Why Open Payments Are Here

The payments landscape has undergone a complete transformation over the last decade. From simply wanting payments to just "work," now is an active and adaptable ecosystem that enables a merchant to tailor its approach to a wide variety of customer needs.

Today, merchants face a very imperative decision: operate their business within the confines of a traditional, closed payment system or open themselves up to new opportunities with open payments.

What Are Open Payments?

Open payments represent a change in the nature of the payment ecosystem. This change is focused on flexibility, customization, and responsiveness to the needs of merchants and consumers alike. 

The Definition of Open Payments

Open payments offer a flexible, cloud-native approach that lets merchants seamlessly tailor and weave various payment services into their ecosystem. This model breaks away from the rigid structures of closed systems by offering decoupled services and promoting interoperability. With open payments, the limitations of closed ecosystems have become a thing of the past.

Key benefits of open payments include:

• Connectivity: Connect with multiple payment providers, gateways, and optimization tools through a single platform, eliminating the hassle of managing complex individual integrations and enabling global reach
• Customization: Merchants can pick and choose the tools that best fit their specific needs, creating a personalized payment setup
• Flexibility: Open payments platforms accommodate a wide range of consumer payment preferences, making it easier to handle transactions across different regions
• Security and Compliance: Store payment data with PCI-compliant vaults and use tokenization to protect sensitive information, all while staying compliant with global regulations like GDPR and PSD2
• Scalability for Growth: Open payment platforms are designed to scale as businesses expand globally, integrating local payment methods and alternative payment options like buy-now-pay-later
• Enhanced Customer Experience: Merchants can provide a seamless, omnichannel payment experience that accommodates consumer preferences, including the 31% of U.S. payments made through alternative payment methods

To grasp the importance of open payments, we need to dive into how the digital landscape for payments has changed.

The Open Payments Journey: A Timeline of Transformation

The First Act: Closed Ecosystems 

The traditional payment ecosystem was powered by a mix of siloed providers—ranging from POS terminal providers to PSPs and hardware manufacturers. This setup led to significant administrative burdens and compatibility challenges, complicating the lives of merchants.

From 2012 to 2017, this model took hold in the digital payments landscape. These closed ecosystems provided the stability and predictability that merchants desperately needed as they navigated the mobile revolution.

Key Characteristics:

• Complex integrations with multiple providers
• High administrative costs
• Lack of seamless operation across channels

The Second Act: The Mobile Revolution and Full-Service Payment Providers (PSPs) 

The early 2010s marked a boom in mobile commerce that exposed a critical flaw: the old Web 1.0 payment systems just weren't cut out for the surge in mobile transactions. As merchants rolled out mobile apps and shifted their focus to mobile users, they ran into a fragmented, outdated infrastructure that couldn't keep up with the demands of modern shoppers.

In response, full-service PSPs like Stripe, Adyen, and Braintree revolutionized the market. They bundled payment stacks—integrating gateways, processing, fraud management, and multi-currency support—into single, easy-to-manage solutions. This integration made it much easier for merchants to accept payments and offered a seamless experience for users. However, while this simplified approach resolved many challenges, it often came at the cost of flexibility and customization, as merchants were tied to the predefined offerings of their PSPs.

By maintaining tight control over these elements, they were able to offer reliable and smooth experiences. For merchants, the appeal was clear: “It just works.” This model took hold in the digital payments scene, providing the stability and predictability that merchants needed as they navigated the mobile revolution.

Key Characteristics:

• Seamless, bundled services
• Locked-in systems with limited agility
• Not suitable for merchants needing diverse tools

The Third Act: From Functionality to Flexibility with Open Payments

Today, there is more cross-border digital commerce than ever before, with the global B2C cross-border e-commerce market projected to reach $7.9 trillion by 2030, up from approximately $785 billion in 2021 (STATISTA) utilizing increasingly diverse payment methods. For instance, digital or mobile wallets accounted for 51.7% of global e-commerce transactions in 2023, followed by credit cards at 20.8% and debit cards at 12.0% (CAPITAL ONE SHOPPING) meaning merchants today are focused on delivering a seamless experience to the growing global market. They need the flexibility to adapt to diverse customer preferences and meet the unique demands of international markets. To achieve this, many are moving away from rigid, closed ecosystems and embracing open payment systems that offer greater customization and adaptability.

