Our teams are always seeking ways to share resources and educate on how the fast evolving payments industry impacts your business, your customers and their needs.
Following is a recent “Business Impact Brief” published by the team at 451 Research (part of S&P Global Market Intelligence) focused on Payments Orchestration and Optimization. You can also download the full PDF of the brief to share here.
The Business Case for Payments Orchestration and Optimization
The 451 Take
Connecting to multiple payment providers can generate a variety of compelling benefits, such as unlocking access to best-of-breed capabilities, enhancing geographic coverage and ensuring failover support. For these reasons and more, 451 Research finds that the majority of merchants prefer a multi-provider approach to payment processing. For online-centric merchants, this is even more the case. These entities often have intricate needs pertaining to cross-border and local payment method acceptance that no single provider can effectively fulfill.
Preferred Approach to Processing Payments: Multi-Provider vs. Single Provider
While there are compelling advantages to working with multiple payment providers, doing so is not without challenges. Having more partners translates to more fragmentation in merchants’ payment environments. This can result in a variety of undesirable consequences, such as added management costs and difficulties in extracting and aggregating payment data. In certain scenarios, this added complexity can even throttle expansion. Consider that more than one in five online-centric merchants say that their current payment acceptance infrastructure has become a significant inhibitor to the growth of their business.
To maximize the value of a multi-provider payment strategy, orchestration is essential. Payment orchestration augments the effectiveness of connecting to multiple partners through the application of rules, logic, intelligence and streamlined connectivity. Ultimately, orchestration unlocks the full value of payments to better drive favorable business outcomes. Results can include reduced complexity, expedited speed to market, better customer experiences, enhanced operational flexibility and, perhaps most critically, revenue optimization.
Forward-looking merchants understand that payments today are much more than a commodity – they’re a top customer experience factor, an enabler of business expansion and a key input to top- and bottom-line growth. Approaching payments strategically is essential to realizing these attributes. For merchants with a multi-provider strategy, that means implementing payment orchestration and optimization.
Payment orchestration and optimization can result in tangible results for merchants. Among the most impactful business outcomes include:
ENHANCED SPEED TO MARKET. Entering new markets is top of mind for merchants. 451 Research finds that one in four online-centric merchants say building out a cross-border payment strategy is a top initiative for their organization. Similarly, one in three enterprise-scale merchants say increasing acceptance of local payment methods is a top priority. The challenge is that executing on these goals requires local partners, which often prove to be time-consuming and integration-intensive to onboard. Using a payment orchestration framework to connect into new providers (e.g., gateways, fraud-prevention providers) via a single integration significantly reduces these hurdles, resulting in accelerated speed to market.
IMPROVED CUSTOMER EXPERIENCE. False declines, limited payment options and transaction latency can all have a detrimental impact on the customer experience. 451 Research finds that in the last six months, one in five consumers have abandoned a purchase with a merchant based outside the US because their preferred payment method was not offered at checkout. Similarly, more than one in four shoppers have abandoned a purchase because one of their transactions was falsely declined. Connections into the local payment infrastructure paired with the ability to dynamically route transactions to the most optimal provider can equate to better acceptance rates, reduced transaction latency and less downtime, ultimately improving the customer experience.
REVENUE GROWTH. Gone are the days when payments were seen solely as a cost of doing business. Payments can be a driver of top-line growth if orchestrated and optimized correctly. Transaction routing, account updater services and local payment method acceptance are all examples of powerful levers that merchants can pull to increase transaction success, resulting in revenue growth. Underscoring the increasing focus here, our research shows that pursuing strategies to improve transaction approval rates is a top-four payments initiative for merchants in 2020.
Payments are quickly becoming a powerful competitive differentiator. 451 Research finds that more than 70% of merchants furthest ahead with digital transformation say payments are a highly strategic area of focus for their business. Looking ahead, merchants that can best orchestrate and optimize payments within their organization will be at an advantage on multiple fronts. We anticipate that the business need for these capabilities will only continue to increase as commerce becomes increasingly global, as the experience becomes the battleground on which customers are won/lost, and as revenue optimization becomes essential to survival. Hyper-growth online merchants, businesses expanding internationally and/or those with complex payment flows are best positioned to see near-term ROI.
451 Research is a leading information technology research and advisory company focusing on technology innovation and market disruption. More than 100 analysts and consultants provide essential insight to more than 1,000 client organizations globally through a combination of syndicated research and data, advisory and go-to-market services, and live events. Founded in 2000, 451 Research is a part of S&P Global Market Intelligence.