For companies conducting business internationally, keeping track of local payments ecosystems and regulations can be a headache. As a result, many businesses encounter challenges with their cross-border payments and are met with higher fees and lower approval rates.
What’s more, tackling this problem in-house can get expensive, especially for smaller companies looking to make their business more global.
Enter global payments orchestration. Third-party companies, such as BlueSnap, have developed tech solutions that manage and optimize payments across multiple channels, currencies, and geographies. This involves coordinating the flow of payment information and funds among merchants, payment service providers, banks, and other key stakeholders.
In a recent PaymentsJournal webinar, Ralph Dangelmaier, CEO of BlueSnap, and Daniel Keyes, Senior Analyst of Merchant Services at Javelin Strategy & Research, discussed how global payments orchestration can pay dividends by streamlining the payments process.
What is Payments Orchestration?
Payments orchestration is the ability to process payments, turn on and off payments services globally, and receive payments via multiple channels. This is enabled by a payment orchestration platform, which is a centralized hub that connects to various payment gateways, acquirers, and processors. This hub allows a merchant to orchestrate all their payments from one place. It can also help streamline the payment process by providing advanced features such as fraud detection, currency conversion, and reconciliation.
Overall, payment orchestration is an essential component of global e-commerce, enabling merchants to expand their reach and improve customer experiences while managing payment-related risks and costs.
“In an orchestra, a conductor needs to have all of the musicians in one spot,” Dangelmaier said. “The conductor can raise and lower the volume of different sections depending on the dynamics of the piece. So there should be one provider that can organize all global payments infrastructure and change which types are used based on the dynamics of the market.”
Although there are many payment orchestration platforms for domestic markets, few have a global focus.
According to Dangelmaier, successfully orchestrating payments globally requires two key elements. The first is the ability to process cards and non-cards bank transfers globally. The second—which can be considered the most important—is keeping the transaction local. One example is paying in a local currency on a local exchange.
“Paying locally increases your authorization rates and lowers cost,” Dangelmaier said. “The cost of processing a payment locally is anywhere from 1% to 2% lower.”
This can result in significant savings on a large transaction.
Additional challenges with expanding globally are regulation and compliance. “Each market has its own rules and requirements,” Keyes said. “Orchestration can help a merchant figure out what they need to be doing differently in Latin America versus Asia, for example.”
Payments orchestration carries additional benefits. It can help with taxes, fraud, and chargeback management. A company’s compliance team may not always be aware of local rules in every country, and a payments orchestration platform can help.
Many companies don’t know this, but cross-border payments often have low payment authorization rates, which can be a drag on business. Paying in local currency can also increase payments conversions.
“Localized payments authorization rates are usually 95% to 99%,” Dangelmaier said. “Cross-border transactions usually have authorization rates somewhere between 80% to 90%. So you can get anywhere from a 3% to 12% lift in your authorization rates by localizing transactions.”
The Cost Savings and Flexibility of Payments Orchestration
Companies can be tempted to rely on cross-border transactions and not have to figure out local payment markets. But, Dangelmaier notes, the costs of doing so can be severe.
“We get on the phone with platforms and merchants all the time, and we tell them: ‘Do you realize that a third of your cross-border transactions aren’t being authorized, and you’re paying 1% or 2% more on $30 million of business?’” he said. “So we walk them through an ROI and show how much money they can save by using local payment methods to ensure higher authorization rates and lower fees.”
And as the payments space continues to see a proliferation of payment methods, leaning on a payments orchestrator can simplify the workload for businesses.
“Whether it’s crypto or BNPL—or even payment methods that we haven’t heard of yet— consumers want to be able to pay [how they want] and businesses need to be able to quickly add them and integrate them into their system,” Keyes said. “Working on individual integrations with each new payment method can take a long time. And payment orchestration can help speed that process up and make it smoother and improve the experience for the consumer.”
Payment orchestration can increase return on investment, by optimizing the way the payment is processed, thereby minimizing fees, and maximizing authorization rates.
Additional benefits to payments orchestration include regulatory compliance, and the valuable data that’s collected.
“Payment orchestration feeds into your business analytics and can be processed by AI to yield key insights that can help executives make decisions,” Dangelmaier said.
Global payment orchestration is essential for businesses looking to expand into new markets, improve their customer experience, increase sales, manage risks, and save costs. It should be a priority in any business’ strategic growth plan.