Deep Dive: How do retailers tackle the complexity of payments?

Navigating the complexities of modern payment systems has become a critical challenge for enterprises, as they work to manage a diverse network of acquirers fraud-management tools

TL;DR:

Today, enterprises are building their payment stacks to manage a complex web of acquirers/processors, fraud-management tools, and value-added services.

This level of complexity, and the associated orchestration, hasn’t always been necessary. Prior to the 2000s, merchants could rely on a single merchant acquiring bank for their payment acceptance needs.

However, as increasing payment options, regulatory requirements, and fit-for-purpose devices came online, merchants needed flexibility that merchant acquirers traditionally did not specialize in.

Let’s look at the three types of payment processing ecosystems many merchants are considering today:

01. A traditional payment ecosystem

To power front-end and back-end capabilities for all the different commerce use cases, enterprise merchants often rely on a combination of different specialized (and siloed) providers – including POS terminal providers, merchant acquirers/PSPs, hardware original equipment manufacturers (OEMs), software providers, and other value-added service providers.

A traditional payment ecosystem provides the highest level of flexibility but comes at the cost of an increased administrative burden and compatibility issues between services and solutions.

02. Full-service payment service providers (PSPs)

Full-service PSPs provide merchants with a bundled payments stack, combining technical integration enabled by gateways with fund collection, acquiring/processing, access to APMs, and value-added services such as fraud management and multi-currency support – all via a low-tech enabled single point of contact.

A PSP provides a very high level of seamless operation, but enterprises are locked into the selected services. While this may work for some businesses, others may need more agility.

03. Payment orchestration

Payment orchestration is a cloud-native unified API layer that integrates all these different and constantly evolving payment solutions and providers. This enables merchants to seamlessly connect to various commerce-enabling endpoints and payment ecosystem stakeholders, effectively routing between them for the optimum payment outcome.

Payment orchestration allows enterprise merchants to build their unique payments ecosystem, enabling the ability to select and effortlessly integrate with best-of-breed infrastructure and commerce enablers, whether in-person (e.g., POS terminal) or online (e.g., in-app or website).

Faced with a complex payment landscape and a wide variety of payment services, it’s no wonder many enterprises find it difficult to choose the ecosystem that’s right for their business. They’re often forced to choose between the agility of a flexible vendor payment ecosystem or the simplicity of a PSP.