Payment Orchestration: A Practical Guide to Optimizing Payment Performance

PAYMENT ORCHESTRATION

A practical guide to optimizing payment performance

INTRODUCTION

Nuvei partnered with Edgar, Dunn & Company (EDC) to create this practical guide to help eCommerce businesses implement and get maximum value from their Payment Orchestration Platform (POP). This study is a comprehensive resource designed to help businesses understand the concept of Payment Orchestration and to provide a toolkit.

We leveraged the results of comprehensive qualitative and quantitative research to gain insights for this study, which were staggering. For example, 84% of our respondents say they are working with up to 20 payment providers and 75% of them wanted to simplify their management.

We’ve consolidated our findings to demonstrate how businesses can accelerate revenue and streamline their payment strategy using Payment Orchestration.

This study showcases in detail the benefits and drawbacks associated with the three ways to implement a Payment Orchestration Platform: inhouse, stand-alone and integrated.

It also offers businesses a practical implementation guide.

The report contains insights into the following:

l Payment Orchestration: why now?

l Everything you need to know about Payment Orchestration

l Tangible business benefits to Payment Orchestration

l How to successfully implement Payment Orchestration

l What an ideal solution might look like

Nuvei and EDC would like to thank the retailers, marketplaces, platforms, partners and Nuvei employees that participated in the research for their time, assistance, and support.

EXECUTIVE SUMMARY

Payment Orchestration is not new.

As a concept, it has been around for many years, but only recently has it entered conversations beyond those among niche payment industry experts.

Skyrocketing eCommerce growth and globalization have pushed businesses to focus on optimizing their payment performance.

As a result, Payment Orchestration is now a hot topic that is beginning to gain traction among businesses selling online.

Yet, implementation rates remain low. As a result, organizations struggle to understand Payment Orchestration’s relevance to their specific business needs.

Payment Orchestration is a centralized approach to payment management that enables businesses to improve their overall payment performance in terms of efficiency, security, flexibility, and scalability.

An orchestration layer seamlessly integrates into the payment flow and can positively impact the customer experience. We have surveyed over 100 businesses that sell online.

They expect an orchestration solution to deliver five key functionalities:

l Connection to many Payment Service Providers

l Smart transaction routing

l Tokenization/PCI-DSS compliance

l Fraud prevention

l Reconciliation and reporting

All features are deemed important; however, we have identified those which should be prioritized. This paper assesses each category in detail. We have also conducted in-depth interviews with six global organizations that have implemented payment orchestration using three configuration models:

l In-house payment orchestration solution

l As a value-added service provided by an existing Payment Service Provider, such as Nuvei

l Outsourced to a dedicated Payment Orchestration provider

Pros and cons will be assessed for each configuration.

Our research and survey have identified clear business objectives that businesses assess when looking at their payment stack:

l Is Payment Orchestration necessary for the nature of my business?

l What is the return on investment for deploying an orchestration layer?

l Does my business have the right resources to set up and monitor an orchestration solution?

l What are my business needs and payment requirements?

l How can I customize and integrate an orchestration layer within my current IT stack?

l How to run a pilot test?

Payment Orchestration is designed to help businesses win sales, optimize payment costs, simplify internal processes, and enhance the payment experience from a customer standpoint.

This study intends to test the validity of these assumptions and provide a toolkit for all businesses choosing to go down the Payment Orchestration path.

PAYMENT

ORCHESTRATION: WHY NOW?

Payment Orchestration is becoming mainstream

74%

of the companies we have surveyed are familiar with the concept of Payment Orchestration.

The eCommerce landscape is changing

In the last decade, the eCommerce landscape has evolved from a relatively straightforward concept to a complex ecosystem involving multiple devices, partners, and channels.

Expectations for product customization, mobile-optimized searches, quick checkout processes, and hassle-free delivery are growing rapidly as customers look for convenience at every turn.

Are you familiar with the concept of Payment Orchestration?

The interest is here, yet the knowledge remains vague. While not a new concept, modern Payment Orchestration platforms have significantly built on their predecessors’ capabilities.

They allow online businesses to better position themselves in a constantly changing eCommerce market while navigating the rising complexity of accepting online payments.

In 2021, global retail eCommerce sales amounted to approximately $5.2 trillion1. This figure is forecasted to grow by 56% in the coming few years, driven by three major geographies: China, Europe, and the US.

However, as markets mature, the amount of competition serving these expectations rises, along with the complexity of bringing these solutions to market.

https://www.insiderintelligence.com/content/worldwide-ecommerce-forecast-update-2022

Payment complexity is increasing

Payment complexity leads to online payment failure. Online payment failure leads to lost sales. It is typically the result of a breakdown in the payment flow from the consumer’s side, technology/security errors on the business side, or because of a data transfer error somewhere in-between.

