*This is an update on an original post published April 2022
The term ‘payments orchestration’ seems to be everywhere, but what is it? As defined by PayPal, payments orchestration is:
An all-in-one solution that provides a single platform for managing all payment service providers (PSPs), offering greater visibility and control over your payment processes and customer experiences.
The payment orchestration layer of your payments stack acts as a hub for traditionally more commercial-facing or wholesale applications, although it can and does also consolidate merchant-facing applications. This can then aid in reducing transactions that are declined and increase authorization rates instead.
How Payment Orchestration Works
The term payments orchestration is really talking about automation—how your system can help automate a variety of payments from initiation all the way through clearing and settlement across different regions and currencies. There’s a lot that happens from Point A to Point B on that journey, including:
UX/I
This is where the payment originates, and businesses can add and remove features from their payments as they please. Businesses can make changes themselves instead of having to change their IT infrastructure or switch to a new payments services provider.
Approvals and queue management
Payments orchestration helps organizations increase their approval rates. Connectivity to multiple payment networks allows utilizing the best acquirer to route the payment authorization request, as well as switching when a payment provider has downtime, poor performance, etc.
Approvals and queue management in payments orchestration work in the following ways:
- Transaction categorization
- Approval workflows and exception handling
- Queue-based processing for failed or pending payments
- Compliance and fraud review queues
Payment engine services
A payments engine handles key payment functions such as authorization, routing, settlement, and reconciliation. It serves as the core infrastructure for multiple payment providers and businesses that handle high volumes of transactions. Its services include formatting, validating that the payment instructions are correct, limit and fraud checks, OFAC/AML screening, etc.
Payment gateway services
Payment gateway services facilitate the secure transfer of payment data between a merchant’s website or POS system and the clearing/settlement networks that process payments. Gateway services process inputted information and facilitate payment authorization.
Notification
Notification from the gateway service that the transaction was accepted/successful. To be more specific, the notification step in payment orchestration refers to the process of sending real-time status updates about a transaction’s progress to relevant parties, such as merchants, customers, financial institutions, and internal systems. This ensures that all stakeholders are informed of important payment events like approvals, failures, chargebacks, or settlements.
In sum, payments orchestration handles the full end-to-end lifecycle of a payment. It leverages API services from external systems that need to be invoked and should be configurable for each financial institution. APIs make it possible for payments capabilities to be added quickly and cost-effectively.
This flexibility can facilitate key payment functions such as intelligent routing. From an end-user standpoint, the payment process is simplified as payments orchestration removes much of the friction consumers face. Ultimately, payments orchestration automates as much as possible.
Benefits of using a payments orchestration platform
- Cost savings: Orchestration can lower processing fees by routing transactions through the most efficient provider or network.
- Payment method diversity: Orchestration allows various payment methods (credit cards, digital wallets, local payment options, etc.), which lowers abandoned cart rates and improves conversion and customer experience.
- Improved authorization rates and reduced declines: Typically, orchestration platforms will dynamically select the best gateway for each transaction and automatically retry failed payments through backup routes.
- Operational efficiency and speed to market: A single orchestration layer can mean less integration work for teams, making integrations faster and easier to scale.
- Improved data and analytics: Orchestration makes it easy to consolidate payment data across all providers and channels.
- Reliability and failover: Merchants and financial institutions using orchestration experience fewer payment interruptions because the orchestration platform automatically handles failures.
- Security and compliance: Orchestration provides fraud prevention tools, tokenization, and standard compliance support, which makes it easier for institutions to meet compliance requirements.
Discover Alacriti’s payments engine
The payments engine is where payments orchestration happens. Alacriti’s payment engine, Orbipay Payments Hub, is the backend connectivity for banks and credit unions to connect to various networks, including The Clearing House’s RTP® network, the FedNow® Service, Visa Direct, and traditional payments orchestration platforms such as Fedwire and ACH. Using microservice-based architecture and open APIs, Alacriti’s platform ensures a future-proof payments infrastructure.
Learn about another common payments term, ‘payments hub,’ in the blog The Payments Hub Explained: Alacriti’s Unique Definition and How It Differs.
Alacriti’s centralized payment platform, Orbipay Payments Hub, provides innovation opportunities and the ability to make smart routing decisions at the financial institution to meet their individual needs. Financial institutions can take full ownership of their payments and control their evolution with ACH, Wire, TCH’s RTP® network, Visa Direct, and the FedNow® Service, all on one cloud-based platform. To speak with an Alacriti payments expert, please contact us at (908) 791-2916 or info@alacriti.com.
