Marco D’Amore, CEO of ErmesHotels.
The orchestration of payments is becoming a highly relevant trend in Europe and the rest of the world. It is already having a significant impact in the e-commerce sector, and therefore, there are already several use cases in the world of e-travel. According to MarketResearch.com, the market growth is 25.75% from 2021 to 2027, forecasted to reach around $4.7 billion by 2027.
Many hotels still rely on a single payment service provider (PSP) or multiple providers that are not integrated with each other. However, this method has some challenges, as it can be difficult to collect all of the data and elements needed to effectively manage receipts. The adoption of orchestration platforms is becoming a popular choice for optimizing the processing of payments at every stage in order to minimize the number of failed transactions, costs and acceptance times. In recent years, thanks to the integrations between Central Reservation Systems (CRS) and payment gateways, I have been able to observe the critical issues of current solutions and the potential of payment orchestration and smart routing to solve them. (Full disclosure: My company offers payment orchestration services, as do others.)
Understanding Payment Orchestration
To understand the meaning of payment orchestration, consider the role of the conductor who directs the instrumentalists in an orchestra. The same concept can be applied to the processing of payments: Each payment instrument integrated into the orchestration platform is coordinated through engines based on artificial intelligence (AI), which serve as the conductor directing each transaction through more efficient routes. Depending on the context, the AI engine identifies in real time the suppliers (e.g., acquirer, fraud prevention service, etc.) most suitable to increase conversions and reduce management costs.
The goal of orchestration solutions is to maximize sales, reduce costs and offer the best possible customer journey without friction and in complete safety. A single access point with multiple providers and several integrations for the processing of payments can be an effective response to many problems that merchants face, which has made them increasingly popular among hotel chains and online booking portals. Some of the advantages of adopting a payment orchestration platform for sales in travel and hospitality include saving resources and time, improving conversion rates, simplifying access to international markets with specific payment systems for each market of origin, reducing computer fraud and automating the reconciliation of payments with individual reservations.
The Role Of Smart Routing
The center of payment orchestration is smart routing—also called dynamic routing—which helps make receipts more efficient by intervening directly on payment flows to reduce failed payouts. Hotels face the problem of failed transactions on a daily basis, which can have a strong impact on conversion rates and revenues. When we talk about failed payments, we mainly refer to transactions rejected by the buyer or issuer for reasons such as lack or incompleteness of card or buyer information, difficulties during authentication or insufficient funds on the payment instrument. Many of these problems cannot be solved directly by the merchant because they can be attributed to factors external to its scope of intervention, especially in cases of technical difficulties within the payment ecosystem or when the transaction fails due to problems related to acquiring or issuing.
This is where smart routing can make a difference. Smart routing automatically directs transactions to the most effective route, thanks to dynamic algorithms. This flexibility allows you to minimize failed transactions by modifying the routes depending on the situation.
Choosing The Right POP Partner
POPs are not without challenges, such as in the areas of integration complexity, security and regulatory compliance. When identifying a compatible payment orchestration platform for your company, determine if a potential partner can effectively take into consideration your unique needs, including scalability, fraud management, conversion rate optimization and international reach. The payment orchestration platform you choose should be able to integrate with your CRS e-commerce platform and be strategically configured to route transactions between service providers.
Safeguarding payment data and maintaining payment security are paramount, as PCI noncompliance can result in hefty fines and even litigation, damaging both your financial and reputational standing. An effective POP partner should ensure you are in compliance with security standards by securely encrypting and storing sensitive customer payment data.
Conclusion
In the hospitality sector, the ability to guarantee purchase experiences consistent with all your hotel’s touch points is important for competing in a more international context. For this reason, integrations are intensified through Application Programming Interfaces (APIs) that increasingly allow CRS and Property Management Systems (PMS) to dialogue with each other and with the various PSPs in order to make the customer journey more fluid and simple. The modern interconnected CRS can allow the customer to have the simplest possible experience. After all, we are typically selling holidays and experiences, and therefore, reducing stress and complications for guests should be one of our primary goals for a great stay.
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