What’s the difference between payments orchestration and payment gateways? The answer is simple, and the application of both can be easy, as well.
To capture as much revenue as you can for your business, you need a payments infrastructure that is not just functional but is also smart and flexible. Understanding the key differences between a payment gateway and payments orchestration software is the first step.
We’ll look at both of them in this article, show you how they work best together, and give you a clear model for optimizing your entire payments strategy.
The difference between payments orchestration and payment gateways
It’s highly likely that you’ll need both a payment gateway and a payments orchestration platform, but they do have wildly different purposes. We could say that the payment gateway is like the workhorse of transaction processing, while the orchestration platform is the farmer guiding the horse to manage all the connections.
Let’s make sure you understand the specifics of each of these different tools.
Payments orchestration defined
A payment orchestration platform gives you a centralized location from which you can manage and optimize multiple payment gateways, providers, and methods through a single, unified platform. You get a vendor-neutral layer that sits between your business and the rest of the payments ecosystem.
The right payments orchestration platform should be able to evaluate a bunch of different things in real time, like cost, performance, and regional preference to name a few. By doing so, your orchestration platform will be able to choose the most effective route for every transaction, a feature called smart routing.
And more than that, you should get automated retries for soft declines, help with reducing processing costs, access to fraud tools, and a centralized reporting layer from all of your providers.
Let’s give you an example. Let’s found a company together called Company XYZ. They’re a SaaS business that operates globally. As such, they need to be able to accept recurring payments from Europe, Latin America, and Asia. They need to integrate to a dozen local payment methods and regional gateways in order to process all of these transactions. They’ll also need fraud tools and
In order to connect to all of these systems on their own, they would need to dedicate hundreds, if not thousands, of hours in human resources to build connections via all those different APIs.
But, the payments manager at Company XYZ has been around the block and understands that by integrating with a payments orchestration platform, they won’t have to manually build those custom integrations.
Now, the platform's smart routing logic automatically directs a Brazilian customer's credit card to the gateway with the highest authorization rate in that country, while a Dutch customer's transaction is routed to a provider that specializes in iDEAL, a popular local payment method. This single, unified system makes sure that Company XYZ captures more revenue globally without having to build or manage complex, fragmented integrations.
Payment gateways defined
Payment gateways are foundational technology that securely authorize and authenticate individual payment transactions. They’re the secure bridge that transmit payment information from the customer to the merchant, the bank that receives the funds, and the bank that issues the funds to complete the transaction.
At the heart of the gateway’s core function is its validation of transaction details. This is how you make sure that the customer making a purchase on your site has the funds necessary to complete the transaction.
Payment gateways securely encrypt or tokenize the sensitive payment data it’s sending to protect it from fraud during transmission, the importance of which cannot be overstated. It’s an absolutely critical step in preventing data breaches.
We’ll note, as well, that the role of the payment gateway is purely transactional. It’s limited to facilitating a single payment flow between a merchant and a specific financial institution.
If you’re only using a single payment gateway you’ll be limited to that provider’s functionality, coverage, and authorization rates. And, of course, that’s where the payment orchestration platform can help (if necessary), as we learned above.
For this one, we’ll use an example of a small online retailer in Canada. They us a single payment gateway integrated directly into their website's checkout page. When a customer pays, the gateway takes the card details, encrypts them, and sends the request to the retailer's bank for approval.
Once the issuing bank approves the charge, the gateway sends the confirmation back to the website. This setup is straightforward and reliable for small business with simple needs in a single market.
Why it’s better to use payment orchestration and payment gateways together
We know now that payment gateways and payments orchestration aren’t two alternatives that are competing with each other. Instead, they’re two very complementary technologies that are far more powerful when used together. A bit like PB&J, but more like the bacon and tomato in a club sandwich, given how much more a payments orchestration platform can do.
You can’t orchestrate payments without at least one gateway, in the same way that a conductor can’t lead a symphony without instruments. The orchestration layer is the strategic command center, and the gateways are the essential tools it commands.
