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Choreographing Payments: Industry Secrets Democratized

iStock 1214041724 - Global Banking | Finance

By Robert Podlesni, CPO at Revolv3

The best plays, dances, music videos and movies are all choreographed. Even the best assembly lines are an elegant flow that delivers quality and volume, so why aren’t your payment systems choreographed?

The economy is caught up in a whirlwind of uncertainties

The fragility of the global economy right now, owing to a multitude of uncertainties and disruptions, including political tensions, supply chain disruptions, the meteoric rise in inflation and the looming recession, is likely to follow it into the next year. For the US economy in particular, with a projected  GDP growth of just around 1.1% in 2023, tight financial conditions are weighing on spending. In a nutshell, the US financial landscape has been witnessing rising costs, operational silos and growing pressure from customers to deliver no less than exceptional quality in everything.

Given the sheer intensity of competition in the market, it goes without saying that customer retention is becoming increasingly challenging as customer loyalty becomes somewhat of an endangered concept. Maintaining a competitive edge amidst all this would require businesses and financial institutions to provide infallible, rich customer experiences and make the best of continuous innovation wherever and whenever an opportunity shows up.

Digital acceleration in the face of an economic slowdown is not an oxymoron

During the two years of pandemic-induced slowdown, followed by a world economic crisis, we have seen the rise and fall of many businesses. But most importantly, the rise of digitisation of services during the period is indisputable. The total transaction value in digital payments is forecasted to show an annual growth rate(CAGR 2022-2027) of 12.31%, resulting in a projected total amount of US$15.17tn by 2027. In this context, the relevance of frictionless online transactions cannot be emphasized enough, and the role of payment orchestration in actualising this.

A payment orchestrator’s platform generally integrates with, and manages a company’s entire billing and payment processes including payment authorization, transaction routing and settlements. Through a single and unified software solution, payment orchestration integrates with the company’s existing system to automate and optimize the entire payment process as well as connect with multiple payment service providers (PSPs), acquirers and banks seamlessly.

Choreographing Payments through Orchestration: Retail and ECom Merchants benefit in numerous ways

The most striking advantage of Payment Orchestration Platforms (POPs) over separate Payment Service Providers (PSPs) or aggregators is that POPs enable online merchants to regulate the infrastructure of payments, monitor centralized analytics in real-time and at the same time profit from smart routing through automatic selection of PSPs for a minimal transaction fee. Here’s a look at some other key benefits.

Scale faster with more agility: By making it easier for retail and ECom merchants to collect and analyze payments data, payment orchestration enables them to focus on their core business instead of operating their own billing firms or dealing with vendor lock-ins. An integrated payment processing solution that rightly fits the unique business model of a company will be able to accommodate the special needs of a scaling company without becoming exorbitantly expensive in the process. By helping the business maintain high payment acceptance rates, manage fees and support the evolution of the business, an efficient payment orchestration platform also evolves with you, irrespective of the size of the company. Moreover, the improved visibility brought in by orchestration provides retailers with the access to real-time data analytics to stay on top of customer behavior and payment trends- information which in turn will allow scaling businesses to not only optimize the payment experience further but also identify new business opportunities.

Reduce the number of failed transactions: Failed transactions due to false declines is one of the most prominent reasons for (involuntary) customer churn, which in turn is hugely responsible for capital loss, especially for companies that rely on subscription billing to generate recurring revenue. Customer churn disrupts the accuracy with which companies predict the following month’s revenue and spendable revenue. Areas of churn include occasions when a payment is due, when a payment failed after the first try or even after retrying, during dunning or post-dunning and after an invoice was issued. In fact, 67% of current payment processing declies are actually false declines, costing you – the merchant – money to both your payment platform and processor. In simple terms, these declined transactions eat into the revenue you’ve already earned- a projected revenue loss of $443 billion worldwide annually.

Optimizing your platform rightly can significantly reduce the likelihood of false declines in the first place. In the event of a decline after the first pass, a clever retry logic can cover the full spectrum of potential declines while maintaining best data, security and network regulation practices. Technologies such as dynamic routing employ intelligence that analyzes a host of data such as card issuer, transaction type, merchant id among other details formattes the data correctly to arrive at the best time, route, processor etc. that will have the highest chance of transaction approval, thereby improving the merchant’s acceptance rate.  A potent combination of orchestration, debit network routing, and account range level payment optimization drive the choreography needed to help keep subscription billing on track without triggering false fraud declines or erroneous decline codes.

