Payment Orchestration vs Payment Gateway

One of the most important yet often overlooked aspects of running an online business is payments. 

How you manage and process payments can positively or negatively impact your customer experience, revenue growth, and scalability.  

Moreover, if you’re looking to expand your online presence to a global market, the complexity of payments can quickly become overwhelming. 

What is the right solution for your business? 

Payment Orchestrator or Payment Gateway? 

In this article, we will break down the differences between these two payment solutions and outline the benefits and drawbacks of each. 

So, let’s get started.

 

Key Takeaways

• Payment gateways and orchestrations provide different service levels and functionality in the payment processing ecosystem.
• Payment gateways are designed to process payments between a merchant and a single payment service provider (PSP), while payment orchestration platforms manage payments across multiple PSPs.
• Payment orchestration solutions offer greater flexibility, security, and scalability than payment gateways but may be more complex to implement and manage.
• Payment gateways are more limited in their payment options and may be more expensive in the long run, but they are generally easier to integrate and manage.
• Payment orchestration and payment gateways can be used together to provide businesses with a more comprehensive and efficient payment processing solution.
• Ultimately, the best payment processing solution for a particular business will depend on its unique needs, priorities, and budget.

 

 

What is A Payment Gateway

A payment gateway is a technology that allows businesses to process online payments

 securely. ‘

It is the virtual equivalent of a point-of-sale (POS) terminal used in physical stores. Payment gateways facilitate the transfer of funds between a customer’s bank account or credit card and the merchant’s account. 

They provide a secure way to process online transactions, protect sensitive customer information, and ensure the merchant receives payment for goods or services sold. 

Payment gateways can be integrated into e-commerce websites, mobile apps, and other digital platforms, making it easy for customers to make online payments anywhere.

Think of payment gateways as the invisible glue that holds together the complex web of financial institutions, payment processors, and merchants that make online transactions possible.

 

How do Payment Gateways Work?

Ever stopped to think about how these transactions happen? 

Or better still,

How does your payment information reach the merchant’s bank account from your computer or smartphone? 

Here’s how it works. 

 

Step one: You initiate a payment

When you visit a merchant’s website or online store and select the products or services you wish to purchase, you proceed to checkout, and you’re presented with various payment options such as credit cards, debit cards, e-wallets, or bank transfers.

 

Step two: Your payment information is encrypted and sent to the payment gateway

Once you select your preferred payment method and enter your payment information, such as your credit card details, the information is encrypted and securely transmitted to the payment gateway.

 

Step three: The payment gateway sends the information to the acquiring bank

The payment gateway then forwards your encrypted payment information to the acquiring bank, which is responsible for authorizing and processing the payment.

 

Step four: The acquiring bank sends the information to your issuing bank

The acquiring bank sends the encrypted payment information to your issuing bank, which is responsible for verifying your account information and ensuring that you have sufficient funds to cover the transaction.

 

Step five: Your issuing bank approves or declines the transaction

Your issuing bank reviews the payment information, and either approves or declines the transaction. If the transaction is approved, your issuing bank sends an authorization code back to the acquiring bank, which is then transmitted back to the payment gateway.

 

Step six: The payment gateway sends an approval or decline message to the merchant

The payment gateway receives the authorization or decline message from the acquiring bank and relays it back to the merchant’s website or online store. If the transaction is approved, the merchant can then fulfill your order and provide you with the product or service you purchased.

 

Payment gateways securely transmit payment information between you, the merchant, and the financial institutions involved in the transaction, ensuring that payments are authorized and processed quickly and efficiently. 

With the help of payment gateways, you can enjoy a wide range of payment options, improve your shopping experience, and help the merchant expand their customer base.

 

Transaction Flow Examples of a Payment Gateway

Some examples of transaction flow for a payment gateway include:

 

1. Credit Card Payment:

• The customer enters their credit card details on the merchant’s website or application.
• The merchant securely sends the payment information to the payment gateway.
• The payment gateway verifies the credit card details and checks with the customer’s bank if sufficient funds exist to complete the transaction.
• If the payment is approved, the payment gateway confirms to the merchant that the transaction is completed. If the payment is declined, the payment gateway returns an error message to the merchant, and the transaction is incomplete.

 

2. Bank Transfer Payment:

• The customer selects the bank transfer payment option on the merchant’s website or application.
• The merchant provides the customer with the payment details, such as the account number and bank name, for the payment to be made.
• The customer initiates the transfer through their bank’s website or mobile app, entering the payment details provided by the merchant.
• The customer’s bank verifies the transaction and transfers the funds to the merchant’s account.
• The merchant confirms the payment has been received and the transaction is completed.

