Why payment orchestration is overhyped and will not save your business
Why payment orchestration is overhyped and will not save your business
By Viktoria Soltesz
Payment orchestration is a popular topic in the financial tech world, often seen as a universal solution for managing all issues around payment and banking. While payment orchestration can offer some valuable benefits, it is often overhyped and can overlook broader and more critical payment and banking issues, making things more complicated rather than easier.
Let me explain why.
The main issue is that payment orchestration focuses too narrowly on one part of the payment and banking picture, ignoring important other elements around the flows, such as risk, compliance, data security, fraud prevention, contract terms, or technological advancements.
One problem with payment orchestration is that it tries to simplify by combining various payment methods into one system. While this sounds helpful, it often misses the bigger picture.
Risk
Banks and payment providers are not regulated equally worldwide. This means they will not pose the same level of risk to your operation. Thinking that orchestrating payments will resolve and optimize your overall payment and banking risks is missing a huge chunk of the overall picture and can be very misleading.
Effective financial management needs a broader approach that looks at all aspects of payment flows within a company. This includes not just processing payments but also managing and securing funds globally by understanding various regulations in different areas of the world.
Other Options
Another issue with payment orchestration is that it often ties you to a single or limited number of providers. These platforms usually have agreements with specific payment channels, limiting you to those options which they represent. This setup can turn orchestration providers into resellers who simply want to push their offerings by adding an extra technology layer on top of their partner providers’ solutions, but without the much-needed, overall, and detailed market research, understanding, and evaluation.
You might need a payment provider or method that is outside the scope of the payment orchestration platform, and by putting all your eggs in one basket, you might be missing out on a solution that could be more beneficial for you in the long term. Limiting flexibility is a big mistake that many companies make, but it is essential for businesses to stay competitive and responsive to changes.
Complexity
The added complexity of payment orchestration can also be problematic. While it promises streamlined operations, businesses must manage and maintain additional systems, fees, terms and conditions, and technologies, which can be very demanding and confusing. Unknown complexities usually lead to higher costs and the need for specialized training, further straining resources if not planned properly.
Unfortunately, I have seen several times in my practice when companies jump into something without fully understanding what it entails, paying much more in costs, fees, and efforts in the long term.
Building a Payment and Banking Strategy
We always advise businesses to take a holistic approach to their operation and investigate various processes from a banking and payment perspective. Understanding and discussing payments and banking within an international group is essential, as it affects every aspect of the business, even though it is less discussed and often not well understood.
Instead of relying solely on payment orchestration, businesses should focus on building and maintaining an overall and comprehensive payment and banking strategy.
A strong payment and banking strategy involves more than just orchestration. It means understanding how to use new alternatives and technologies to enhance payment security and efficiency. It also requires carefully reviewing contracts with providers to ensure proper risk assessment, compliance, and protection from fraud. The strategy also focuses on the complex issues around technology, integration and reconciliation and involves various departments of a company such as finance, legal, marketing & sales, business growth and strategy, technology, and security.
Today, payments and banking affect every aspect of the business, but payment orchestration platforms often don’t fully cover these important areas. Without discussions and understanding, we might find ourselves taking unnecessary risks, incurring additional costs, or reducing the effectiveness of our processes.
What is the Scope of the Strategy?
The strategy should not only include various payment methods and drive traffic to the cheapest options, as payment orchestration platforms usually do, but also understand the deeper level of the new financial technologies. A good strategy addresses various areas of the operation, such as compliance, security, and fraud prevention. A holistic approach to payments and banking ensures that all incoming and outgoing flows are processed efficiently, the funds are managed efficiently within the group (for example, by having a strong treasury function to avoid “idle” or “pending” funds on any account for a long period), and all areas around the company’s funds are monitored and updated efficiently and securely.
Only a comprehensive payment and banking strategy can manage all payment and banking flows and their related challenges successfully, catering to diverse customer preferences, enhancing satisfaction, and driving growth.