Tony Allen, Chief Technology Officer at Recurly.
Payments orchestration is a pivotal tool for scaling subscription operations. By integrating local payment methods and alternative payment methods (APMs)—and optimizing the checkout experience—subscription-based businesses can improve authorization rates and expand into new markets.
However, navigating the integration of diverse payment methods and managing updates can be a costly and time-consuming endeavor when managed in-house. Let’s define payments orchestration, discuss routing network tokenization and life cycle management, and look at how to build a payments orchestration strategy.
Payments Orchestration Defined
Payments orchestration basically simplifies the complex facilitation of payment routing and activities across multiple providers, which allows subscription businesses to determine the placement of each piece within the ecosystem.
The reality is that real payments orchestration is a substantial investment, requiring complex integrations and complex logic to ensure that payments always flow along the best route. Once the initial investment is made, there is a significant maintenance cost for such a large, complex system. This underscores how important it is that you work with a strong business partner—unless, of course, you’re fully prepared to make and manage such a significant investment.
Intelligent Routing For Speedy Transactions
The concept of intelligent routing takes center stage in the payments orchestration playbook. By selecting the optimal path for transactions, businesses can significantly streamline the payment process. For instance, the way transactions are routed—looking at factors such as currency, geographic location and business unit—and routing them correctly makes it faster and creates less friction. Speeding up the processing time creates a more positive user experience and contributes to higher authorization rates—a win for both the business and the subscriber.
For example, the average API response time for requests from third-party services like payment gateways and tax processors can vary wildly—from 100 to 3,000 milliseconds. For reference, our portion of the call averages 80 milliseconds. Additionally, incorporating sophisticated revenue recovery strategies and retry logic proves instrumental in recovering lost revenue.
Network Tokenization For Enhanced Authorization Rates
An additional ace up the sleeve is network tokenization, a powerful tool that boosts authorization rates. However, network tokenization is highly complex, and most businesses will work with either a gateway or a partner to implement it.
Tokens create a link between the consumer and merchant for the recurring charge, leading to improved acceptance rates. By tokenizing sensitive payment information, subscription businesses fortify security measures and instill confidence in subscribers. This not only enhances the overall transactional security, but it also contributes to a smoother payment process—fostering trust and loyalty with subscribers.
A Holistic Approach To Subscriber Life Cycle Management
Subscription businesses follow a multistep process to orchestrate integrated global transactions successfully. This involves secure vaulting to improve life cycle management, automated retry logic for effective revenue recovery and the creation of robust dunning campaigns. This comprehensive approach streamlines the subscriber life cycle, adding significant value to both the business and its customer base.
Building A Payments Orchestration Strategy
Now that you have a stronger understanding of payments orchestration, you must consider both how and where to start. Here are some key considerations when planning out your payments orchestration strategy.
Gateways And Payment Methods
To map out your payments orchestration journey, it is important to consider which payment methods and gateways you will need to support. To determine this, you need to understand how your customer base would prefer to pay.
Also, understanding where your customer base is located is critical, as gateway performance can vary greatly in different parts of the world. Having a good understanding of all of the different gateway relationships and payment methods that you need to support will help lead to success in planning your overall strategy.
Ownership And Success Metrics
A payments orchestration strategy is not a “fire-and-forget” initiative. Even the best strategy is going to require ongoing experimentation and tuning as new payment methods become available and your customer base shifts in location or demographic.
It’s important to define your strategic goals, how you will measure the attainment of those goals and who will own strategy updates as you progress. Payment method adoption, invoice success rates and payment failure recovery rates are good places to start, but it is important to define the right metrics that will drive business success.
Build Vs. Buy
Once you understand the payment methods and gateways you need to support as well as the associated goals and success metrics, it’s time to start plotting your path to success. It is at this point that you will need to consider some important questions:
• Do you have the resources to build a payments orchestration solution that will allow you to support the payment methods and gateways on your list, achieve your success metrics, and provide the flexibility to experiment and adapt your strategy in the future?
• What is the total cost of ownership of a solution built in-house compared to a solution from a vendor/partner?
• Do you have all of the correct expertise available to ensure success in the complex field of payments?
• Will investing in building a solution in-house distract you or your teams from your core business?
Payments orchestration is a game-changer for subscription businesses aiming to scale efficiently and reach broader markets, and a well-designed strategy that encompasses intelligent routing, recovery practices and network tokenization can optimize the subscriber life cycle.
By adopting a holistic approach to payments orchestration, subscription businesses can not only boost authorization rates but also cultivate enduring subscriber relationships, ensuring sustained growth in the competitive subscription landscape.
Forbes Technology Council is an invitation-only community for world-class CIOs, CTOs and technology executives. Do I qualify?