With an orchestration platform, you connect to a single API that gives you the ability to connect to multiple payment gateways. It’s not just about having a backup, either. Merchants who use two or more gateways see up to a 12-to-15-percentage-point increase in successful authorizations during peak sales compared to their single-gateway peers. A single percentage-point increase in authorization rates can equal millions in annual revenue for a high-volume platform.
Here’s another example for you. You’re an international merchant and you’re suddenly experiencing a 2% drop in authorization rates from Germany. That’s a lot, because Germany is a huge market. If you have just one gateway, your only option is to wait for the issue to resolve.
With payments orchestration and a multi-gateway strategy, the platform’s real-time analytics instantly detect the dip. Your payments team can immediately update your smart routing rules within the orchestration layer to direct all German traffic to an alternate, high-performing gateway, saving the transactions before hours of revenue are lost.
Being able to pivot immediately is a huge part of why payments orchestration platforms and payment gateways work so well together.
Do I need a payment gateway, payments orchestration, or both?
If you are currently relying on a single payment gateway, determining when to add an orchestration layer requires an honest look at your business's current challenges and its future growth goals. Here are four key questions to help you determine if the time has come to incorporate payments orchestration.
Do you accept transactions in more than one country?
If you are selling to customers across borders, you are already facing limitations because authorization rates vary dramatically by region and payment provider. A gateway that performs well in the US might have terrible acceptance rates in Europe or Latin America.
You can’t afford to lose a sale simply because your single gateway is not optimized for a specific bank or country. Payments orchestration is specifically designed to overcome this challenge by connecting you to the best regional gateways and allowing you to route transactions to the one with the strongest approval performance in that specific country.
Do you have or anticipate high-transaction volume?
For a high-volume business, relying on a single gateway is a huge risk. You need redundancy. If one gateway's network throttles traffic or goes down during a peak sales period, a payments orchestration platform’s failover systems will automatically route your traffic to a secondary, stable provider in milliseconds.
This protection makes sure that you can maintain uptime and can continue processing payments and, quite frankly, that’s a non-negotiable safeguard against lost revenue.
The added benefit of multi-gateway smart routing is that you can also increase your overall authorization rates by sending each transaction to the one that is most likely to approve it.
Do you need to accept more payment options?
A single payment gateway is often limited in the alternative payment methods (APMs) and local payment methods (LPMs) it supports. As your business expands globally, you are going to need to accept LPMs like iDEAL in the Netherlands or Pix in Brazil, because these methods often dominate local e-commerce volume.
Without these options, you risk cart abandonment in those markets. Payments orchestration solves this by acting as a single connection point to a vast ecosystem of payment methods and gateway connections. Now you can offer your customers their preferred local options instantly without a complex, new integration every time.
Do You Have Compliance Needs?
Handling sensitive cardholder data is a major responsibility that comes with the burden of maintaining Payment Card Industry Data Security Standard (PCI DSS) compliance.
By using a payments orchestration platform that includes an advanced vault, you can greatly reduce your own compliance scope. The orchestration layer securely collects and stores customer tokens, centralizing the security standard for all the payment types and gateways you use.
You get a dramatically simplified compliance process that reduces the financial risk and administrative cost of managing it across multiple, disconnected integrations.
Payment gateway or payment orchestration? Why not both?
A payment gateway is the tool you use for executing individual transactions, while a payments orchestration platform is the intelligent layer that optimizes and manages a multi-gateway strategy. The difference is simple: a gateway does the job of processing, and an orchestration platform makes sure that job is done in the most efficient, cost-effective, and flexible way possible. They are not competitors; they are the perfect pairing for a modern payment stack.
By combining the transactional security of gateways with the intelligent routing and multi-provider flexibility of an orchestration layer, you turn your payments strategy into a revenue-generating asset that fuels growth. Stop losing approvals, eliminate vendor lock-in, and gain the necessary control over your online revenue.
Ready to get a full briefing on the differences between payments orchestration and payment gateways? The Spreedly team is here to help you decide the best direction for your business. You can contact us here!