The knock-on effect is that failed transactions push customers to question the trustworthiness of a business and ultimately abandon online carts. Whatever the reason for a failed transaction, complexity in the payment system usually plays a part.

Besides payment failure, there is a growing list of payment challenges and complexities that eCommerce businesses have experienced in the past few years.

One example is security enhancements. Online businesses widely implement additional security layers such as 3D-Secure (3DS), even outside Europe.

However, for all their back-end benefits, these layers lengthen the payment and validation process, further impacting the already-fragile conversion rates for eCommerce sales.

A second example is the rise in Alternative Payment Methods.

These include digital wallets and Buy Now Pay Later (BNPL) solutions and can vary significantly between markets. While this rise occurs, online businesses need to sunset older payment method options.

The result is a complex and growing payment mix.

A third and final example is the large and constantly evolving number of acquirers/gateways. These drivers fuel complexity and require eCommerce businesses to focus on optimizing their complex payment ecosystem.

That way, they can control the whole payment value chain while creating seamless customer payment experiences.

Payment optimization is gaining traction

Our in-depth interviews revealed that offering various payment methods and a great customer journey are key priorities for businesses in today’s landscape. The payment experience is an important component of the overall customer journey, and all interviewed businesses claimed to see their payment teams focus on payment optimization.

Regardless of the device used to make the purchase (desktop, mobile or tablet), today’s digital consumer has come to expect a checkout process that:

l is simple and friction-free;

l allows them to pay with their preferred payment method and currency;

l delivers a successful payment; and

l ensures their payment details are always kept secure.

Payment Orchestration can certainly help businesses deliver the high standards customers expect, and we see the following business types stand to benefit most from implementing Payment Orchestration Platforms:

l Large businesses with high numbers of cross-border transactions

l Businesses accepting a wide range of payment methods, including many Alternative Payment Methods across different markets

l Omnichannel businesses

l Businesses with multiple acquirers and/or connections with multiple gateways

l Businesses accepting multiple currencies

l Businesses with complex processes that require coordination between multiple tasks, systems, and teams

“A technical infrastructure with several state-of-the-art payment providers in parallel ... (1) wiggles room (for eventual downtimes etc.), (2)

enables the Payment Team to address better conversion rate issues and (3) unlocks launches of new payment methods and new countries with the most relevant providers.”

Laurene Lecomte - Head of Risk, Payments and Fraud

at Backmarket

The relevancy of Payment Orchestration is increasing

Businesses that utilize single Payment Orchestration Platforms can integrate with multiple PSPs, payment gateways and acquirers while centralizing and reducing the overall complexity of their payment setup.

Moreover, they can give access to a greater mix of relevant Alternative Payment Methods without it becoming overbearing.

Implementing Payment Orchestration Platforms can also help businesses avoid system outages and downtimes, adding robustness to their payment system to fit their customers’ payment preferences better.

Payment Orchestration, implemented the right way, is instrumental in enabling businesses to benefit from the best possible payment solution in each market they operate in and for each payment method.

Payment Orchestrators should always advocate for working with a business’ existing stack, and be able to seamlessly connect to multiple providers across the spectrum – even if these may sometimes fall in the competitor category.

Payment Orchestration practices can help spur healthy competition between payment providers while preventing businesses from being exposed to monopolistic practices.

“With regards to Payment Orchestration, the benefit we expect is to simplify the maintenance of integrations locally and internationally, and avoid critical vendor dependency, while reducing time to market for local payment methods. We are already working with some global PSPs and we would like to improve our performances with local players/payment methods without having to manage 10-15 different connections.”

Head of Payments Group for a multinational conglomerate specializing in luxury goods

EVERYTHING YOU NEED TO KNOW ABOUT PAYMENT ORCHESTRATION

What is Payment Orchestration?

A Payment Orchestration Platform is a Software as a Service (SaaS) solution operating as a technical layer, accessed through one API, to:

l facilitate the integration and handling of multiple payment providers (e.g., acquirers, banks, payment gateway and fraud prevention providers);

l provide access to a variety of payment methods, and

l optimize payment performance (e.g., achieve highest possible card approval rates).

Payment Orchestration can be seen as a technical “layer” between the business and the external world of providers such as Payment Service Providers (PSPs) and acquirers.

“The orchestrator is only a piece of the puzzle, and needs to be connected to the other parts of the puzzle.”

Digital Payments Platform Group Manager for an international food and beverage manufacturer

How does a Payment Orchestration Platform integrate into a card payment flow?

It is key to understand where the orchestration process stands in the payment flow and its role in the transaction.

