles with high decline rates and costly transactions. It deploys a mix of fraud and payment services to optimize transactions and deliver a better customer experience
In each case, a critical business need was supported by selecting the best mix of payment services. And because every business’ requirements are unique, the need for a diverse range of services is essential. It’s also why we see market watchers like the 451 Group saying that 70% of merchants now demand a multi-provider approach to their payments strategy.
At Spreedly, we’ve advocated for Payments Orchestration since before it even had a name. We’ve long been committed to the mission of supporting a diverse, inclusive payment ecosystem. Why? Because it improves digital commerce for all parties – merchants, aggregators, consumers, and providers.
Let’s take a look at the three forms of Payments Orchestration that we see being offered by solution vendors.
Agnostic Payments Orchestration
This category is primarily focused on enabling, optimizing, and analyzing payments across multiple PSPs. Merchants and merchant aggregators that value independence and the flexibility to use whichever payment service is best for their particular needs tend to prefer this mode. It’s independent because the platform supports numerous PSPs, fraud tools, and other services, while remaining agnostic about which services the user leverages.
Why does independence matter? It’s important because it allows a user to select the right mix of services from across the entire ecosystem. They aren’t forced into a walled garden of solutions that are approved by the orchestrator. Instead, a company can experiment with new vendors, or change up their mix if they are unhappy with the service provided by a particular vendor.
Independence is also helpful because it provides a significant source of data and insight for companies. Agnostic orchestrators can, by their nature, gather authorization rates, latency times, and other intelligence across payment services globally. That insight helps companies better choose which payment services they want to work with.
Spreedly has conducted analysis across hundreds of millions of transactions. We see that the most popular gateway for a given currency seldom is the best performing gateway. And the best performing gateway for a given currency is often not even in the Top 5 for other major currencies. That’s why agnosticism matters – choice leads to better results for digital businesses.
Spreedly and IXOPAY are two examples of Payments Orchestration platforms that fit into the agnostic category.
Augmented Payments Orchestration
The second type of Payments Orchestration solution is an “augmented” approach. That is a solution offered by a payment company that lets merchant customers process payments outside of its proprietary stack. When Checkout purchased ProcessOut and Payoneer bought Optile, these vendors fit this mold.
This gives the merchant additional flexibility by being able to transact with additional services as needed. For instance, the provider may not be able to accept payments in a particular region. Or, it might lack a specific function that the merchant requires. Adding support for specific use cases from competitors gives the merchant value and reduces the likelihood of the merchant moving all of their volume to an alternative service.
A key value that augmented providers will focus on is the relative openness of their solution. They tend to position their competitors as being closed stacks that lock in a merchant.
This model is ideal only for merchants that are comfortable with the core benefit of the payment provider. Other payment companies may not connect or work with the augmented provider for competitive reasons. That’s in contrast to the agnostic model, where that limitation doesn’t exist.
Solution-Centric Payments Orchestration
The third type of Payments Orchestration platform is a solution-focused one. In this case, the primary focus of the merchant is on the particular solution type that the platform offers. That could be a fraud-first or security-first focus on the part of the vendor, for example.
In this category are vendors like VGS and TokenEx that have an orchestration value proposition, but lean very heavily into their capabilities for vaulting and tokenization. These solutions often cross into other areas of focus beyond payments, like tokenizing Personally Identifiable Information (e.g. Social Security Numbers in the United States).
Fraud-first vendors are similar in that they are principally focused on reducing false declines and fraudulent transactions. These kinds of vendors are particularly appealing to merchants and aggregators that value orchestration less than the core solution that the vendor focuses on.
More Diversity is Better for Digital Commerce
At Spreedly, we believe that a great customer experience is best served through a diverse and inclusive payments ecosystem. And that view extends to the Payments Orchestration market too. The good news is that with so many approaches to orchestration, merchants and aggregators can choose the right solution for them. Whether that’s an agnostic, augmented, or solution-centric approach to Payments Orchestration.