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The Path to Payment Orchestration

No-size-fits-all

If you’re the Chief Financial Officer of an airline who wants to use a Payment Orchestration solution to consolidate payments for your flights, you’re probably considering whether to buy or build one.

It’s a conundrum that many other Heads of Payment have faced in the past. Unfortunately, there’s no ‘one-size-fits-all’ solution; both approaches are valid, and each are more or less applicable based on the background, strengths, and weaknesses of your brand itself.

This is a deeply pertinent issue for airlines, who rely heavily on online payments for a stable stream of revenue.

Indeed, a recent study from ResearchGate has shown that a whopping 67.70% of all airline bookings are now conducted entirely online.
Despite this reliance on online transactions, many potential ticket sales fail at the last hurdle.
Data provided by SaleCycle suggests that airline websites boast the highest abandonment rates in online travel. This rate stands at 87.87% – higher than the overall average of 79.17%, and the overall online travel abandonment rate of 81.31%.

Answering the question of ‘buying vs building’ requires a bit of introspection from those in charge of the airline’s payments. Business leaders at this level need to know what the pros and cons of each approach are, before they can make an informed decision about what approach is best for them

In this article, we’ll examine the advantages and disadvantages of each approach, including relevant case studies and a deep dive, to help CFOs decide which of the two potential solutions fits their business needs.

On Payment Orchestration

We’ve already covered this subject in great detail in an article you can find on our blog. In it, we define Payment Orchestration as the process of managing and optimising several payment methods, providers and channels through one centralised system.

Rather than relying on any number of hard-to-manage, disparate payment options, it means that payments are consolidated in one intuitive platform. This helps to simplify the payment processes, granting your merchants better visibility of their sales figures, while also boosting security and minimising the risk of potential fraud or theft.

Payment Orchestration also pulls double duty by improving customer satisfaction; diversifying payment options and creating a smoother checkout experience for consumers who might otherwise feel restricted by a lack of choice, or frustrated by an unwieldy payment experience.

What makes Payment Orchestration essential in modern times is the high expectations of online consumers; who have gotten used to having their many needs catered for when shopping in global marketplaces. Modern flyers expect a multitude of payment offerings, including credit and debit payments, e-wallets, and buy now pay later services.

McKinsey study
- These alternative forms of payment have become extremely popular in recent years, and this trend is only expected to intensify as time goes by. Indeed, according to a McKinsey study, the number of consumers who intend to use three or more digital wallets to pay for their online purchases in the coming years has increased dramatically, from just 18% in 2021 to 30% in 2022. Click here and read the full study

Despite this, it can still be challenging for CFOs who want to simplify increasingly-complex payment management systems. Indeed, according to a poll conducted by Mckinsey, approximately 74% of survey participants claimed that they wanted to simplify the management of their payment providers.

Payment Orchestration enables businesses to meet the payment expectations of online consumers by partnering up with Payment Service Providers (PSPs) to offer the right payment options to the right markets at the right time. In this case, Payment Orchestration acts as a middle layer between an airline’s checkout page and various payment providers. Because of this inherent agility, Payment Orchestration provides a more holistic experience through a centralised management tool – one which also optimises routing, authorises transactions, and maximises sales.

The above makes the prospect of owning a Payment Orchestration platform highly appealing to airlines wanting to increase their sales. But what is the best way for them to go about obtaining them?

The buy vs build dilemma:

So, should CFOs aim to licence a Payment Orchestration platform from a third-party, or let their airline create their own Payment Orchestration layer from scratch?

Determining which option is the best fit means taking a number of crucial business factors into account, including your airline’s budget, timeline, and the resources and talent it has to hand, as well as your overall organisational strategy. Each of these factors will affect which potential outcome is optimum for your specific business needs.

Licensing Payment Orchestration Platforms (the buying option) can be highly effective for Heads of Payments who are looking for a ready-made solution with minimum development time, and don’t have the necessary prior experience of managing complex compliance regulations. It’s for businesses that don’t think they can handle the hassle, not to mention the extra expenses, and want to leave development to the experts. And there’s nothing wrong with that at all.

Contrariwise, a business that has access to more money and better resources, and who has experience in this kind of development, might opt to take the figurative bull by the horns and build their own personal payment orchestration layer in-house. Although this will add extra pressure and burden them with a bigger workload, it will ultimately give the business extra control and allow them to customise their payment solution to meet the company’s needs.

Pros and cons of Buying Payment Orchestration Platforms

Pros of buying

Payment Orchestration Platforms offer vendors a much faster time-to-market. Buying a Payment Orchestration Platform outright delivers a pre-built solution to merchants. This, in turn, saves them from the rigours of a lengthy development time, which grants merchants the time and space they require to launch new payment options to their customers quickly

There’s also the fact that buying POPs allows airlines to ensure that they are on the cutting-edge of payment options. Buying a Payment Orchestration Platform keeps a brand on the forefront of the latest tech innovations thanks to their modern tech stack, which can aid airlines who want to stay up-to-date with the latest advancements and ensure that the software they’re reliant on isn’t going to become obsolete in the near future.

Buying a POP can also save your airline money in the long run, since it spares your business the onerous additional development costs and associated fees, and frees up resources in payment functions, as well as internal manpower within the business itself.

Finally, there’s also the fact that buying a POP helps airlines stay abreast of regulatory requirements to ensure that they automatically remain compliant. They also provide them with advanced security features to prevent fraud and potential cyberattacks.

