Payment Gateways vs. Payment Orchestrators: what’s the difference?

A payment gateway at its most basic level provides a technical connection between a merchant’s online website or mobile app and the merchant’s acquirer or Payment Service Provider (PSP). This gateway connection provides secure collection and transmission of consumer payment data in accordance with industry standards such as PCI-DSS., between these two parties.

Connectivity between the merchant’s platform and gateway is determined by the security level of the platform itself and the level of control the merchant wants to maintain over the user experience. For merchants whose platforms are themselves PCI compliant, the merchant may choose to integrate using the gateway providers API’s. In this scenario, the merchant is presenting the payment page and collecting the consumer payment information within their platform.

The benefit to the merchant of this approach is that they are in complete control over the consumer experience. The downside is that the merchant is responsible for any potential data breach associated with the collection and storage of sensitive data. The merchant’s platform is also subject to annual 3rd party audits associated with PCI compliance, which are expensive.

For merchants whose platforms are not PCI compliant, there are several Hosted Payment options available. One option is a fully hosted payment page, where the merchant redirects the consumer to a payment page hosted within the payment gateway provider's secure environment. Another is the use of individual payment fields which are hosted within a provider's secure environment but are embedded into the merchant’s own payment page. Each has pros and cons related to control and security.

We have established how Payment Gateways enable secure transmission of payment data between merchant platforms and the merchant acquirer/PSPs.

In this sense, a payment gateway is at the foundation of a Payment Orchestration Platform (POP). However, a traditional payment gateway is a static service, meaning the payment methods are presented in the same way under all circumstances, the route to the acquirer/PSP is fixed, and all transactions are sent to the same location. Any alternative routing decisioning (technical failover, alternative acquirer/PSP) is managed by the merchant – in most cases manually.

For instance, if the merchant's primary acquirer goes down, the merchant would need to manually reconfigure the Merchant ID (MID) and the acquirer/PSP that the transaction needs to be routed to, if they have a secondary provider. Additionally, Payment Gateways typically provide single solution options for value-added services such as fraud management and 3D-Secure. In this case, you can only use the service they provide, as opposed to having a choice of preferred providers.

By contrast, a Payment Orchestrator maintains a comprehensive payment ecosystem of global, regional, and local acquirers/PSPs, fraud management providers, 3D-Secure Merchant Plug-ins (MPI) providers and other value-added services. This provides merchants the choice of who their preference for each service.

The core of a Payment Orchestrator is a sophisticated rules engine that allows real-time, dynamic decisioning against an infinite number of attributes. True orchestration platforms have rules engines that can not only determine the optimal transaction routing based on cost, approval rates, availability, and other factors, they can also dynamically determine which available payment methods should be presented to the consumer at the point of checkout.

Additionally, the platform can handle intelligent decisioning of what services to apply to a particular transaction (invoke 3DS or not, send for fraud review or not) based on the results of previous action. All of this is engineered to drive customer conversions while reducing merchant cost.

Payment Orchestrators serve to enhance the overall transaction process to drive merchant sales and improve profitability. In the world of payments, the priority is to be frictionless – the last thing that should be on a consumer's mind is the technical processing of their payment.

Therefore, as ecommerce transactions account for $8.1 trillion US dollars worldwide, smooth and effortless payment is crucial for improving customer experience, efficiency and revenue. Here are just a few of the benefits of payment orchestration, and why they matter:

Better customer experience

The goal of Payment Orchestration is to create a frictionless consumer journey at every juncture. With embedded checkout and broader availability of relevant payment methods, consumers encounter fewer hurdles to clear in order to complete their purchases. What’s more, recent reports revealed that lack of preferred payment methods contribute to 40% of customer abandonment. If the end-consumer experience can be improved to decrease the level of payment abandonment or failures, this will significantly enhance revenue per every transaction.

Optimised transaction flow

In the scenario where a customer is lost due to a failed payment, it can be because of processing failures on the side of either the acquirer or issuer. The intelligent routing function of Payment Orchestration allows pending transactions to be sent to the best-performing processor in order to avoid this outcome. In addition, if one payment processor is down, the transaction can automatically be routed to another processor without any interruption to the customer, which is especially important as customers expect a frictionless payment process.

Increased scalability

Since Payment Orchestration functions by integrating all processes and aspects of the transaction flow under one API, the time required to set up new payment options and add-ons is reduced. Consequently, a merchant can take its product to the market quicker and reach more potential customers with a wider range of payment options – offering the right payment type at the right time.

Enhanced security and compliance

With traditional payment processors, cardholder data is shared between multiple Payment Gateways and providers, weakening protection against potential fraud. The automatic data routing provided by Payment Orchestration lets you control transaction routing, helping identify data inconsistencies in real time.

The architecture of Payment Orchestration also allows merchants to assess a number of providers while maintaining consistent fraud and compliance management across all providers, helping to make online transactions smooth and secure in a shorter amount of time. This is especially useful for executing smooth cross-border payments, as the integration lets merchants adjust payment systems, services and software (the payment stack) to accommodate international transactions. These would otherwise require dealing with region-specific compliance and regulations like PCI DSS, PSD2 and GDPR.

Reduced costs

As merchants grow their business and need to enhance payment performance, developing new features or integrating further payment options may be required. In turn, this requires investment in maintenance, IT, resource, development, and licensing – all of which incur costs that add up. With full integration of Payment Orchestration total expenses can be reduced by up to 20% by consolidating costs under a single platform.

A Payment Orchestrator is built to integrate with existing cloud software, helping merchants to reduce the cost of storage and bandwidth. It enables them to aggregate data and share data with other merchants and fraud detection services to spot, and thereby reduce financial risk. This way, the payment stack incurs fewer fees for setting up integrations and add-on costs for providing services like automated transaction routing.

Finally, additional cost savings can be found in using multiple acquirers and routing payments to the lowest cost or local payment providers.

Centralised reporting and analytics

Besides integrating with existing systems for smoother transactions, Payment Orchestration platforms adapt to the payment preferences of each merchant. Payment Orchestrators gathers transaction information spread across multiple Payment Gateways and PSPs in a single view allowing merchants to make alternative strategies driving transparency and efficiency. These analytics and insights make it easier for merchants to better manage their payments ecosystem through more informed decision-making.

Payment Orchestration is a future-proof payment solution that gives any online business with a scalable, resilient, and cost-effective payment ecosystem. It provides end-to-end visibility to payment processing, gets new payment methods to market quicker, and can integrate new acquirers or backend processes as and when your business deems them necessary. On top of that, it brings greater ease and simplicity to the customer’s online experience.

Reach out today to begin your Payment Orchestration journey and learn how CellPoint Digital can help tune up your payments to perform like a symphony.