INSIGHTS

The ultimate test for a new technology is whether or not it solves a problem for the user. However, very often this crucial aspect is forgotten amidst the hubbub and hyperbole of something new and shiny. The payments space appears to have fallen into this trap. The sheer number of them means that rather than helping merchants focus on their core business and taking payments for goods and services, merchants are having to spend a huge amount of time and resources investigating, integrating, and managing a plethora of systems. There is a solution though, with some recent market entrants looking to deliver payment orchestration that helps different systems interact, and solves the problem of payment fragmentation.

There are an expanding number of payment systems vying for a merchant’s attention. They offer a bewildering array of tweaks and enhancements; either focussing on security, payment, reconciliation, the buy now, pay later space, credit card payment, current accounts… the list goes on.

Online payment systems should theoretically make a merchant’s life easier, give them more time to interact with their clients and complete their transactions. In reality they have made life more complicated. It has gotten to the point where large merchants are now having to maintain a ‘payment stack’ so that they can make transactions appear seamless. What this means in practice is that merchants at the middle and top end of the market are spending a huge amount of time and effort trying to work out which payment provider to take for which features.

Integrating each individual system has a huge financial and time cost for the merchants, and while the cost wouldn’t be as high as going back to processing cheques and international money orders, it can quickly rack up. In particular when a merchant is trying to trade internationally.

Payment orchestration simplifies this entangled spaghetti of payment systems, offering automated end-to-end payment processing. It solves problems in the back office, absorbs know-your-client and anti-money laundering challenges, removes the need for coding to integrate new payment providers, and removes the cost (and pain) of having to maintain a payment stack.

Similar to ‘software-as-a-service’ providers, payments orchestration firms take the chaotic mix of fintech vendors that currently reside in the payments space and lets customers access them through a single orchestration platform. The security and sign-off concerns are outsourced, and merchants can simply log into the portal and get on with the business of interacting with clients and completing transactions.

With payment orchestration, merchants don’t need to develop, integrate and manage a payment stack from multiple payment providers, banks, and fintech companies. All the merchant has to do is decide which currencies, payment methods, and banking infrastructure they want to work with.

For fintech vendors, on the other hand, time to market can be significantly reduced. This is because they can focus on their own system, and then integrate it with the payment orchestrator’s, rather than develop the entire platform that needs to work with a range of individual merchant systems. This will mean that innovation can flourish in the payments space.

Size of the prize

According to recent estimates, 26% of the total annual sales that the average US and UK business generates come from cross-border payments, while 96% of chief financial officers plan to digitise at least one aspect of their accounting operations[1].In this type of environment, an efficient payment orchestration platform is likely to yield significant benefits.

This is reflected in the sector’s growth forecasts. The global payment orchestration market is expected to deliver a compound annual growth rate (CAGR) of 20% between 2021 and 2026, according to Payment Orchestration for Global Commerce, a report published by PYMNTS and Payoneer.[2] QYR Research forecasts are even more optimistic, forecasting a CAGR of 25.8% between 2021-2027 in a report that suggests that the global payment orchestration market will rise in value from USD785 million in 2020 to USD4.8 billion by 2027[3].

Plenty of scope

Payment orchestration, so far, has mostly focused on working with the top-end, cross-border merchants; where the level of complexity means that there is a massive opportunity to add value. Once this is achieved, there is plenty of scope for merchants to extend their support down the value chain, supporting smaller organisations and enabling them to live up to their potential.

In regards to the sector, it is still early days, but venture capitalists and merchants have seen that there is a huge benefit in being able to take payments from several different systems in terms of risk reduction, innovation and simply being available to a wide range of clients.

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[1] https://financialit.net/news/payments/versapay-and-pymnts-publish-research-based-400-cfos-insights-digital-transformation

[2] https://www.pymnts.com/tracker/payments-orchestration-international-ecommerce-cross-border-innovation-security-compliance/

[3] https://securecdn.pymnts.com/wp-content/uploads/2021/03/PYMNTS-Innovating-Cross-Border-Payments-What-US-And-UK-Businesses-Need-To-Know-March-2021.pdf