This is Part 2 of a two part webinar recap article on ‘Turning Payments Complexity Into a Competitive Advantage’. In a recent webinar, Modo execs, Brian Billingsley and Lynn Holland, walked through how to explain growing payments complexity to stakeholders in your company and turn that complexity into a competitive advantage. Part 1 covered the background of the payments ecosystem and the players involved. Part 2 dives into how companies can use payments orchestration to manage their third party payment providers to their advantage.
Due to the introduction of new payment channels, there was a boom of third party payment providers required to manage and maintain payment operations, from fraud providers to global processors to new payment methods. The complexity of payment operations grew tremendously, leaving many merchants to look for ways to offload the burden of payment operations elsewhere, or decide it was strategic to their business and bring the management in-house.
Today, many merchants believe they only have two options when building their payments stack:
- They can offload operations to a single provider to do everything for them, or
- They have to build everything in-house
But, in reality there is no such thing as a single payment provider solution that can handle all the needs of enterprises. We asked attendees of our ‘Turning Payments Complexity into a Competitive Advantage’ webinar how many third parties they used and most had multiple providers. Merchants may have a single provider for their cards business or another single payment product, but that doesn’t help them with their financing or private label card business or their loyalty business - the list of payment products goes on.
The complexity comes in when you have multiple payment products and services that are all reaching directly into your back office systems and either directly or indirectly driving your customer journey and back office processes. Working with a small number of third party providers forces you to comply with their customer experience. Many times this means removing you from your site and onto their platforms. When you become increasingly ingrained in third party processes, it becomes hard to switch and you lose control of your payment operations.
Using a “single” provider is not managing complexity to your advantage - a single provider reduces your control while increasing your cost. There is no competitive advantage in this situation. This leaves you beholden to the processes of the third party provider with which you have chosen to work.
The second option that merchants choose is to build in-house. This option increases control over your payments, but it requires a large dedicated team to focus on building and managing the payments infrastructure. The operational cost of managing and maintaining the payments integrations are overwhelming.
What is Payments Orchestration?
Payments Orchestration Brings Control
There is an alternative to sourcing through a “single” provider or bringing payment operations in house - utilizing payments orchestration.
Payments orchestration opens up the world of PSPs, so you are able to PICK which payment providers you want to use instead of having to make connections to each one of these third parties. You can focus on your core business while abstracting these third party payment providers from your core business systems. You can see a representation of this in the above diagram where the Payments Orchestration Platform sits between enterprise channels and third party providers.
Payments orchestration brings multiple third party relationships together throughout the lifecycle of a payment to process, to provide a great customer experience and oversight. It lets you use the best-of-breed partners to process, manage, and protect your payments while still being able to concentrate on your core business and manage your risk.
As a merchant, you want to differentiate yourself with an outstanding customer buying process that is brand-centric. The customer journey is where you can differentiate yourself from your competitors. Orchestration allows merchants to use different providers for different products without having to change the customer experience you have worked so hard to perfect.
In the back-office, merchants no longer have processes for managing treasury and ERP tied directly into what one of their payment parties now offers. Merchants can optimize their back office processes and integrations by removing third party reach into your core systems.
Why is Orchestration Key?
Orchestration all comes down to retaining control of your payments operations and reducing your cost of payments acceptance.
Control is centered around three things:
- Control over how you interact with your customer and abstracting that from how your third party partners work
- Control over the products and services that you offer to your customers
- Control over how your back office processes service the business
Control over your payment ecosystem can drive cost management by reducing your cost of payments acceptance. Orchestration isn’t just about connecting to the payment endpoints. It’s much more than that. Orchestration allows you to abstract your connections and reduce the influence third parties have of your ecosystem.
“One path to an authorization is not necessarily the only path or the right path.” - Lynn Holland
Payments orchestration is what managing payments complexity to your advantage looks like. Payments orchestration allows you to retain control of your payments money and data flows while using the best technologies for each transaction.
A platform constructed around orchestration changes the game over the traditional hub, switches, and third party PSPs that are focused on cards, APMs, or cross border. With those options, you’re always left trying to integrate third parties. Having a payments orchestration platform abstracts the business layer and allows you to manage each partner separately without having to recode any connections.
The Question to Ask Yourself
As you think about your payments operations, there is a very important question to ask yourself:
How can I start disconnecting myself from the hold my current payment service providers have on my payments experience and focus on payments orchestration?
When you speak with your business about investing in payment operations, remember this metaphor shared by Lynn: You have two cars - a Classic Mustang and a new Lexus. You can fiddle around with the Classic Mustang, but couldn’t even begin to work on the new Lexus. That’s the difference between the payments ecosystem that we started with and the complex ecosystem we’re in today. The complexity under the hood is massive. And it’s very difficult for companies to truly outsource to someone without either adapting their internal systems to meet that third party’s needs or without constricting the services and processes that they offer to fit those systems.
It’s time to disconnect yourself from the third party payment providers you’ve been tethered to and look towards orchestration. Adopting payments orchestration will allow you to use payments complexity to your advantage, regain control of your payment operations, and reduce payments cost.
Watch the Full Webinar
If you have any additional questions about Modo’s enterprise payments orchestration platform, we’d be happy to answer them. Reach out to us at www.modopayments.com/contact!