Payments Innovation

Why Payments Orchestration Is Becoming A ‘Must-Have’ For Platform Merchants

Payments Orchestration Is Becoming A Must-Have

The pandemic is accelerating the great migration of merchants to online channels, and particularly online platforms. In an interview with PYMNTS, Daniel Wideman, VP of product at Spreedly, said that platforms, payments orchestration and smart routing of transactions are becoming “must-haves” in an online world – and are improving conversion rates, too.

 

The pandemic is accelerating the great migration of merchants to online channels, and particularly online platforms.

In an interview with PYMNTS, Daniel Wideman, vice president of product at Spreedly, said that platforms, payments orchestration and smart routing of transactions are becoming “must-haves” in an online world.

At a high level, he said, the pandemic has been quickening the evolution of the payments industry at large – and that’s putting it mildly, perhaps.

COVID-19 is impacting core trends and transformations that were already underway and creating opportunities for more and more participants in the ecosystem,” Wideman told PYMNTS. At the same time, the coronavirus has shone a spotlight on the challenges facing merchants – long-standing challenges that have only become more acute in recent months.

Those challenges boil down to reaching more customers and fulfilling more demand, even as COVID has helped spur a huge demand for certain goods and services.

But the virus, Wideman added, has shut down traditional access paths for customers, requiring merchants to pivot in response. He said that has given rise to platforms that offer merchants a shortened “runway” to the customer, and easier access to what they need in the meantime.

Many of the more traditional companies have run into growth constraints, said Wideman, as “hastily built” payment stacks have proved both inflexible and costly to scale.

“Platforms are quickly moving from nice-to-have tech to urgently necessary investments for many merchants,” he said. “The need to move quickly to mitigate risk and meet specific requirements of the business has further driven interest in partnerships to get to those goal lines faster.”

Increased demand for these commerce-enabling platforms has led the platforms themselves to want to improve their payments strategy. More than ever, they are now embracing multi-gateway strategies and payment orchestration. Wideman maintained that such a strategy positions these companies to “grow faster and more efficiently, because their valuable resources are freed up to focus on customer needs first.”

Levels Of Maturity

Wideman added that “different business models certainly impact the relative importance and nature of their payment needs with traditional merchants. In many ways, their maturity level dictates their needs.”

Nascent firms may need basic payments enablement, or help with automating regulatory and compliance functions. More advanced firms may want to improve their success rates, using payments as a strategic differentiator.

“But platforms are aggregating merchants who come to the door with varying levels of payments, sophistication and pre-existing vendor relationships, “ Wideman said. “The platforms themselves face additional challenges around the flexibility and choice supporting a wide range of payments.”

Those platforms must seamlessly manage complex payment flows, including alternative payment methods and localized payment preferences – and even emerging options like push to pay.

Wideman offered examples of that platform-enabled flexibility, where Toast has expanded its POS service to restaurants to capitalize on contactless payment and order-ahead trends. Elsewhere, he said, “a digital publisher, like Arc Publishing (a division of The Washington Post), can paywall content with a button flip versus a multi-month buildout, where it's critical to commoditize payment capability.”

Payments orchestration is becoming a “must-have” for platforms looking to grow rapidly and to have payments functionality running 24/7. At a minimum, platforms need failover orchestration across multiple gateways.

“They have to establish redundancy and resilience in the face of inevitable provider outages or service degradations,” noted Wideman. “Platforms can bake this service into their offerings to abstract the burden away from their merchants.” Smart routing can help leverage cost optimization and improve conversion rates, and can result in lower-risk transactions, he said.

The visibility afforded by platforms into the entire transaction life cycle, across all the providers, can drive greater efficiencies and cost savings for their merchants.

Looking ahead, said Wideman, the platform/merchant ecosystem will continue to evolve, but may even see consolidation. He noted that eCommerce is growing by double digits annually, and high-growth verticals (where M&A has already dotted the food delivery landscape) may see further deal-making.

“It boils down to whether the COVID-19 tailwinds that many platforms are experiencing will subside,” Wideman told PYMNTS. “Post-pandemic, we expect continued success for platforms enabling merchants in high-growth verticals like home entertainment, online gaming and delivery.”

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NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020 

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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