From the business environment to the orchestration layer

In the case of card payments, the journey starts once the cardholder has entered their card details on the hosted payment page and triggered the payment. In most cases, the payment-hosted page is not in the business environment but held on a third-party web page where the transaction can be securely conducted.

The integration of an orchestration layer does not alter that setup. Once the payment has reached the Payment Orchestration Platform environment, a set of events are activated in a specific order. This is when the payment enters the “smart routing” process, whereby the algorithm routes the payment to the most appropriate available payment gateway/acquirer.

Next, the algorithm is customized using specific business rules that aim to maximize the likelihood of a successful card authorization while minimizing associated costs. Business rules can be configured by the Payment Orchestration Platform.

The business can also provide instructions to the Payment Orchestration Platform to set the rules. Alternatively, the Payment Orchestration Platform can let the business access the system via a plugand-play API, whereby businesses can configure the rules themselves.

From the orchestration environment to the gateway and acquirer layers

The rule-based algorithm will filter all available routes through the smart routing process and return a list of payment gateways or acquirers that match the business rules. The probability of payment success is a typical criterion the system considers.

To do this, smart routing capitalizes on its core engine. This module stores the configuration set by business rules and Machine Learning (ML) data to communicate with the payment gateways.

Historical data for success rate, ticket size, card issuer, card type/brand, country, currency, Bank Identification Number (BIN) etc. are among the multiple variables that the engine considers when deciding where to route transactions.

If the first payment attempt fails with the prioritized gateway or acquirer, a cascading effect occurs. This automatically sends the transaction to the second prioritized gateway, and so on. Unlike smart routing, cascading is triggered once the transaction has been declined.

Most importantly, cascading eliminates the need for the cardholder to retry his payment in the event of a soft decline (i.e., when it is possible to retry and not in the cases of “hard” declines by issuers).

Several Payment Orchestration Platforms leverage clever mechanisms to cut down soft decline volumes experienced by businesses. These mechanisms can be integrated within the cascading process to optimize conversion rates.

For example, Nuvei product teams have witnessed issuers soft decline Card-on-File transactions simply for not sending a 3D challenge.

To overcome that hurdle, automatically operating a 3D challenge request in the cascading process will transform a potential lost transaction into a successful one.

Hard declines should not be retried and occur when the issuing bank of the cardholder has denied the payment request for specific reasons.

Hard declines are mostly associated with fraudulent payment operations caused by invalid cards, stolen cards, or closed accounts.

The cascading process will not be triggered when this happens, as additional attempts will not result in a new outcome.

From the acquirer to the card network

Once the algorithm selects the most appropriate gateway, the payment information is passed to the payment gateway.

It will then forward the encrypted transaction information to the acquirer, who will use the card scheme rails (domestic or global) to send the request to the issuing bank. The card schemes will operate additional fraud screening checks during this process.

Reaching the issuer

The issuer will then process the transactional data, conduct additional fraud checks, and approve or decline the request. Finally, the outcome of that process will be sent back to the acquirer via the card scheme.

Sending the authorization response back to the orchestration layer

Once the acquirer has received the approval message from the issuer, it is sent back to the orchestration layer (possibly through the gateway if used in the transaction process), which in turn will inform the business of the outcome of the payment request.

The business will finally confirm to the buyer the approved transaction. The acquirer will receive funds from the cardholder’s issuing bank via the card scheme and transfer it to the business account.

Quantitative survey outcomes: Payment Orchestration key functionalities

We asked payment leaders working in various international businesses to give us their thoughts on what they see as the key Payment Orchestration functionalities to prioritize when implementing a solution.

Below is an overview based on the data we collected. All features can hold equal importance, but it is up to the individual business to prioritize these based on their circumstances.

Connection to a multiple payment providers (PSPs & acquirers)

59%

of the surveyed businesses sell online in over five different markets. Businesses typically need to integrate with multiple payment providers to sustain that configuration.

Card transaction approvals are often closely linked with local acquiring capabilities. While alternative payment methods are gaining more traction, cards largely remain dominant across the globe in eCommerce.

So, businesses often need to work with local card acquirers in each market they operate in, hence increasing the total number of providers they work with. This was confirmed by our research.

62%

of respondents have more than four payment methods on their payment page; and businesses typically need to integrate with multiple payment providers to sustain that configuration.

Payment Orchestration Platforms provide multi-acquiring capabilities centralized in one place, acting as a single connection to many acquirers and payment gateways/PSPs. This is a key value proposition of Payment Orchestration for businesses with multiple integrations.

In how many countries do you sell online?

How many payment methods do you provide on your payment page?

To how many payment providers your organization is integrated to?

Smart transaction routing & cascading

Without orchestration layers, businesses can split payment volume between different payment providers. However, it is cumbersome and does not optimize payment performance based on real-time data.

