Payment orchestration and payment gateway
- Client inputs the details of their payment method, such as credit card number, validity date and security code, in a checkout page.This page may be hosted entirely by the payment gateway or the input fields and information may be encrypted and transmitted to it.
- Payment gateway encrypts the data received, runs fraud checks and transfers the information and transaction details to the acquirer of the merchant.Fraud checks are designed to see if the transaction is legitimate and to protect the merchant.
- The acquirer retransmits the information to the payment method schema (e.g. Visa, MasterCard, etc.) and to the issuing bank.The payment method schema checks if the card is valid and there are enough funds in the account.The issuing bank makes the decision to authorize or refuse the transaction based on several factors, such as availability of funds, client’s credit history and likelihood of fraud.
- Payment gateway informs the client and merchant about the authorization.If the transaction is authorized, the payment page will display the payment confirmation.If it is refused, the page will request the client to try another payment method.In this stage, the payment gateway can also provide additional information about the status of the order.
According to a study by InsightAce Analytic, the global payment gateways market was valued at US$29.65 billion in 2022 and should reach US$162.68 billion by 2031.If your business has not yet invested in this sector, it’s time to start thinking about it!
To learn more about this system, read our article:Payment gateway or PSP: understand the differences between the technologies.
What is a payment orchestrator?
Now that it’s clear how a payment gateway works, let’s dive into the other concept involved in our comparison: payment orchestration.
A Payment Orchestration Platform (POP) brings togethervarious apps, payment gateways, acquirers and banks in a single platform.It is an increasingly important service for companies – its market share is expected to surpass US$4.8 billion by 2032 –, as it enables them to manage payments more efficiently.
Payment orchestration enables companies to:
- Offer their clients a variety of payment options, including credit and debit cards, digital wallets and bank transfers.
- Route payments to the most appropriate processor or gateway based on factors such as cost, speed and reliability.
- Automate the invoicing and settlement process, saving time and money.
- Obtain detailed analysis of their payments to identify opportunities for improvement.
What does an orchestrator do?
Similar to a payment gateway, a payment orchestrator follows well-defined steps that make it easier to understand this tool:
- When a client adds a product or service to the online cart, they are directed to the checkout page, where they choose their preferred payment method from a list of options.Up to this point, payment orchestration and payment gateway are not very different.
- As soon as the client places the order, their payment data is sent to the most appropriate payment gateway.This process is run by POP, which automatically routes the payment request to various processors to reduce the number of false refusals.If the first payment processor cannot authorize the payment, the same request will be sent to another processor.
- Once the acquiring bank receives the payment information, it communicates with the issuing bank to verify and authorize the payment.If the payment is approved, the acquiring bank sends the authorization response code to the payment gateway and the merchant.
- By using several payment gateways and an automatic routing system, POP reduces the risk of false refusals and maximizes payment acceptance rates,which improves customer experience, increases revenue and helps prevent loss of sales due to problems in payment processing.
4 differences between payment orchestration and payment gateway
Although payment orchestration and payment gateway are related terms, they are not the same thing.One can even use both platforms together, since each performs specific functions and brings different benefits.
To better understand what each system can offer your business, here are four important differences:
The scope of each solution is different
While a payment gateway is a vertical solution that usually focuses on one payment type (such as credit or debit card), payment orchestration is a horizontal solution that can be used to process a variety of payment types, including credit and debit cards, boletos andPix, among others.
You might be interested:Payment methods in Brazil: Boleto.
Orchestration is a more complex solution
Payment gateway is a relatively simple solution as it works with a single type of payment processorand can be configured quite easily.Payment orchestration, on the other hand, is more complex as it integrates different gateways and solutions in a single placeand hence, requires more meticulous planning and implementation.
Payment gateways usually cost less
Payment gateways are simpler and cheaper solutions, which could even have fixed fees.Payment orchestration is a more complex and expensive solution, with variable and customizable fees according to the needs of each client.
Both solutions offer different levels of flexibility
Customizing payment orchestration is significantly different from customizing a payment gateway, which is usually limited to a set of resources and options.This flexibility makes payment orchestration much more adaptable to the specific needs of each business.
What is the best payment intermediary?
Now that you know the differences between payment orchestration and payment gateway, you may ask:which is the best payment intermediary for my business?
The answer is there’s no single correct answer.The most appropriate solution for your business will be the one that suitsyour company’s current situation and your specific needs.
Some questions that could help you find the solution you need: