Orchestrating Gateways To Increase Transaction Success Rates

Payments choice is the mantra of 2020, and payments flexibility powers those choices. Financial institutions (FIs) and merchants that offer that flexibility have an edge, as every legitimate transaction that is authorized and every fraudulent one that is stopped marks a step toward recovery.

PYMNTS’ September 2020 Payments Orchestration Playbook, done in collaboration with Spreedly, looks at payments flexibility and choice from the perspective of unifying new digital capabilities in single, powerful ecosystems that streamline new transactional flows.

Using multiple payments gateways is one of the surest known methods of increasing transaction volumes, for example. And it’s more pressing now as commerce becomes ever more digital.

“The migration away from brick-and-mortar retail toward eCommerce is pressuring retailers to modify their payments operations, but building the in-house infrastructure to support those systems from the ground up can be prohibitively expensive and drain businesses’ time and resources,” according to the new Payments Orchestration Playbook.

“Many are therefore turning to cost-effective payment integrations to enable the experiences their customers crave. One major challenge these businesses face is successfully transitioning to a digital ecosystem while maintaining the same transaction success rates.”

PYMNTS’ September 2020 Payments Orchestration Playbook dissects the issue of transaction success rates in the context of system upgrades that make new business models viable at scale.

The ROI of Orchestration

Noting that “many businesses are learning too late that it takes more than simply providing digital products, offering numerous payment methods and generating sales to build successful eCommerce and digital content businesses,” the September Playbook states that “firms must also effectively manage the operational systems that tie these myriad features and functions together.”

Tech stacks are using orchestration layers to achieve this, with some eye-opening results. There are challenges to overcome, as always, but the math works out well for adopters.

“Maximizing [return on investment] on a multi-provider strategy means understanding comparative performance, identifying opportunities to increase success or reduce cost, and tuning implementations to capitalize on opportunities,” Daniel Wideman, vice president of product at Spreedly, told PYMNTS.

“Doing this at scale across multiple providers without the benefits of centralized orchestration that has cross-industry data is complex, expensive and time-consuming. Speed to market, agility and flexibility are put at risk. This is a sacrifice most are unwilling to make when working in a competitive market or looking to expand,” Wideman said.

Outsourcing the orchestration task “frees teams from maintaining complex payment integrations,” Wideman added. “Payments orchestration creates the flexibility to easily integrate with the right service for the right customer at the right time.”

The $43B Opportunity That Gateways Represent

With payments gateway players projecting a compound annual growth rate (CAGR) of 16.4 percent over the next five years, it will be a market worth nearly $43 billion by 2025.

So, not only is there “gold in them thar hills”— but there’s a way to get to it as well.

“Payments orchestration layers that utilize AI- and machine learning (ML)-based analytical methods can provide even more value by enabling businesses to monitor how factors such as transaction success rates, chargebacks and instances of fraud change in real time, and how payments should be processed to allow for maximum operational efficiency,” per the Playbook.

“This technique, called smart routing, sees payments orchestration layers use all data available to determine which payments are best suited to process through certain payment gateways, resulting in higher transaction success rates and lower fees.”