An orchestration layer enables businesses to benefit from a smart routing experience. This configuration routes transactions to the most appropriate payment provider in real-time, based on dynamic criteria tailored to a specific transaction to increase approval rates and optimize acceptance costs.

These features are critical to businesses.

56%

But payment optimization is about much more than just reducing the cost of acceptance and improving efficiency.

Smart routing capabilities have tremendous potential to accelerate revenue for businesses and boost acceptance rates, by ensuring card transactions are routed through local acquirers, for example.

It’s important that businesses do not miscalculate the potential return on investment for Payment Orchestration Platforms and consider the significant contributions they can make to the bottom line.

of surveyed respondents claimed that reducing the cost of accepting payments is their top concern when looking at orchestration solutions.

What would/are the business objectives for your organization to implement an orchestration solution?

Tokenization/PCI-DSS compliance

The Payment Card Industry Data Security Standard defines a set of requirements intended to ensure that all companies which process, store or transmit credit card data maintain a secure environment.

Orchestration solutions leverage tokenization technology to meet The Payment Card Industry Data Security Standard (PCI-DSS).

For example, an orchestration solution may decide to leverage Network Tokens issued and managed by major payment schemes (i.e. Mastercard & Visa) and linked to a specific card account.

Alternatively, the orchestration provider may decide to leverage business tokens issued by a business or a payment provider to protect sensitive cardholder data.

Reconciliation & reporting

Payment Orchestration allows businesses to access a comprehensive dashboard of KPIs (Key Performance Indicators) across all their transactions in one centralized and secure location.

It reconciles data from different payment providers, sales channels, and geographies to offer a single reporting experience. This feature is traditionally positioned as a valueadded service but is increasingly becoming an industry staple.

49% of surveyed businesses consider reconciliation and reporting as the number one functionality when they seek an orchestration solution.

Today, a select number of providers offer this functionality as a value add, yet we expect it to become table stakes as familiarity with the concept of Payment Orchestration increases.

What are the key functionalities you would prioritize/you are prioritizing for your payment orchestration solution?

Fraud prevention

Fraud prevention remains a major concern for businesses regardless of the payment stack configuration.

Fraud prevention tools can be integrated in different ways within an orchestration layer.

They can be embedded through the orchestration’s API, allowing the solution to send transaction data to an external fraud prevention provider for analysis.

In return, the orchestration solution will receive a green, orange or red light according to the fraud risk assessment outcome.

Only

28%

Another configuration is the plugin integration with fraud prevention providers.

In this scenario, the fraud prevention tool is seamlessly integrated within the workflow orchestration environment and does not require any upstream setting from the business.

In a plug-in context, the orchestration tool is marketed with fraud value-added services and can be defined as a one-stop-shop model.

The third configuration is a built-in fraud decision engine offered by the orchestration provider. Most of the time, it can run simultaneously with another plug-in fraud prevention tool. What is critical is to enable businesses to access their fraud data. of surveyed businesses claim to be satisfied with their fraud rate analytics, so we expect these features to be a key consideration for businesses in the market for a Payment Orchestration solution.

Do you have access to the following payment data analytics?

TANGIBLE BUSINESS BENEFITS OF PAYMENT ORCHESTRATION

Payment Orchestration can act as a key enabler for the following objectives:

Revenue enhancement

Broader market reach by offering a large range of relevant forms of payment

Payment orchestration enables businesses to quickly choose and customize the ideal payment mix, all on a single payment page.

In addition, these payment methods can include a combination of traditional, alternative, global, and local methods. This enables businesses to scale into new markets and territories with ease.

Offering relevant currencies

Through its APIs, Payment Orchestration allows businesses to offer local currencies and use local wallets, with the conversion taking place at the business’s end, providing more control over transactions and leading to additional revenue.

Optimizing approval rates

By allowing eCommerce businesses to increase the success of transactions with the most relevant acquirer and automatically routing transactions to the lowercost payment processing option, the Payment Orchestration layer can significantly increase approval and, thus conversion rates.

Furthermore, businesses seek that single point of service to improve omnichannel customer experience, ensure customer loyalty, prevent and control fraud, and achieve higher efficiency to accept large volumes of payments at optimal speed.

“To optimize approval rates of existing forms of payment for B2C is our key priority. We are losing 30% of our potential clients on the payment page for various reasons. With Payment Orchestration we aim to increase conversion rates by 5%”

Payments Manager for an international car rental company, focusing on leisure and corporate rentals

Cost reduction

One of the most important ways a Payment Orchestration layer can boost a company’s bottom line is by helping streamline all payment processes to reduce costs. Unfortunately, almost 20% of the businesses we surveyed consider managing multiple payment providers difficult and a small proportion think it is very difficult.

