By most reports, the financial infrastructure held up well during the pandemic's digital shift, just as the internet itself proved to be a reliable utility, despite unheard-of traffic testing the limits of its digital pipes.
The same can mostly be said of the network of payment gateways that connect merchants to acquiring banks and financial institutions (FIs).
But there’s always a caveat.
Many merchants still rely on a single payment gateway to process card transactions. While this arrangement does the job, Jillian Munro, chief technology officer at Spreedly, told PYMNTS that the success rate of transactions can be greatly improved by a multi-gateway approach.
“We're looking at payments infrastructure as a strategic play,” Munro said. Embracing the philosophy that “redundancy is good” when it comes to payment gateway access, “the ability to have multiple providers for any sort of business process generally improves your overall flexibility or resiliency, and clearly creates operational continuity.”
That goes double for having multiple gateways always available.
It’s not just about solving for resiliency at the core, Munro said, but rather “…really focusing on an overall payment strategy that gives you a ton more flexibility in terms of moving into new [geographic] locations, optimizing your payments and your transaction costs.”
Orchestration And Higher Success Rates
Physical retail and eCommerce have both caught on to payments choice and the power of consumer preference at checkout to drive conversions. To complete that buying experience, the payment method of choice is ideally routed to a gateway best-suited to its attributes.
But that can’t happen in a single-gateway payments configuration.
“I have a transaction, it needs to be processed [by] what is the most available, the most cost-effective processor that can [give] that transaction the highest success rate,” Munro explained. “If one [gateway] happens to go offline … then you want to have defaults behind the scenes — but you don't want to be addressing [gateway failures] at the time the event happens.”
This is where platforms prove their worth with specialized, automated ecosystems.
“If you go back in time, payments was really a cost of doing business,” Munro said. “Our view is that it's becoming a revenue opportunity for merchants, gateways and other services within the payments ecosystem. With millions of people moving online across the globe, for example, merchants really need that flexibility to be able to do localized payments, to focus on uptime across their providers and to really create a new flexibility.”
Munro shared a use case in which a Spreedly merchant was achieving transaction success of 86 percent using a single gateway. When they moved to the platform environment and added a second gateway, success rates rose to 93 percent — equating to an additional $2 million per week for this particular firm.
“That [shows the] value of just one additional gateway,” she said.
With the unfolding Wirecard scandal rocking the FinTech world, seeing that incident clearly is one way to prevent it from happening again.
Munro told PYMNTS, “it all comes back to … overall resiliency and gateway provider strategy. To provide operational continuity, [merchants] essentially must inoculate themselves [against] large- and small-scale continuity events” of that kind.
More and more merchants are achieving resiliency (and improved transaction success rates) via the payments orchestration route. An ability to have card transactions routed to the most available, most efficient gateway is proving itself as more commerce moves online — and more of it converts.
“It’s a strategy where you are looking at an orchestration process as opposed to a single point-to-point process, so you can make the best use of the strengths of any one processor. If one happens to go away, by default you’re operationally [able to recover from]” that incident, Munro explained.
“For customers to have successful purchasing experiences, to have their transactions be successful with reduced latency — that's what merchants really should focus on, while payment systems are helping to process revenue,” Munro told PYMNTS.