 

3. Digital Wallet Payment:

• The customer selects the digital wallet payment option on the merchant’s website or application.
• The customer logs into their digital wallet account and authorizes the payment.
• The payment gateway receives the payment request and sends it to the digital wallet provider for verification.
• The digital wallet provider verifies the payment request and confirms with the customer that they want to proceed.
• Once the payment is received, the payment gateway communicates the transaction results back to the merchant, confirming the order and notifying the customer of the successful payment.

 

These are just a few examples of transaction flows for payment gateways, and the specific flow may vary depending on the payment method and the payment gateway being used.

 

What is Payment Orchestration?

Payment orchestration is a newer technology that has emerged due to the growing complexity of payment processing. 

It refers to the process of routing payments to the most suitable payment processors based on various factors, such as payment method, currency, location, and payment history. 

 

What is a Payment Orchestration Platform (POP)?

A payment orchestration platform (POP) software solution helps businesses manage and optimize their payment processing operations. 

This platform is a central hub connecting merchants with a range of payment service providers (PSPs), allowing businesses to manage their payment transactions through a single platform. 

A payment orchestration platform provides several key benefits for businesses, including:

 

1. Streamlined payment processing: By aggregating multiple PSPs into a single platform, a payment orchestration platform simplifies payment processing and eliminates the need for businesses to manage multiple payment integrations.
2. Increased flexibility: Payment orchestration platforms allow businesses to easily switch between different payment providers, enabling them to choose the most cost-effective and efficient options based on their specific needs.
3. Enhanced security: Payment orchestration platforms often employ advanced security protocols and fraud prevention measures to ensure payment transactions are safe and secure processing.
4. Improved payment insights and reporting: Payment orchestration platforms provide businesses with real-time data on payment transactions, enabling them to monitor payment flows and optimize their payment operations based on actionable insights.

 

 

 

What is a Payment Orchestration Layer?

 

Imagine a payment processing system as a three-layer cake. 

The bottom layer is the payment infrastructure layer, which includes payment service providers, acquirers, and processors. 

The top layer is the merchant layer, which includes businesses that accept electronic payments. And in the middle, we have the payment orchestration layer – the sweet spot that connects the two.

Simply put, a  payment orchestration layer is a software solution that sits between the merchant’s front-end systems and the payment processing back-end. 

It acts as a translator, facilitating communication between different payment providers and acquirers and managing the payment processing workflow.

It’s also responsible for routing payment transactions to the appropriate payment service providers, ensuring that the payment data is translated into the correct format for each provider, and managing the payment flow from start to finish. 

 

How Does Payment Orchestration Work?

When you make a payment online or at the point of sale, you don’t consider the intricate process behind the scenes. 

But rest assured, payment orchestration is hard at work, ensuring that your transaction is processed securely and efficiently.

How does payment orchestration actually work? 

 

Let’s break it down step by step:

 

Step 1: Transaction initiation

It all starts with you. You initiate a payment transaction on the merchant’s website or at the point of sale. This could be as simple as entering your credit card details online or tapping your phone to a payment terminal.

 

Step 2: Payment orchestration

Once you initiate the transaction, the payment orchestration layer enters the picture. The payment orchestration layer receives the payment request from the merchant and routes it to the appropriate payment service provider (PSP) for processing. This could be a credit card company, a mobile wallet provider, or other payment service providers.

 

Step 3: Authorization 

The payment service provider receives the payment request and checks with the issuing bank to ensure that you have sufficient funds to cover the transaction. This is a crucial step in the process, as it helps prevent fraudulent transactions and ensures that your account remains secure. 

If the transaction is approved, the payment service provider sends an authorization message back to the payment orchestration layer.

 

Step 4: Payment capture

Assuming that the transaction is approved, the payment orchestration layer then captures the payment details and sends them to the payment service provider for payment capture. 

The payment service provider then captures the payment from your account and returns a payment confirmation to the payment orchestration layer. This step happens almost instantaneously, so you won’t have to wait long to receive confirmation that your payment has been processed.

 

Step 5: Settlement

With payment capture complete, the payment orchestration layer then sends the payment details to the acquiring bank, which processes the payment settlement and transfers the funds to the merchant’s account. 

This is the final step in the payment process, where the merchant receives payment for the goods or services you’ve purchased.

 

Step 6: Confirmation 

Finally, the payment orchestration layer sends a confirmation message to the merchant and to you, indicating that the transaction has been successfully processed. 

