Against the backdrop of long-term economic challenges, a recent report from Google, Temasek, and Bain & Co estimates that the digital payment market in Southeast Asia will flourish to reach a value of $2trn by 2030.
The increase in transactions is matched by the increasing rate of change and innovation across the digital payments landscape. This can be attributed to an increase in Peer-to-Peer commerce, as well as the rising popularity of emerging digital payment methods, such as e-wallets and Buy Now Pay Later (BNPL), to name a few.
As the volume of solutions and services offered in the payments market increases, so does the complexity of payment technology stacks. From intricate components and third-party connections to a greater number of functionalities and disparate internal systems, these stacks are becoming less efficient at processing payments and pose a greater challenge for businesses to manage.
This translates into missed revenue opportunities and competitive disadvantages that are difficult to overcome due to stretched human and technical resources, and budgets.
So how can the industry put its house of payments in order?
One highly effective way is with service orchestration.
What is service orchestration?
Service orchestration unites previously disparate products, such as payment methods, multiple platforms and risk management applications, from multiple providers, allowing them to be managed via one user interface. It does so by unifying all the independent components of a transaction under a single control layer, enabling end-to-end management and automation of payments processing, harmonising the checkout flow.
An effective service orchestration engine is a business-oriented platform, designed to respond to ever-changing business needs. It helps manage the financial and operational aspects of payments acceptance, from checkout through to the settlement of funds into a merchant’s bank account.
This removes the complication of monitoring the performance of multiple, manually integrated, and siloed products and platforms. It also automatically aggregates and processes crucial data streams, providing both payment service providers (PSPs) and merchants with valuable, real-time analytics. For APAC to take digital payments to the next level, service orchestration is the key to unlocking the untapped potential of optimising performance, accelerating growth and reducing complexity.
What are some more benefits?
Risk is always relative but not having an orchestration engine is a bigger risk than having one. The benefits of orchestration largely come from it being a central hub for payments that lends greater control over the entire payments process. This can be seen across a number of key areas, such as business strategy, data, and cost centres.
On the business strategy front, omnichannel commerce will continue to lead for merchants, especially as online and in-store commerce continue to merge. Here, PSPs have to ensure that payments function, often having multiple platforms to manage payments across stores and digital realms, making efficient execution of omnichannel offerings difficult. An orchestration layer can eliminate this complexity and accelerate omnichannel strategies because it unifies channels.
Improved fraud detection combined with reduced costs
Similarly, transaction data, instead of being spread over multiple platforms, is centralised across a single layer. This makes data analytics significantly easier and more robust, leading to actionable data insights across channels as well as location, payment method and other key parts of the payments process.
With data centralised, detecting fraud also becomes significantly easier and more efficient.
Orchestration can also greatly reduce costs. These cost benefits mainly stem from not having to maintain payments infrastructure technology and avoiding costly IT development trajectories, as payments are managed from a single system rather than multiple ones.
Another IT process that orchestration simplifies is configuration. Many orchestration offerings are also no-code, allowing PSPs to activate and configure products without resorting to complex coding. This further frees up tech teams and allows them to focus on innovating their platform, instead of spending hours integrating third-party solutions. In the case that new providers do need to be brought on board, orchestration allows them to be easily added, tested, and replaced as needed.
Orchestration: increasing conversion
In short, what orchestration does is it optimises payments and checkout processes. Another key issue it also helps with is something that’s on the top of almost everyone in the payments industry’s list of priorities: increasing conversion.
Having the right payment methods is an essential part of the conversion equation but behind this lie many technical processes that can increase conversion. The most obvious ones are balancing security so as to not turn away legitimate transactions and reducing failed payments via smart routing to alternative providers – these represent the tip of the iceberg when it comes to orchestration.
This ability to efficiently increase conversion will become even more important to the success of both payments companies and their merchant clients in the digital age, where the speed of commerce requires payment solutions to be easy to manage, quick to deploy and scale, and able to take on new requirements at speed.
Oliver Rajic is Chief Growth Officer at PPRO