In most cases, overcoming difficulty takes time. And time costs money. 36% of respondents stated they find the task neither easy nor difficult. This suggests that businesses have simply accepted the burden of managing payment providers as a part of their day-to-day operations.

Do you believe it is easy or difficult to manage your different payment providers?

At the same time, 74% of our sample also admit to needing help to simplify the management of their payment providers. This shows there is an untapped opportunity for Payment Orchestration to add value.

Would you like to simplify the management of payment providers?

Cost-saving and cost-reduction initiatives have been among the top priorities for many businesses as they continue to rebuild after the COVID19 pandemic.

For example, 56% of surveyed businesses ranked reducing payment acceptance cost as their top objective in implementing Payment Orchestration, followed by improving internal efficiency (for 49% of respondents). Let’s take the example of the airline industry.

In 2020, the pandemic propelled 43 commercial airlines to file for bankruptcy. This is because the airline business model is both risky and unique.

First, airlines run multiple direct sale channels in different geographies and support high volumes of crossborder payments.

They also accept high volumes of transactions with a high percentage of changes, refunds, and exceptions.

In addition, airlines operate on very thin margins with high fixed costs and rely on a plethora of different suppliers across the value chain, including Global Distribution Systems (GDS), payment gateways/ Payment Service Providers (PSPs), technology vendors, acquirers, etc.

That’s where Payment Orchestration can make a difference not only by helping reduce payment acceptance costs for these thin-margin businesses, but also by helping to generate incremental sales.

What would/are the business objectives for your organization to implement an orchestration solution?

Internal efficiency

Another objective deserving of special attention is that of internal efficiency. Payment Orchestration reduces the complexity of internal processes, such as financial reconciliation, in three ways:

Simplicity

Accessing and analyzing real-time transactional and financial information is vital for business controls and maintaining agility.

Unfortunately, many companies capture data from a variety of different sources, resulting in arduous and inaccurate reports.

With 54% of survey respondents being integrated with six or more payment providers, including 21% of them working with more than ten providers, being able to bring disparate sources of transaction data into one place could keep businesses away from time consuming manual processes.

Payment Orchestration not only simplifies overall operations with multiple payment processors and methods but also helps to simplify reconciliation processes.

To how many payment providers your organization is integrated to?

Speed

Reconciliation can be extremely time-consuming for companies that still depend on manual spreadsheetdriven processes.

By automating processes and reducing manual intervention, Payment Orchestration enables finance and accounting teams to focus on more strategic activities.

Account reconciliation is both a critical step and a key control for finance and accounting.

The process is often highly manual, resulting in wasted time, errors, management of multiple data owners and access, inconsistent process timings, and limited capacity for analysis.

While 74% of our survey respondents would like to simplify the management of their payment providers, 18% are not pleased with their current paymentrelated reporting dashboard.

As a single, accessible, and accurate source of transactional data, Payment Orchestration streamlines financial reconciliation processes and helps companies optimize their resources.

That’s why agility in plugging and unplugging new payment partners and payment methods is one of the top priorities for respondents (50%).

At the same time, 49% of them would prioritize automation of reporting and reconciliation as a key functionality of their Payment Orchestration solution.

“Another key benefit of Payment Orchestration is that it provides more visibility and consolidation in order to efficiently manage our different payment partners”

Would you like to simplify the management of payment providers?

Payments Manager for an international car rental company, focusing on leisure and corporate rentals Accuracy

Are you pleased with your current payments-related reporting/dashboard?

Ease in scaling

According to The Paypers, 94% of consumers in the APAC region consider using an alternative payment method in 2022.

Payment Orchestration Platforms allow eCommerce businesses to centralize all their payment partners and payment capabilities into one platform and potentially across all their channels.

In addition, companies with global growth ambitions need to optimize their businesses quickly, to enter new markets and regions at speed.

Alternative Payment Methods have truly taken the LATAM region by storm, reaching a 39% share of total digital-commerce volume – a value of nearly USD $400 billion – as of the end of 20222. Alternative Payment Methods are already major players in Europe.

Recent research from Research & Markets3 states that 90% of surveyed individuals in Austria revealed that their preferred payment method being available is one of the most important factors they consider when shopping online.

In Poland, the possibility of payment upon delivery influenced online shoppers’ perception of a B2C E-Commerce website’s credibility when shopping for the first time.

That’s why having easy access to local payment methods and ensuring that payment processes are frictionless is at the heart of every successful eCommerce business.

Using Payment Orchestration, eCommerce businesses can quickly adapt their checkout process to accommodate each region’s most relevant payment methods, display amounts in local currencies, remove irrelevant fields, and even direct those transactions to payment partners who specialise in their business type and region.

