Payment Orchestration: An Operating System for Streamlining Payments

In recent years, payment orchestration has become a hot topic, capturing the attention of a growing number of merchants. What lies behind this growing popularity, however, has been shifting significantly. While conventional definitions focus narrowly on the technical integration of multiple payment service providers (PSPs), it has become apparent that a more holistic approach was needed to address regional nuances and broader business needs.

Payment Orchestration is a sophisticated payments operating system that connects with the merchant’s tech infrastructure, providing a unified layer that intelligently manages the entire payment lifecycle, from checkout to reconciliation. Payment Orchestration Platforms (POP) provide a unified integration layer which can power multiple components of the merchant’s payment ecosystem. This layer includes:

• Native Checkout Experience: Seamless, native checkout experience, personalized for each market & its customers
• Integration Engine: This allows merchants to integrate and manage various payment service providers (PSPs), acquirers, payment gateways, and other financial service providers through a single, unified, no-code platform. It is like a universal adapter that can connect to different types of electrical outlets.
• Routing Logic: Think of the routing logic as a traffic controller for payments. It determines the optimal path for processing transactions based on predefined rules and real-time data, such as cost, success rates, auth rates, performance, fraud, chargeback rates, contract commitments and regional regulations. This ensures that each transaction is processed through the most efficient and cost-effective channel.
• Unified Analytics and Reporting: This component provides businesses with a dashboard to monitor their payment stack performance across various dimensions like PSPs, Payment methods, FRM providers etc. It offers valuable insights and data on transaction trends, success rates, auth/acceptance rates, and other key metrics, enabling businesses to identify areas for improvement and optimize their payment strategies. Furthermore, it makes payment operations seamless with automated reconciliations, chargeback & refunds management and much more.
• Security Measures: Security is paramount in payment processing. The POP incorporates robust security measures, like tokenization and encryption to ensure compliance with industry standards, such as PCI DSS, and protect sensitive customer information. This acts as a safeguard against fraud and data breaches.

All these aspects of payment orchestration come together to enhance and optimize payments to meet their business objectives of improving conversions, optimizing payment fees & operational costs, and serving diverse customer preferences.

Regional dynamics strongly shape country-specific trends. It is increasingly clear today that an effective payment orchestration strategy must be tailored to meet the unique needs of each market, rather than relying on a one-size-fits-all approach. A major challenge for merchants across regions is balancing payment process friction with customer preferences. Inefficiencies and unmet expectations often lead to passive churn—a widely recognized industry challenge where an estimated 30% of transactions fail due to declines—resulting in revenue loss and reduced customer loyalty.

At Juspay, we also see distinct regional factors shaping market dynamics and highlighting unique regional pain points.

United States

The US is a market that continues to be driven by legacy payment infrastructure and very much dominated by credit and debit card payments in terms of consumer-to-business transactions. Along with high card usage, we are seeing a rise in the popularity of ACH transfers, particularly due to the adoption of real-time payments and the emergence of mobile payment apps. All forms of credit payments are more prevalent in this market, along with the growing interest in Buy Now, Pay Later (BNPL) options. Consequently, merchants face several key challenges:

• Transaction costs. US merchants have to navigate higher transaction costs associated with cards (and indeed ACH) compared to other developed economies. In fact, according to a 2023 report, U.S. merchants face the highest card acceptance costs globally, with a 34% increase since 2009, driven largely by the growth of e-commerce. These higher costs stem from elevated interchange rates and the lack of regulatory caps on credit card fees, unlike in Europe.
• Regulatory complexity. Integrating modern payment solutions with legacy systems is a challenge in itself, especially when navigating complex federal and international regulations, such as AML and PCI DSS, all while staying aligned with the card network mandates.
• High fraud rates. The fraud landscape in the US market mirrors the global trend of rising e-commerce payment fraud rates, but it also faces challenges unique to the region. The US accounts for 42% of fraud by value, significantly higher than Europe’s 26%. This disparity emphasizes the need for both merchants and payment providers to prioritize security measures in light of rising cyber threats.

Europe

The European payments market is one that has been traditionally better served by payment orchestrators since it has been highly developed both in terms of infrastructure and regulatory frameworks, particularly around card payments. The regulatory initiatives aimed at boosting competition like the PSD2 directive and Interchange regulation have fueled a strong shift toward local payment methods. This shift, along with the diversity of currencies and customer preferences, has contributed to the further fragmentation of payment rails.

Merchants operating in European markets face the challenge of meeting heightened consumer expectations while managing complex regional regulations and the necessity for cross-country and cross-currency processing.

Typical challenges for European merchants are:

• Local and alternative payment methods. Cards and standard bank transfers can no longer be assumed as default payment options, with the rising adoption of digital wallets and other alternative instruments. Yet, amid this diversity, consumers expect seamless cross-border payment experiences, perhaps now more than ever.
• Reducing friction. Merchants must also balance security with user experience, particularly given stringent authentication requirements. In particular, with 3DS implementation causing friction for merchants, the ongoing challenge of fraud prevention versus user convenience has led to innovations like Click-To-Pay and PassKeys to enhance merchant and customer experiences.
• Chargebacks. Reducing chargeback rates is another core challenge for merchants, due to increased protections for both payees and buyers. This involves finding effective ways to address both customer protection and fraud prevention, especially as account-to-account (A2A) transactions through Open Banking and other payment channels with fewer built-in consumer protections become more prevalent.

APAC & MENA

While otherwise heterogeneous, APAC and MENA markets share some key characteristics that often trip global players off - particularly those originating from Europe or the US. Driven by rising mobile adoption and targeted government initiatives, some countries across APAC and MENA are embracing fast, innovative local payment methods, often bypassing traditional banking systems. This shift is creating an increasingly digital-first payment landscape, steering market participants toward localized solutions rather than conventional payment infrastructures.

As a result, we see several key challenges in these markets, including:

• Fragmentation of payment methods and rails. Merchants face a fragmented payment ecosystem with numerous local providers. The dominance of mobile payments, domestic A2A schemes and other unique payment methods (including cash-on-delivery) implies that relying solely on local card acquiring is insufficient for maximizing acceptance and conversion.
• Cultural and behavioural diversity. Merchants' payment teams must account not only for these technological complexities but also for the diversity within local populations, including the varying levels of digital literacy, as well as the regulatory landscape.
• Significant government presence in the ecosystem. Stringent compliance requirements driven by national policy agendas are common across both regions, which in a country like India for example include data localisation laws and strong customer authentication mandates. This reflects the substantial government investments in digital and payment infrastructure.