Reduce operational costs: With the help of a specialist partner in payment orchestration, companies can make use of expert knowledge and purpose-built technology to streamline the payment processes. This results in the company spending less of valuable capital on invalid subscription payments and churn, thanks to the payment orchestrator’s guidance on the billing strategy. Automating the payment process with the help of a payment orchestration platform can help businesses to bring down operational costs.  Businesses can also save on the additional resources required to be spent on acquiring new customers to make up for the churn and any extra fees charged by services that offer “decline remedies”. Merchants are charged only for approved payments and that translates to saving on a chunk of unwarranted expenses.

Decreased compliance burden: At the current pace of innovations in technology, especially in fintech, it is no surprise that compliance regulations are never static. By working with various security solutions, payment orchestration platforms can help ensure businesses that their payment systems are compliant with regulations and are completely secure. Data analytics comes in handy to help identify potential security risks or threats. Reliable security technologies available today including tokenization can be utilized to protect sensitive customer data and ensure that industry regulations are consistently met. Payment orchestration also takes away the hassle of integrating region-specific payment providers, cross-border payments and currencies among other things. This also simplifies expansion efforts and accelerates the process of venturing into new markets, especially for e-commerce businesses. Achieving customer satisfaction and loyalty in new geographies becomes a manageable feat when the customer experience is made impeccable through a reliable payment orchestration platform.

Simplify back-end payment processes: Back-end orchestration is an important component of payment orchestration and involves managing and processing payments through various PSPs to reconcile transactions, issue refunds and so on. Simplifying these processes allows for faster, more efficient payment experiences for customers, as they’re offered a variety of payment options, while at the same time makes it easier for retailers to increase conversion.

New innovations in the payments industry to look forward to

Debt simplification: Keeping a tab on multiple credit cards, their respective dues and due dates could get quite challenging. Customers who grapple with managing multiple cards are now catered to by fintech companies that help solve a number of related issues. There are modern platforms that help customers make better financial decisions about various aspects like which card to pay first based on a forecast of their monthly income and expenses, when to pay and how much to pay based on minimum balance vs. retiring principal, while at the same time optimizing their credit scores.

Reg-tech: The dynamic regulatory landscape is oftentimes a tricky place to navigate. However, with the help of  Artificial Intelligence, Machine Learning and blockchain technology, there are new, efficient and transformatory ways to look at the same. Regulation technology makes it easier for businesses to comply with regulations and in effect help reduce non-compliance fines that have crossed over $300 billion since 2008.

Artificial Intelligence in fraud detection: The banking and finance industry can benefit greatly from the improved capabilities presented by AI which combines supervised learning algorithms with unsupervised learning to understand customer behavior with an increased level of accuracy. This in turn allows enterprises to do a better job at identifying and preventing unauthorized and  fraudulent activities.

Automation and RPA: Robotic Automation Process (RPA) is an automation technology that can create programmable bots to tackle the challenges stemming from manual Accounts Payable (AP) processes. AP management, which requires a host of numerous repetitive, time-consuming and rules-based tasks such as data entry, calculations, audits and invoicing is vulnerable to errors and potential frauds. This is where the innovative software bots come in- to process the daily repetitive tasks in a much faster way while also significantly reducing the likelihood of possible errors. They do this by verifying and spotting errors in voluminous spreadsheets of data with thousands of data-points, such as a general- ledger, with utmost accuracy at the shortest possible time. Apart from this, RPA also lends efficiency to payment approval, processing workflows, handling orders and even day-to-day admin tasks such as sending late payment notifications to vendors or suppliers.

Choreographing payments in modern business

The modern business landscape is more dynamic today than ever before. In addition to millions of possibilities uncovered by technology everyday, businesses are also presented with new and unprecedented challenges as they evolve and grow in newer areas and niches. Depending on the industries they operate in, scaling companies often find it difficult to establish a foothold in the market and encounter difficulties they need to overcome before they achieve set milestones.

Being able to manage all payments through a centralized platform and automating processes hitherto done manually can effectively take off a large chunk of delicate responsibilities from enterprises, allowing them to channel their resources and efforts to more lucrative areas. An effective payment choreography platform offers the expertise and clear understanding of internal flows of transaction processing required to keep up with the fast paced growth environment and simultaneously growing customer expectations. Understanding their needs and preferences to deliver customer-oriented approaches is a priority to increase customer conversion and retention. Choreographing payments also opens doors to unlimited growth opportunities for businesses that are entering new markets by offering many global and local connectors integrated into the platform along with payment methods, both traditional and alternative to suit the requirements of the new markets.

663 - Global Banking | FinanceAbout Robert Podlesni:

Payments industry leader and former professional race car driver, Robert brings more than 15 years of experience improving credit card payment processing for startups and large-scale companies. As an operations executive, Robert led multiple companies in their integration of third-party billing solutions and most recently designed and implemented a full-stack bespoke billing engine for Experian. His subject matter expertise is in payments, subscriptions, merchant solutions, payment card industry, and revenue optimization.

Global Banking & Finance Review


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