A Payment Orchestrator is a service that enables businesses to manage and optimize their payment processing by connecting to multiple payment providers and processors through a single platform.
Payment orchestrators act as an intermediary layer between the merchant and the payment gateways, offering flexibility, redundancy, and optimization capabilities. Payment orchestrators streamline the process of routing transactions to the most appropriate payment providers based on various factors such as cost, success rates, currency, and geographical location.
Core Functions of a Payment Orchestrator
Here we’ll cover the core functions that drive the core value of payment orchestrators.
Multi-Provider Integration: Payment orchestrators integrate with multiple payment service providers (PSPs), gateways, and acquiring banks, allowing merchants to access a broad range of payment methods and currencies. This integration helps businesses expand globally by supporting local payment methods.
Smart Transaction Routing: A key feature of payment orchestrators is the ability to route transactions intelligently. The system selects the most efficient payment provider for each transaction based on criteria like transaction fees, currency conversion rates, geographical proximity, and the likelihood of transaction success.
Redundancy and Failover: Payment orchestrators provide redundancy by ensuring that if one payment provider fails, the transaction can be automatically routed to another, reducing the risk of failed payments and increasing overall reliability.
Fraud Prevention and Security: Many payment orchestrators incorporate advanced fraud detection tools, leveraging machine learning and AI to identify and prevent fraudulent activities. They also ensure compliance with industry standards like PCI DSS.
Data Analytics and Reporting: Payment orchestrators offer robust analytics and reporting tools, giving businesses insights into their payment operations. This data can be used to optimize payment strategies, identify trends, and make informed decisions.
Unified Reconciliation and Settlement: By consolidating transactions from multiple providers, payment orchestrators simplify the reconciliation and settlement processes, reducing administrative overhead for businesses.
Global Payment Reach: Orchestrators facilitate cross-border payments by supporting various currencies and local payment methods, making it easier for businesses to operate on a global scale.
Market Overview of Payment Orchestrators
The market for payment orchestration has been growing, driven by the increasing complexity of global payment systems and the demand for seamless, efficient payment processing solutions.
The global payment orchestration market is experiencing significant growth, driven by the rising adoption of digital payments, e-commerce expansion, and increasing demand for streamlined payment processes. In 2023, the market was valued at approximately $1.2 to $1.45 billion and is expected to reach between $6 billion and $7 billion by 2030, growing at a compound annual growth rate (CAGR) ranging from 19% to 25.6% during the forecast period.
Key trends include:
- Global E-Commerce Expansion: With the rise of global e-commerce, businesses are seeking ways to optimize payments across different regions and currencies. Payment orchestrators are well-positioned to meet this need by offering a unified platform for managing diverse payment methods.
- Increased Focus on Conversion Rates: Businesses are becoming more aware of the impact of payment success rates on their bottom line. By using a payment orchestrator, they can optimize routing to increase the likelihood of successful transactions, directly impacting revenue.
- Regulatory Compliance: As regulations around payments become more stringent, payment orchestrators offer businesses a way to maintain compliance across multiple jurisdictions, reducing the risk of penalties and enhancing consumer trust.
- Demand for Operational Efficiency: Companies are looking for ways to streamline their payment operations, reduce costs, and improve customer experiences. Payment orchestration provides the tools needed to achieve these goals through automation and intelligent routing.
Types of Companies Using Payment Orchestrators
E-Commerce Platforms: E-commerce businesses, especially those operating globally, are among the primary users of payment orchestrators. They benefit from the ability to offer multiple payment methods, optimize transaction costs, and ensure high payment success rates across different regions.
Marketplaces: Online marketplaces that connect buyers and sellers across various countries use payment orchestrators to handle complex payment flows, including split payments, multiple currencies, and regulatory compliance.
Subscription-Based Services: Companies offering subscription services, such as SaaS providers, use payment orchestrators to manage recurring billing, reduce churn by optimizing payment retries, and handle global payment methods efficiently.
Travel and Hospitality: Businesses in the travel and hospitality sector use payment orchestration to handle international transactions, manage currency conversions, and provide a seamless payment experience for customers booking from different parts of the world.
Retail Chains: Large retail chains with both online and offline presence utilize payment orchestrators to unify their payment processing, allowing them to offer consistent payment experiences across channels and optimize costs.
Fintech Companies: Fintech companies often use payment orchestration to offer a variety of payment solutions to their customers, integrating with multiple providers to expand their service offerings.
Businesses that don't Need Payment Orchestrators
The Downfalls of Using a Payment Orchestrator
Cost: Payment orchestrators tend to be more expensive compared to working directly with a single payment processor. Costs can include:
- Subscription Fees: Most orchestrators charge a recurring monthly or annual fee, which varies depending on the size and complexity of the business. These fees often increase as the business scales, especially for those handling high volumes of transactions or requiring advanced customization.