For instance, 9% of US shoppers abandon their cart because their preferred payment method is unavailable according to a Baynard study conducted in the US in 2022.

To scale fast and experience rapid customer acquisition when entering new markets, eCommerce businesses need to have partners capable of providing relevant payment methods across various markets in a short timeframe.

47%

of the businesses we surveyed say that covering more markets and integrating with more payment providers are key when implementing Payment Orchestration

HOW TO SUCCESSFULLY IMPLEMENT PAYMENT ORCHESTRATION

Orchestration solutions have long been developed and deployed inhouse by large organizations.

However, times have changed, and modern innovative players have started gaining market share. This has had a transformative effect on the payment ecosystem.

In this section, we describe the different orchestration models a business can opt for and assess the pros and cons of each.

The three models that currently exist are:

IN-HOUSE

Developed internally by the business; implemented and maintained in its existing payment infrastructure.

STAND-ALONE

Offered by existing payment gateway providers or acquirers as one line of business from their product portfolio.

INTEGRATED

Offered by providers that have natively built and designed their orchestration solution as a stand-alone product.

In-house model

At that time, no third-party solution was available in the market and the “Payment Orchestration” terminology, as we know it today did not exist. Therefore, businesses had no alternatives but to operate orchestration on a “do it yourself” basis if they wanted to optimize payments.

An interview with a multinational food and drink conglomerate, processing payments in 40 countries, revealed that this organization had built its internal orchestration solution ten years ago.

The business today has a development team of 15 FTEs managing the in-house solution.

It has successfully integrated seven payment gateways (some of which are only technical payment gateways, and some have both collecting and acquiring roles).

Moreover, they have embedded machine learning-based third-party fraud prevention providers into their proprietary solution.

The business case to switch to an external Payment Orchestration Platform is not viable for that organization.

Despite this, the full cost of their orchestration build still needs to be recuperated.

Hence, businesses considering developing a similar in-house solution must understand the full range of pros and cons before taking the ‘costly’ plunge.

PROS:

l Allows for all payment operations to be located in-house and on a single platform (instead of having to engage with the orchestration provider and different payment providers)

l Allows the business to have a fully tailored acceptance and reporting system

l Enables the internal ERP system to trigger the payment via the orchestration solution (if the integration has been made between the two systems)

l Allows the business to keep payment-related learnings and confidential payment data in-house, thereby potentially creating a competitive advantage

l Enables the deployment to subsidiaries or even to be licensed to third parties or partner companies

l Provides the ability for the business to define its own roadmap

CONS:

l Restrains the business from capturing a consolidated data report from all payment operations as each payment provider offers different analytics tools and report the data separately

l Diverse data formats can result in significant overhead required to create a unified back-office reconciliation across different payment methods and providers

l Excessive workload required to create a system of business rules that direct transactions to the most appropriate payment provider

l Significant time lag to observe an attractive return on investment

l Potentially slow time to market and inability to deliver new services at a reasonable pace to support new customer journeys and offer new payment methods

l Requires continuous investments to keep up with industry and regulatory developments (e.g., 3DS vs2, new providers, new payment methods, etc.)

l Unable to benefit from external perspectives of payment providers and industry best practices

l Diverts internal resources away from their core business

“If you have some capabilities and resources, it is better to go for an in-house Payment Orchestration solution. Because there is some valuable intel that the company would rather keep to itself.”

Director for Corporate Planning and in charge of implementing Payment Orchestration at an airline in the LATAM region

Stand-alone model

Stand-alone providers offer orchestration solutions that have been natively built and designed to simplify payment infrastructure by absorbing the complexity of managing multiple Payment Service Providers.

PROS:

l Provides a unified payment analytics and reporting environment

l Hosts an operating model that systematically guarantees the optimal smart routing path

l Boasts independence from other payment providers

l Time to market is comparatively fast

CONS:

l Stand-alone providers cannot lower operational costs (e.g., connectivity, business logic, etc.), while integrated players can by using existing PSP infrastructure

l Many stand-alone orchestrators struggle to become profitable and make interesting acquisition targets for the established provider. Their life expectancy seems to be short due to

M&A: Pay.On (acquired by ACI Worldwide), Zooz (acquired by PayU), Optile (acquired by Payoneer) are among the examples of players absorbed by larger players

l Some stand-alone orchestrators claim to have multiple existing integrations but are in fact using a justin-time methodology to implement the requested integrations when required by a large client

l PSD3 might mandate API standardization and might trigger the anticipated consolidation phase of the Payment Orchestration Platforms landscape. Several stand-alone orchestrators with limited resources may fail to adapt and might have to exit the market

Integrated model

Card schemes, payment gateways and Payment Service Providers/acquirers such as Nuvei are among those organizations that have expanded their product portfolio with orchestration services. These long-established actors have recently started coopting the ‘Payment Orchestration’ terminology to capitalize on market momentum.

