Payment gateways and payment orchestration platforms— two key players in the world of payment processing— are often misunderstood or used interchangeably. This guide explains the key differences between payment gateways and payment orchestration, helping you determine which solution aligns best with your business goals.
What is a payment gateway?
A payment gateway serves as the digital bridge between e-commerce merchants, their customers, and financial institutions. Payment gateways collect payment details from a customer making a purchase, and then send an authorization request to the corresponding payment network to process the payment. Once verified, the payment gateway then informs the merchant whether the transaction was successful or not.
Within each of these processes, payment gateways perform four critical functions:
- Encryption: Ensuring a customer’s payment information is secure by encrypting the data before it is sent to or from the payment network.
- Authorization: Payment gateways facilitate the passing of transaction data between the merchant’s acquiring bank and issuer bank or payment processor. This ensures that the details of the transaction - including the payment method and source of the customer’s funds - are verified.
- Fraud Detection: Payment gateways use advanced security processes and tools to identify and prevent fraudulent transactions before they occur.
- Data Storage: Payment gateways typically store and provide merchants with transaction data that can be used to understand how payments are flowing through their business.
Commonly used payment gateways include: PayPal, Stripe, Adyen and Square. Each of these payment gateways has become a critical tool for merchants looking to accept payments in-person or online. Banks sometimes have their own payment gateways also that they offer to merchants in addition to their acquiring bank services.
What is payment orchestration?
Payment orchestration takes a more comprehensive approach to managing payments. Acting as an additional layer of infrastructure, a payment orchestrator connects multiple payment gateways, acquirers, and payment methods into one unified system. Essentially, a payment orchestration platform allows businesses to consolidate all of the various components of their payment operations – transactions, compliance, and analytics – into one interface.
In addition to centralizing payment operations, payment orchestrators offer features that go beyond what a single payment gateway can provide. These include:
- Smart routing: Directing transactions to the gateway or acquirer most likely to approve them, increasing approval rates and reducing costs.
- Payment integrations: Supporting various currencies and payment methods, delivering a consistent experience across regions.
- Automation: Simplifying complex tasks like retries for failed payments, recurring billing, and compliance.
- Real-time insights: Providing advanced analytics to monitor performance, optimize revenue, and identify trends.
Payment orchestration vs. payment gateway: key comparisons
While both payment orchestrators and payment gateways enable secure payments, they vary significantly in functionality and scalability.
Coverage and scalability
A payment gateway is ideal for businesses operating in a single market or region. It handles localized transactions effectively but may require additional integrations to support global payment methods.
Payment orchestration platforms, on the other hand, are built for scalability. They connect multiple gateways, acquirers, and methods, enabling businesses to support diverse customer preferences across regions. This scalability is essential for companies aiming to expand internationally.
Operational efficiency and automation
Payment gateways often involve manual processes for reconciliation and transaction management, leading to inefficiencies. Payment orchestration automates these tasks, reducing manual intervention and improving efficiency. Businesses can automate retries for failed payments and streamline billing processes, freeing resources for growth initiatives.
Smart routing vs. standard payment flow
Smart routing through a payment orchestrator ensures that transactions are routed to the most suitable gateway or acquirer based on factors like geography, currency, or payment method. This minimizes declines, reduces costs, and optimizes the payment process.
Security and compliance
Payment gateways offer essential security measures, but businesses may need to implement additional compliance features for global operations. Payment orchestration platforms integrate compliance standards like PCI-DSS and GDPR, ensuring adherence to global regulations and reducing the burden on businesses.
When to use payment orchestration
For businesses with complex needs or plans for growth, payment orchestration is often the better choice. It offers the flexibility, scalability, and efficiency required to handle large volumes of transactions and diverse customer preferences.
Growing internationally
Expanding into new markets requires businesses to support local payment preferences, currencies, and compliance standards. Payment orchestration simplifies this process by offering seamless scalability and global payment support.
Managing high transaction volumes
Businesses with high transaction volumes, such as subscription services or SaaS companies, benefit from payment orchestration’s automation capabilities. It ensures uninterrupted service by automating retries for failed payments and integrating multiple gateways to handle demand efficiently.
Choosing the right solution for your business
Selecting between a payment gateway and payment orchestration depends on your current operations and long-term goals. If your business primarily operates in one market, a single payment gateway may suffice. However, if you’re planning to expand globally, support diverse payment methods, or optimize recurring billing, payment orchestration is the more scalable solution.
Evaluate your needs by considering these questions:
- Are you expanding into international markets?
- Do you need to support multiple currencies and payment methods?
- Are failed payments affecting revenue and customer experience?
- Would automation reduce operational burdens for your team?
Optimize payment strategies with orchestration
Maximizing customer satisfaction, reducing costs, and achieving global reach requires the right payment solution. While payment gateways provide a solid foundation for localized transactions, payment orchestration offers the scalability and flexibility needed to meet the demands of a growing business.
Yuno’s payment orchestration platform simplifies payment management with smart routing, global transaction support, and robust compliance capabilities. Ready to take your payment strategy to the next level? Contact us today to discover how Yuno can help your business thrive.
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