Voice of the Industry

Payment processing without a PSP? What merchants must do to remain competitive in the future

Thursday 10 June 2021 08:33 CET | Editor: Andra Constantinovici | Voice of the industry

Ingo Blum, senior consultant for aye4fin, makes a detailed account of the reasoning and advantages behind merchants employing payments orchestration to create efficiencies and ROI

Payment processing usually takes a back seat for many online merchants and is seen as a necessary evil rather than a priority. However, innovative and high-growth online businesses no longer view payment processing as a standard service but rather a business process critical to their competitiveness. What if merchants could skip or bypass the middleman, i.e. the PSP, and talk directly to the partner of choice?  

Many online merchants currently rely on standard solutions from individual payment service providers. In doing so, they are often confronted with a solution that offers little to no room for customisation and cannot be individually adapted to their requirements.   

But why so? 

Ideally, merchants want to use all sales channels to achieve a unique product range and streamline processes. The PSP, on the other hand, mainly provides its merchants with standard solutions due to their large customer base, which inevitably means a compromise. In addition, the use of a single PSP entails risks of failure and possible vendor lock-in.  

The fundamental questions 

With so-called payment orchestration (PO), a new concept has emerged in recent years that address the urgent need of merchants for independence and innovative solutions. With payment orchestration, a merchant-specific solution is developed. This solution consists of technical, functional, and regulatory building blocks. In the best case, a merchant is directly connected to the critical partners for its business. Shoppers request four simple functions at checkout:   
  1. The preferred payment methods must be available  

  2. Payments must be possible in the select currencies  

  3. Payment authorization must be successful on the first try 

  4. The payment process must be as fast, secure, and seamless as possible.  

Accordingly, the key questions a merchant must ask themselves are:  

  1. Which payment methods do I need for my target group and which are just nice-to-haves?  

  2. How should my optimal checkout process look like regarding an optimal conversion rate?  

  3. Which internal systems are connected or still need to be coordinated?  

  4. What information do I need to set up meaningful reporting?  

  5. How high are my current costs compared to market prices? 

These considerations must be made with a view to strict efficiency and cost optimisation, which is described below. In the end, it is rarely the number of payment methods that is decisive, but their relevancy.   

Reduce costs while improving performance.  

It is not uncommon for payment processing to be way too complex for many companies. Thus, most stay with their existing running system because it ‘just kind of works'. But will it still do so in two, three, or five years? Today, through technical networking and well-rehearsed cooperation, the PSP is firmly integrated into a retailer's business processes. This integration can only be solved with difficulty and at a high cost.  

Nevertheless, the pandemic has shown how important online business will become in the future. Therefore, now is precisely the right time to reduce the complexity of pure payment processing to the most critical target components – and the most important partners!  

By building an individual approach through payment orchestration, online merchants protect themselves from the risks of single sourcing and quickly switch providers if a payment channel fails. 



The solution described above enables complete control over payment acceptance, from checkout to settlement of funds to the merchant's bank account. Depending on the merchant's setup, this may require several different integrations, which quickly become a challenge as digital innovation and payments continue to evolve. However, the advantages outweigh the disadvantages: 

Increased efficiency  

  1. Payment processing providers are forced to be more accommodating and innovate in less time.  

  2. Merchants can unlock payment methods, use them in parallel or block them as needed.  

  3. Rapid entry into new markets is possible at any time, e.g., if only one alternative platform is used for less relevant payment methods.  

  4. Illustrated reports based on key figures across all partners enable direct comparison of all payment methods.  

  5. New functions can be developed if required.  

Cost reduction  
  1. Merchants can work flexibly with different payment providers, depending on cost and performance.   

  2. Due to better-negotiating power and flexible control, this approach is comparably more cost-effective than using a single payment processor.  

Better conversion – higher product margin – higher ROI

On a payment orchestration platform, service providers compete directly with each other. This competition shifts the balance of power and forces providers to meet innovation requests faster.

The way payments are accepted, processed, matched, and analysed will ultimately drive a merchant's growth and create customer value. 

In conclusion, it is essential to optimise not only the existing products but also the payment mix. In the worst case, this will make the PSP obsolete. 

About Ingo Blum

Ingo is a Senior Consultant at aye4fin consultancy with more than 16 years of experience working with national and international clients. His main focus is on ecommerce, acquiring, payment gateway, strategy and implementation. He had a leading position in the acquisition and implementation of international payment projects and detailed knowledge of the payment market, optimisation strategies and market introduction.

About aye4fin 

aye4fin advises high-growth companies with  transaction-based business models, stationary retailers, and digital platforms on  the implementation of regulatory requirements, the optimisation of core processes and payment transactions and on digitization. Experienced industry and IT experts accompany the introduction of digital payment methods from planning to product launch. Our clients include international industrial and retail companies and payment service providers.   

As a system-neutral partner, we also support the introduction and operation of a payment orchestration solution. Since 2019, aye4fin has been part of the Consileon Group. With over 450 employees, the medium-sized consulting company offers clients from various industries, including automotive, banks, insurers, and retail, specialist and IT consulting, including technical implementation. 

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Keywords: payments orchestration, online payments, ecommerce, payments infrastructure
Categories: Payments & Commerce
Countries: France
This article is part of category

Payments & Commerce