Kristian Gjerding, CEO of CellPoint Digital, explores how payment orchestration is playing a key role in supporting merchant growth by enhancing payment options.
Supported by a payments ecosystem that becomes increasingly more sophisticated each day, and driven by accelerated digital transformations following the pandemic, the payment methods consumers have at their disposal today are myriad.
Not only are Alternative Payment Methods (APMs) proliferating across the globe, they are already dominating cards in some countries and consumers are developing specific preferences according to region or country.
Armed with and accustomed to this array of APMs, consumers can spend their money in multiple, digital-first ways almost anywhere in the world from card or cash-based wallets to mobile payments, to paying by instalments.
Merchants unable to accept these APMs risk creating customer friction-points that interfere with their growth ambitions and prevent them from scaling their businesses to serve a global customer-base.
The rise and rise of APMs
Consumer adoption of APMs is growing exponentially and were believed to account for over half of all global eCommerce payments in 2019 – the last year for which results are available. At a more regional level, it is reported that in Europe, upon reaching the Point of Sale (POS), 80% of consumers have an expectation to pay for their goods and services with a digital payment method rather than a typical debit or credit card.
Meanwhile, across the Asia-Pacific (APAC) region, nearly all consumers (94%) report that they would consider using an APM in 2022 and within the Middle East and North Africa (MENA) experts are saying digital wallets are set to be the region’s preferred means of making payments. Owed largely to the pandemic and the necessity for online, digital, and contactless payments, Latin America is also catching up with 55% of the population now banked and the use of APMs on a steady increase.
As we can see, consumers are shifting towards APMs in ever increasing numbers. For merchants with cross-border growth ambitions, it means that developing an APM strategy is now crucial for penetrating global markets and driving revenues.
Tackling cart abandonment
‘Cart abandonment’ is an inevitable bugbear for online merchants with 70% of shoppers deserting their virtual trolley at the point payment is requested.
As an increasing number of merchants with ambitions of international growth are experiencing, an inability to accept a customers’ preferred payment method is one of the more reliable ways to kill a conversion. Indeed, a recent study in the US found that 42% of American consumers will bring a purchase to a halt if their favourite payment method isn’t available.
The problem for merchants is, with all these different payment methods, some more popular in specific regions than others, and with a gauntlet of contrasting international regulations to navigate, implementing and managing all these methods can be incredibly difficult.
It is partly because of their ability to confront this friction that payment orchestration platforms are growing in prevalence.
Enter the payments orchestration provider
According to PYMNTs, the global market for payment orchestration platforms is also expected to grow 20% every year between 2021 and 2026. With each new merchant implementing the technology, consumers across the globe have a new place to spend their money in whichever way suits them best.
The platforms provide merchants with a single interface through which all transactions between themselves, their customers, and their payment providers are initiated, directed, and validated. The agility this confers to merchants who would otherwise need to manually integrate new APM options – resulting in protracted time-to-market and decreased competitiveness – is considerable.
Moreover, the complexity of monitoring the performance of multiple, manually integrated, and siloed payment methods would add to these obstacles and delays. Here, payment orchestration intercepts by automatically aggregating and processing these crucial data streams and providing merchants with valuable, real-time analytics that save time, prevent human error, and aid decision making.
This speed to market coupled with comprehensive real-time reporting allows merchants to begin increasing revenues in the short-term and make better decisions to facilitate growth in the long-term. However, the opportunities to enhance cash flows don’t stop there.
When a merchant relies on a single acquirer/PSP it is they who have ultimate control over transaction flows. For example, if the PSP succumbs to an outage, the merchant is subsequently and directly impacted. Likewise, if the PSP routes transactions to a specific acquirer, the merchant can do little if the costs they incur from this acquirer are unfavourable to them.
A payment orchestration provider redresses this imbalance by transferring control of the transaction flow back to the merchant by allowing them to create real-time rules for switching transactions and offering APMs to consumers. This dynamic routing improves the success of processing rates, gives customers more payment options, and means failed transactions can be re-routed to the next acquirer leading to fewer lost sales.
Collectively, these various payment orchestration features and functionalities both unleash the potential of APMs and provide merchants with the speed and flexibility to drive revenues to ambition-exceeding levels.
Partnership with payment orchestration platform provider is key
By plugging directly into existing core or eCommerce systems, payment orchestration platform providers allow merchants to go straight to market with a growing payment ecosystem where the best suited partners are easily picked and added. With their online checkouts optimised to accept a full suite of APMs, opportunities for growth quickly begin to multiply.
Merchants can display their products or services across multiple digital channels knowing that consumers can pay using whichever APM they prefer. This reduces cart abandonment rates and allows merchants to target specific regions by demonstrating their ability to accept the most popular APMs consumers in that region use.
Payment orchestration enabled APMs add an agility and dynamism to today’s merchants that allow them – for the first time – to give consumers whatever payment method they want, wherever they are. As adoption of APMs continues its steep upwards trend, this capability will only become more essential for merchants looking to thrive on a global scale.