- Transaction Fees: In addition to the standard fees charged by the payment processors themselves, payment orchestrators often add an extra layer of transaction fees. This means businesses may end up paying both the processor’s fee and an orchestrator fee per transaction. For smaller businesses with thin margins, these fees can accumulate quickly and cut into profits.
- Integration Costs: Implementing a payment orchestrator involves setup and integration, which can be complex and time-consuming. Whether businesses choose an off-the-shelf solution or require custom development, the cost of integrating the orchestrator with existing systems (e.g., ERP, e-commerce platforms) can be significant. This includes the cost of developers, consultants, or third-party vendors who specialize in payment integrations.
- Ongoing Maintenance: Maintaining an orchestration system requires technical resources to monitor, update, and troubleshoot the system. For businesses without dedicated IT teams, this can result in additional costs for external support or managed services. The long-term costs of maintaining the system may not always justify the benefits for smaller businesses.
Complexity: Implementing and managing a payment orchestration system can introduce new layers of complexity, both technically and operationally:
- Technical Complexity: Orchestrators require integration with multiple payment processors, gateways, and possibly other third-party services (such as fraud prevention or currency conversion tools). Setting up and managing these integrations can be challenging, requiring in-house expertise or external specialists to ensure everything works smoothly. This level of complexity might be overwhelming for businesses with limited technical resources or experience.
- Operational Complexity: A payment orchestrator may necessitate new workflows and processes for the business. For example, staff may need to be trained on how to manage and troubleshoot different payment routes, handle multiple currencies, or address issues with different payment gateways. Managing relationships with multiple processors can also complicate reconciliation, reporting, and customer support operations, as issues may arise across multiple platforms.
- Ongoing Customization: For businesses that frequently change their payment strategies (e.g., adding new gateways, optimizing routing), ongoing customization and reconfiguration of the orchestrator may be required. This could further increase complexity and the need for continuous development resources.
Potential for Overhead: Payment orchestration adds layers of functionality that may be unnecessary for businesses with simpler needs, leading to wasted resources:
- Unnecessary Features: If a business primarily operates in one region, accepts a limited number of payment methods, or processes a low volume of transactions, the advanced features of a payment orchestrator—such as global routing, multi-gateway redundancy, or advanced fraud detection—may be overkill. In such cases, the orchestrator’s capabilities could become more of a burden than a benefit.
- Increased Operational Costs: Even though the orchestrator simplifies payment processing on a large scale, businesses with straightforward requirements may find themselves paying for features they don’t need or use. For example, a local business that only accepts one payment method in a single currency could handle its payments through a single processor without the need for a full orchestration system, reducing both operational and financial overhead.
- Risk of Overengineering: Smaller or more localized businesses may not have the infrastructure or transaction volume to justify the added complexity of a payment orchestrator. By implementing an overly complex system, these businesses risk overengineering their payment setup, leading to inefficiencies, increased maintenance, and unnecessary technical debt over time.
Pricing for Using a Payment Orchestrator
The pricing for using a payment orchestrator can vary based on several factors, including the size of the business, transaction volume, and the complexity of the payment setup. Typically, the cost structure includes a combination of the following:
Monthly Subscription Fees: Many payment orchestrators charge a base monthly fee, which can vary based on the size and needs of the business. This fee often scales with the number of transactions or the level of customization required.
Transaction Fees: In addition to subscription fees, payment orchestrators usually charge a fee per transaction. This fee is often a small percentage of each transaction and can fluctuate depending on factors like transaction volume or geographic reach.
Integration Costs: Depending on the complexity of the payment ecosystem and the level of integration required, businesses may incur one-time setup or integration fees. This can include costs for API connections, custom development, or specialized configurations.
Value-Added Services: Some payment orchestrators offer advanced features, such as fraud detection, currency conversion, or optimized routing, which come at an additional cost. These services are often priced based on usage or as part of a premium tier.
Support and Maintenance: Depending on the service level, businesses may pay extra for dedicated customer support, technical assistance, or ongoing maintenance of the system.
Ultimately, the cost of using a payment orchestrator is driven by the complexity of a business’s payment requirements. For larger, multi-region businesses with high transaction volumes, the investment in a payment orchestrator often provides significant value in the form of increased efficiency, reduced payment failures, and access to multiple payment providers.
Do you Need Help Deciding if you Need a Payment Orchestrator?
Navigating the decision to implement a payment orchestrator can be challenging, especially when considering the complexity of payment processes, transaction volume, and business needs.