This confirmation message proves that your payment has been accepted and the transaction is complete.

 

Payment Orchestration Vs. Payment Gateway: How Do They Differ?

 

Here’s a side-by-side comparison between payment orchestration and payment gateway

 

 

Criteria	Payment Orchestration	Payment Gateway
Scope	Manages payments across multiple payment service providers (PSPs)	Focuses on processing and authorization of payments between a merchant and a single PSP
Flexibility	Allows businesses to easily switch between payment providers and payment methods based on their specific needs	They may be more limited in payment options and may offer a different level of flexibility.
Security	Prioritizes security but may be more susceptible to fraud and security breaches due to limited scope	Often employs advanced security protocols and fraud prevention measures
Supported Payment Methods	Supports multiple payment methods and providers	Support a limited number of payment methods and providers
Integration	It can be integrated with a wide range of existing systems and software	Often requires direct integration into a website or point-of-sale system

Payment Orchestration Vs. Payment Gateway: Do They Work Together?

Payment orchestration and payment gateways work together to provide businesses with an even more robust payment processing solution. 

By integrating payment orchestration with a payment gateway, businesses can enjoy the benefits of both solutions, leveraging the flexibility and security of payment orchestration while also taking advantage of the payment processing capabilities of a payment gateway.

 

For example, a business could use a payment orchestration platform to manage payments across multiple PSPs while integrating with a payment gateway to process credit card payments. 

 

This would allow the business to offer customers a wider range of payment options while also benefiting from the added security and fraud prevention measures offered by payment orchestration.

Likewise, a business could use a payment gateway to handle payment processing for a particular payment method while integrating with a payment orchestration platform to manage payments across multiple payment methods and providers. 

 

This would also allow the business to optimize its payment processing operations, taking advantage of the strengths of each solution.

 

 

Payment Orchestration Vs. Payment Gateway: Is One Better Than the Other?

Payment orchestration and payment gateways are two distinct approaches to managing and processing online payments. 

Both have advantages and disadvantages and deciding which is better depends on a business’s specific needs and requirements.

The following compares their features ranked from 1 to 5, where 1 is the weakest and 5 is the strongest.

 

Feature	Explanation	Payment Orchestration	Payment Gateway
Flexibility	Payment orchestration connects businesses to multiple payment gateways for flexibility, whereas payment gateways only provide a single connection.	5	2
Scalability	Payment orchestration scales businesses with multiple gateways, optimized routing, and high transaction handling, while payment gateways are limited by their providers.	4	3
Security	Payment orchestration and payment gateways have robust security measures to protect sensitive data. Yet, payment gateways have an advantage as they specialize in secure payment processing.	3	5
Payment Optimization	Payment orchestration optimizes payment routing to reduce transaction costs and increase approval rates by intelligently selecting the best payment gateway, which may not be possible with payment gateways alone.	5	2
Global Reach	Payment orchestration connects businesses to multiple global payment gateways with diverse payment options, while provider partnerships may limit payment gateways’ reach.	5	3
Integration Complexity	Payment orchestration has complex integration as it manages multiple gateways, while payment gateways are simpler to integrate as they require only one connection.	2	5
Cost	Payment orchestration incurs higher costs for managing multiple gateways, while payment gateways offer simpler pricing and are more cost-effective for small businesses.	3	4
Reporting & Analytics	Payment orchestration offers comprehensive reporting and analytics for all connected gateways, providing valuable payment performance insights. Payment gateways offer basic reporting and analytics limited to their platform.	5	3

 

Related Article: 7 Things to Consider Before Choosing a Payment Gateway for Your Business

 

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On top of our unbeatable rates, customers enjoy premier customer care that ensures all needs are met promptly and effectively. 

Whether it’s a payment orchestrator or gateway service, we have the technology to outperform the competition. 

With our unparalleled service and reliable support, your financial transactions will be easier than ever before. 

Get instant access to secure and cost-effective solutions for your business now!

Final Thoughts: Payment Orchestration Vs. Payment Gateway

The debate between payment orchestration and payment gateway can be likened to an epic battle between two superheroes with unique powers and strengths. 

The payment gateway is like the seasoned warrior, standing tall with its robust security and many features. In contrast, the payment orchestrator is the up-and-coming prodigy that can unify and streamline the entire payments ecosystem. 

Ultimately, it all boils down to your business’s specific needs and desires. 

Are you looking for a standalone champion to handle your transactions, or do you need a master conductor who can harmonize the complexities of the payments world?

So, dear reader, the decision is yours to make. Choose wisely and let your business flourish!

Still, have further questions? Contact us now!