Buzzword Bingo – Payment Orchestration: what it is and why it matters.
There’s a lot of talk about Payment Orchestration. It seems to have found its place at the buzzword bingo table alongside
Generative AI, Cloud Computing, and Open Source technologies. Some of that hype is well-deserved. Through our
investments in merchant-enabling technology companies (e.g., @One, Inc., @Teikametrics, @Plooto), and our continued
exploration of the space it has become clear that merchants and consumers desire and can benefit from a more localized
Traditional Merchant Acquirers, Payment Gateways and Payment Service Providers (PSPs) like JPM, Worldpay, Stripe, and
Adyen do a reasonably good job when it comes to global reach, scalability/performance, processing costs and fraud.
However, when it comes to flexibility, choice, improved conversion and reducing FX costs, merchants and consumers
could do better with the help of a Payment Orchestration Company (POC). While the big payment providers facilitate
payments all over the world, they still have gaps in coverage for certain geographies and corridors and make it difficult to
bolt on newer payment modalities (e.g., BNPL, new wallets, etc.). This limits merchants’ flexibility in connectivity and can
constrain their profit potential. This is where POCs have an important role to fill.
POCs are similar to payment gateways, but typically do not sit in the flow of funds and are not regulated to do so, and
therefore don’t compete directly with traditional PSPs and merchant acquirers. POCs serve as a tech middleware layer,
helping to connect merchants to local payment options (banks or wallets) and new payment modalities. Rather than
merchants integrating into a host of different PSPs or gateways, merchants can integrate with a POC and allow them to
manage payment connectivity on their behalf. Doing so helps drive a lot of value for merchants, including:
▪ Revenue Conversion: local acquirer to local issuer or wallet transactions often improves credit card authorization
rates by 10% 1 or more, i.e., 10% more revenue to the merchant
▪ Profitability: reducing the volume of cross border transactions can lower foreign exchange costs
▪ Redundancy: thanks to having multiple acquirers in each market
▪ Checkout Optionality: access to multiple payment acceptance points, including the latest payment modality. For
example, there are more than 100 BNPL firms globally 2
▪ Security & Portability: tokenize payment details and securely store and port them
▪ Reconciliation: providing transparency and control to payment operations
▪ Outsourced Maintenance Costs: allow the POC to bear the cost of building and maintaining connectivity
▪ Fraud Controls: expanded payment data across merchants provides for federated learning of machine leaning
models and better fraud prevention capabilities
By operating payments more locally, it also helps meet consumers’ demands which include:
▪ Preferred Payment Method(s): e.g., ability to use their preferred local bank or wallet
▪ Currency: local currency tends to be a strong consumer preference, and it can lower transaction costs
▪ Payment Acceptance: reduce friction at checkout and drop off rates by ensuring the first transaction is accepted
While there are many benefits to the merchant and consumer, POCs pose the risk of disintermediation for the likes of
Stripe, Adyen and other incumbents. All else being equal, the tech-forward incumbent payment providers would prefer to
offer merchants a similar value prop, creating friction or competitive tension. POCs can represent a single point of failure
For POCs building in this space – selecting the right institutional investor(s) can make all the difference. The right
investor(s) can help enhance commercial connectivity, ensure you are appropriately capitalized, and have management
and board support to invest appropriately in security, scalability, and commercial partnerships.
Centana Growth Partners is eager to invest in one of the emerging global POC winners. If you are building in this space,
please connect with us (email@example.com)!
1 SBA – 2021
2 According to S&P Global Market Intelligence’s 451 Research (Reuters).