Six ways payment orchestration boosts ROI for businesses
When the average business uses two to three payment providers, it’s no surprise they aren’t getting the best ROI from their payments.
Many don’t realise this, but using multiple payment vendors adds time and costs due to the technical and reporting debt. In today’s challenging macro-economic environment, there isn’t room for superfluous operations so forward-thinking leaders are now looking to paytech to drive down costs and increase revenue.
Thankfully, the emergence of payment orchestration is helping businesses turn their payments from a cost-centre to a revenue-generator. This new technology allows businesses to seamlessly activate and deactivate various payment functions on demand, offering precise control over different aspects, such as country, product, issuer and more.
Given the vast amount of work that goes into payments behind the scenes, here are six ways payment orchestration is catapulting businesses towards profitability.
1. Improves authorisation rates
Our research shows that nearly half of businesses only have an authorisation rate of 70%, meaning 30% of transactions are being declined. On top of paying processing fees, this is a massive blow to sales and the overall customer experience which deeply impacts revenue-generating abilities. You have made every effort to attract the customer, get them to add your product to their basket and go to checkout only for 30% of purchase attempts to fail.
Through payment orchestration, businesses can minimise their losses and capture more sales by using intelligent payment routing. This routes payments to the bank most likely to approve the transaction by considering multiple variables about it in real-time. This includes the currency, card issuer, local acquirer, and merchant category code.
By routing transactions through a global network of banks, businesses can drive down cross-border fees, foreign exchange rates, and increase authorisation rates.
2. Fulfilling global customers payment needs
Checkout abandonment is another major strain on revenue. One of the top reasons this occurs is because businesses don’t offer payment methods and currencies that are familiar to their customers. For example, Dutch customers prefer to pay using iDeal. In wider Europe, some might prefer SEPA Direct Debit.
These nuances may seem small, but they change the entire shopping experience for customers. Merchants shouldn't lose customers simply because they presented a price in a different currency or offered a restricted set of payment types – it’s wasted potential.
Leveraging payment orchestration reduces checkout abandonment as the technology enables all the key payments needed – including a range of payment methods and currencies – into one platform for merchants, allowing them to capture more sales.
3. Removes unwarranted fees
Now that you’ve nailed down how your customers want to pay, it’s time to cut down on fees. Processing payments globally is great, but it doesn’t positively impact the bottom line if you’re losing revenue to cross-border interchange fees.
This is the fee that acquiring banks charge firms for processing their payments internationally. It often includes a fee of up to 2% by card brands on top of the existing foreign exchange fees.
To take back the money lost to fees, merchants can leverage local acquiring - where international transactions are routed to local banks so they’re processed locally. A payment orchestration platform will be integrated with a number of major banks around the world to help businesses avoid cross-border fees and process their transactions by a local bank in the region of purchase.
Not only does that save revenue lost to fees, but it increases your sales conversions. Since international transactions tend to have a higher fraud risk, processing the payments through a local bank will prevent transactions from being flagged or flat-out being denied.
4. Consolidates your payments vendors
To make payments even more lean, you need to reduce the technical debt. Considering that nearly half (49%) of all businesses use two to three payment gateways, a lot of them are getting tied up in technical debt, before seeing profit.
Technical debt is the unanticipated development work. For example, if you work with five payment providers, you’ll need to update your payments five times if you change a feature. If you’re looking to do maintenance updates, you need to do it five times too. Not only do you lose time, but you need to hire highly skilled developers to make sure it all fits – another drain on budget.
Payment orchestration allows businesses to reduce this cost by consolidating all the vendors into one platform. This can include everything from fraud, tax, compliance, risk, KYC and more. By orchestrating all the payment needs within one connection, businesses can expand their features into new regions or add new payment types without having to worry about technical debt creeping up on them.
5. Invisible friction free payments
The orchestration platform should eliminate friction for your customers, by routing their transaction to the optimal processing bank and maximising the chance of authorisation and a successful sale.
Similarly, any orchestration platform should eliminate the complexity of managing this routing so that all this happens as if by magic and is invisible to you and your consumers.
6. Sets a contingency plan for protection
Lastly, it’s always important to have a contingency plan. If your primary bank fails, you may not be able to process payments as well as lose access to your cash reserve – this is why partnering with the right payment provider is key and can be the difference between surviving or thriving.
Given the recent failures of Credit Suisse and First Republic Bank, it’s clear that it’s too risky to rely on a single bank to manage your payments. Businesses need a payment solution that comes with built-in redundancy and failover so that they can process payments 24 hours a day.
Since payment orchestration platforms are connected to major banks worldwide, if one goes down, this payment technology can route the payments to a back-up bank to ensure it’s not declined. Payment outages like this rarely happen but when they do, you’ll be patting yourself on the back for adding that layer of protection.
Payments has always been viewed as a crucial, yet a costly part of doing business. Today, businesses can start looking at payments as a cash cow, where ROI can be achieved by reducing technical debt, declining conversion rates and other inefficiencies. By working with an effective global payment orchestration platform that’s a one stop shop, businesses can obtain all the benefits of working with multiple vendors without the hassle and added cost.