There is a clear increasing demand to process payments across a large range of geographies with a single entity and a focus on optimizing customer experience.

This has pushed long-established players to develop smart routing and automated retry capabilities as a value-add service and ultimately offering businesses the best of both worlds.

PROS:

l Provides a unified payment analytics and reporting environment

l Leverages proprietary payment optimization based on their PSP expertise within various steps of the orchestration process. Partial authorizations, non-3D transaction conversions to systematized 3DS checks or automated 3DS check for Card-on-File transactions are among the examples that can fit within the smart routing and cascading steps

l Have a long-term track record in the payment landscape and the ability to leverage a large network of payment and technology providers

l Can capitalize upon a large amount of authorization data compiled across all their business customers to develop cascading logic

l Enables businesses to access a wealth of industry knowledge and payment expertise

l Typically, integrated orchestration providers are established companies with deep roots in the payment industry, making them less interesting acquisition targets

CONS:

l May be perceived as biased towards redirecting payment transactions to their proprietary gateway or own acquiring business; however, this is typically an incorrect perception as it contradicts the smart routing value proposition inherent to orchestrators

l Rarely offer white label solutions/ plug-and-play APIs to allow businesses to create their own retry logic that would best suit their needs

Some businesses using an integrated Payment Orchestration model may request that providers refrain from integrating their gateway service in its connectivity portfolio of Payment Orchestration.

These businesses believe this will prevent any conflict of interest in the routing process. However, the drawback of this approach is to discard a potential routing option –integrated natively – which ultimately may become relevant for specific transactions.

Other businesses indicated that detailed and transparent reporting provided by the integrated vendor should be enough to spot any smart routing inconsistency. This argument is further enhanced when the business uses a plug-and-play API to add/ remove payment methods, integrate/ remove payment providers and configure the orchestration layer to leverage analytics.

The rationale for selecting one model over another will mainly be driven by the objectives each individual business has set for its payment acceptance. These objectives may differ according to the markets and segments they operate in.

At the end of the day, the beauty of using an orchestration layer lies in the fact that it encourages a multi-vendor payment stack – to reduce costs while truly optimizing the payment experience. It gives businesses complete control over routing decisions without them having to worry about the technology part.

So, businesses must pay close attention when selecting a provider to support their payment orchestration needs.

They must avoid vendors who brand themselves as payment orchestrators but are in fact closed ecosystems who advocate using their own capabilities over those of their competition. This can have a detrimental effect to the business and ultimately defeat the whole purpose of Payment Orchestration.

“We want to be independent as possible. The Payment Orchestration Platform is taking care of the technical part and we oversee the business aspects, such as setting the rules ourselves for smart routing.”

Head of Payments for a company in the luxury sector

CONCLUSION

Payment Orchestration helps to optimize online payment processing from start to finish, including payment authorization and capture, via a single connection. In this way, businesses can reduce the number of integrations and third-party service providers they must deal with.

With a Payment Orchestration solution, businesses can also figure out the best payment routes to send transactions, leading to a higher conversion rate and/or lower costs. In addition, the Payment Orchestration layer avoids potential failures and reduces the number of online payment failures.

Managing and monitoring the rate of failed payments is an ongoing challenge for businesses across markets and industry verticals. In addition to the lost revenue and the direct costs incurred, failed payments negatively impact customer experience and customer retention.

The True Cost of Failed Payments 2021 global research study from LexisNexis has identified that 85% of failed payments affect internal staff workload and the external customer experience. Furthermore, 59% of customers who have experienced a failed payment will not retry the purchase process.

In addition to payment failures, businesses may also face dropouts if customers’ preferred payment methods are unavailable.

Orchestration solutions aim to solve the technical pain points and unmet needs that lead businesses to loosing transactions and clients.

Several factors have led businesses to face significantly high volumes of dropouts or failed payments:

l Not providing the payment method consumers are willing to use

l Integration issues with several payment gateways or processors

l Incorrectly configuring fraud detection rules

l Limited data and analytics capabilities for tracking and analyzing payment performance to constantly feed the payment acceptance rules

An orchestration solution is designed to mitigate the volume of failed payments. Yet, businesses ought to remain proactive in monitoring the performance of their implemented orchestration solution.

Most importantly, businesses must have a clear ideal state and roadmap before implementing their orchestration layer to enjoy a sustainable and fit-for-purpose solution.

From a customer’s point of view, Payment Orchestration provides more payment functionalities to improve the customer experience.