In response to this shift, payments orchestration expanded, introducing a unified API layer that integrates diverse payment solutions and providers into a single ecosystem. This cloud-native approach enables merchants to build customized payment stacks tailored to their unique needs, enhancing their ability to meet varied market demands effectively.

Merchants and platforms began to debate whether to stick with tightly controlled payment systems or move to these more adaptable open payment platforms. This trend towards open payments is even being adopted by some PSPs themselves, with major players breaking up their services to offer greater interoperability. For example:

• Decoupling Services: PSPs like Stripe now allow merchants to use specific modules without being tied to their entire ecosystem
• Data Mobility: Providers are making it easier to move card data across platforms, giving merchants the freedom to pick the tools that best meet their needs

Key Characteristics:

• Unified API connecting various payment services
• Customizable, flexible ecosystems
• Support for both in-person and online payments

Building Out Your Organizations Payment Stack: A Checklist

Piecing together a payments stack for any organization is not an easy task. Which why we’ve put together a checklist of the imperative features a payments ecosystem needs to be successful and highly functional in modern times:

1. Omnichannel Capability: Supports both in-person and online payment options
2. Alternative Payment Methods: Includes digital wallets and buy-now-pay-later options
3. Ease of Management: Allows existing personnel to manage the solution without added complexity
4. Risk Reduction: Offers advanced fraud protection and secure data handling
5. Scalability: Enables global growth without significant operational changes
6. Regulatory Compliance: Meets ever-changing global payment regulations
7. Flexibility: Empowers merchants to choose vendors and solutions that best fit their needs

So, Why Open Payments Now?

Open payments platforms give merchants the flexibility to connect with multiple providers, unlike closed systems that lock businesses into rigid setups. Early digital payments relied on closed ecosystems, forcing merchants to manage complex integrations with various providers. This led to high administrative costs, compatibility issues, and limited flexibility. Closed systems also lack interoperability, making it hard to integrate new tools or expand into new markets, and they often lack cost transparency, leaving merchants in the dark about the financial impact of their payment operations.

Building your own payments orchestration system can unintentionally create similar challenges. While it offers control, custom-built solutions often demand significant resources to develop and maintain. Ongoing costs for maintenance, PCI compliance updates, and creating new integrations can quickly add up. This makes it harder to scale, adapt to changing business needs, or add new providers and payment methods efficiently. As a result, in-house orchestration can become another form of a closed system.

As the payments industry evolves, open ecosystems are becoming more important than ever. Consumers expect a smooth and secure payment experience. Advances in technology—like APIs and new payment methods—make flexibility a must. Open payments platforms give businesses the tools to break free from the constraints of closed systems, quickly adapt to market changes, expand globally, and grow revenue with payment systems built for their success.

Why Spreedly is Your Partner for Open Payments Success

Spreedly enables businesses to integrate hundreds of gateways and payment services via one API, allowing customers to build customized payment stacks that scale globally, support diverse payment methods, and improve authorization rates.

According to recent data, 76% of POS terminal-centric merchants leverage payment orchestration services, highlighting the growing demand for these flexible solutions. Spreedly processes over $50 billion in GMV annually, underscoring our proven ability to handle the complexity and scale of modern payment ecosystems. Spreedly is the trusted partner for delivering seamless, secure payment experiences. By simplifying payments, we enable you to focus on what matters most: growing your business.

Ready to see Open Payments in action? Check out our interactive demo or connect with us via the chat feature on our website to explore how we can help you unlock your organization's full revenue potential with open payments.

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