This allows businesses to have one platform that connects with multiple payment processors, so that they can accept relevant payment methods, including Alternative Payment Methods, and let customers pay how they want.

It provides a greater geographic reach and an enhanced use of technology, improving payment flows and resulting in a better customer experience.

High-level best practices / guiding principles for businesses considering Payment Orchestration

Opting for an orchestration solution will tackle three objectives considered as a cornerstone for any efficient business operations: increase revenue, minimize costs and simplify internal processes.

Businesses can adopt three main models when implementing an orchestration layer: in-house, stand alone and integrated. There is no universal best way to do it, but businesses must assess their current environment and future objectives properly before going down any path.

Leveraging the numerous industry interviews conducted for this study, Nuvei and EDC have identified a set of guiding principles that all businesses ought to follow to implement, run and benefit from an orchestration solution successfully:

l Analyze the current situation and develop an overall future state and realistic roadmap. Implementing Payment Orchestration is likely to be a key part of this roadmap

l Assess the business case and the return on investment for an orchestration solution

l Ensure internal governance and payment resources are set up internally before moving to the selection process (RFI & RFP)

l Evaluate the business needs and payment requirements (e.g., payment methods, currencies)

l Consider customization and integration (e.g., integration to ERP)

l Ensure clear payment KPIs are set up and designate internal resources to monitor the KPIs to track the performance of the orchestration solution

l In the implementation phase, ensure to run an initial pilot and validate the different business cases

What an ideal solution might look like

Payment Orchestration provides businesses with a unique opportunity to truly accelerate their revenue by optimizing their payment process. This is no mean feat, so choosing the right provider is key to a successful implementation and a sustained return on investment.

Based on the results from our survey and the in-depth interviews we conducted as part of this study, we identified some of the key aspects businesses should pay close attention to when choosing a supplier to help with their Payment Orchestration needs.

Customization is king

Each business is different. Payment Orchestration providers should know this and understand that their technology should fit the businesses they are serving, not the other way around.

So, whatever the original set-up, tech stack or business priority, payment orchestrators should have the ability to customize their solution to seamlessly fit these.

Platform interconnectivity should be part of their DNA

Multi-platform interconnectivity is one of the main features businesses look for in a payment orchestrator. But it can often be used to disguise a closed ecosystem, so it’s vital that businesses do not make this mistake. This becomes particularly relevant in the context of choosing an integrated solution.

Businesses should look for a Payment Orchestration provider that seamlessly integrates into as many alternative payment methods as possible, multiple acquirers across global markets as well as other payment providers if necessary –even if these can often be classed as competition.

Human powered support should not be underestimated

Payment Orchestration is about more than getting access to data. Data alone means nothing without the careful consideration that attributes meaning to it. This is where the value of expert, human support is second to none.

Businesses should focus on working with a robust provider with a trackrecord of knowing the payments world inside-out.

A provider who can not only offer access to multiple data points, but also provide professional guidance to transform these raw data points into valuable insights that can help support key business decisions.

To make that happen, it is crucial that the people representing the brand are pleasant to work with. While being Canadian can be advantageous in that regard, it’s best to experience it first-hand.

METHODOLOGY

EDC conducted the research in Q4 2022 and in early Q1 2023. This involved conducting primary and secondary research, including the completion of in-depth interviews with large multinational B2C businesses.

A survey was also conducted at the beginning of 2023. The survey has been administered online to a sample of respondents working in the finance, payments or commercial fields for international businesses serving two or more markets.

The questionnaire included a mix of pre-qualifying information, multiple choices, and openended questions regarding their experiences and views on the topic of Payment Orchestration.

All data was collected anonymously.

ABOUT

About Nuvei

Nuvei (Nasdaq: NVEI) (TSX: NVEI) is the Canadian fintech company accelerating the business of clients around the world. Nuvei’s modular, flexible and scalable technology allows leading companies to accept next-gen payments, offer all payout options and benefit from card issuing, banking, risk and fraud management services.

Connecting businesses to their customers in more than 200 markets, with local acquiring in 45+ markets, 150 currencies and more than 600 alternative payment methods, Nuvei provides the technology and insights for customers and partners to succeed locally and globally with one integration.

About Edgar, Dunn & Company

Edgar, Dunn & Company (EDC) is a global consultancy specialising in payments and financial services. Since 1978, we have partnered with clients across the globe and developed an unrivalled depth in specialist expertise.

We offer a truly independent voice and have never accepted a referral fee or commission from any vendor. Our vision is to be the most trusted global payments consultancy.

Today, we serve clients in over 45 countries through our global office network in North America, Europe, Middle East and Australia.

For more information, visit www.nuvei.com

https://edgardunn.com/