Cons of buying

However, that’s not to say that buying is a fool-proof option by any means. There are a few associated drawbacks:

For one, a certain lack of customisability. While pre-built solutions offer vendors a relatively convenient form of POP implementation, it’s not as flexible or customisable as building a Payment Orchestration layer.

Relying on a pre-build platform means that the payment options provided won’t necessarily be the ones best suited to the target consumers of your business or the needs of the business itself. Thus, buying often means that unique payment processing requirements cannot always be met

Furthermore, although it’s true that buying Payment Orchestration Platforms can save a business money on development and resources, that’s not to say that this approach is always cheaper in the long run. POPs depend on licensing tech out, which invariably means there will be accompanying fees. The costs of using a third-party solution, therefore, can gradually add up over time and prove to be quite expensive. Buying also makes an airline depend on third-party payment providers and their technology, which could cause issues if there are any technical problems or downtime.

Finally, it’s important to remember that a lot of Payment Orchestrators are still in the early stages of their development. As a CFO, you’ll need to ensure you’re not paying through the nose for a platform that later turns out not to be fit for purpose.

Pros and cons of building a Payment Orchestration layer

Pros of building

However, there are advantages to building a Payment Orchestration layer from scratch too.

The first to mention is customisation. Choosing to build means that a Heads of Payment can work with developers to design a solution that meets their specific needs. This can prove to be very useful for airlines that have specific requirements for their payment options, or who just want to stand out from their competitors.

Secondly, building from scratch allows an airline to seamlessly integrate their payment layer with their existing business systems and processes. This can help save time, and can also assist the layer’s ongoing development and customisation.

Building an orchestration layer in-house also provides CFOs with greater control over the payment process, and also grants them the ability to make changes easily. It also means you aren’t reliant on third-parties to operate, which is one less thing to stress about.

Cons of building

That said, there are also some drawbacks to building from scratch.

The first, and potentially most prohibitive, is the sheer length of development time. Building an orchestration layer can take 2-3 years to develop, by which time competitors who have opted to simply buy one can often already have forged ahead with the latest tech and cutting-edge platforms.

Indeed, an airline is unlikely to have the necessary development experience to hand, since this is a different field entirely to that of software development and payment solutions, so opting to build one might not be the best idea.

Building a Payment Orchestration layer from scratch can also prove costly. It can require continual CAPEX investment, as well as vendors hiring large development teams who boast specialist expertise in payment methods and compliance.

CFOs should also bear in mind the inevitable ongoing maintenance and support they’ll need to provide to their in-house later. This can prove to be an additional burden to company IT teams, which can prove insurmountable.

Finally, there’s the added security and compliance risks involved. Building an orchestration layer increases the risk of errors and cyber breaches. Thus, airline IT teams will also need to stay on top of security protocols and regulatory requirements to ensure that cyberattacks don’t affect profits.

Which option is right for your business?

To determine which option is best for your airline, as a CFO, you’ll need to think carefully and realistically about your company’s technical capabilities, internal resources and existing funds. Do you have the resources, not to mention realistic expectations and the necessary experience, to pull it off while also grappling with a busy business and all the demands that the travel industry entails?

Buying an orchestration solution is the best choice for small-to-medium sized businesses with limited resources or technical expertise. It’s more cost-effective, allows a quicker time-to-market, has minimal risk, and provides ease of integration. Meanwhile, larger digital native businesses with extensive in-house capabilities and experience building similar platforms before might choose to build their own orchestration layer to allow for greater control of their payment processes and customise based on their individual business needs.

Case studies

Consider these prior cases of brands in and around the travel industry to see in what instances other travel companies have opted for buying vs building.

For example, the mobile-focused ticket platform Seat Geek bought a Payment Orchestration Solution from a third-party provider to access more elegant and streamlined payment methods for their customers. After buying from a third-party, Seat Greek was able to offer two-tap payment functionality for returning users.

The company’s CEO, Russel D’Souza, has since stated that choosing this method allowed the brand to avoid potential engineering issues, and remain compliant, while returning a 40% rate of returning users.

On the other hand, a major brand like Airbnb boasted the know-how, capacity, and budget to build their own in-house Payment Orchestration layer. The brand took the time to thoughtfully redesign their existing payment system to improve its maintainability, extensibility, performance, and resiliency. In time, AirBnb was able to launch a new payment orchestration system that is faster, easier to maintain, and can more easily support new products, features, and business needs.

How Cellpoint Digital can help you embrace Payment Orchestration

If you’re a CFO who is thinking of opting for a Payment Orchestration Platform, but doesn’t know how to get it off the ground, then Cellpoint Digital can help. Our POP simplifies and optimises end-to-end payment transactions, helping you to reduce costs, scale faster, expand globally, and craft a better customer experience.

We can provide several delivery options to meet every business’s specific needs, and extensive acquirer, PSP, and APM coverage with over 400 connections covering key payment methods and use cases. CellPoint provides robust checkout tools and best-in-class intelligent routing capabilities with advanced conversion and cost optimisation functionality. Cellpoint also boasts a proven track record of implementing Payment Orchestration for several international airlines, including Icelandair, Virgin Atlantic, Arajet, and many more. This means that they understand the unique challenges that airline merchants face when it comes to ticketing, reconciliation, and refunds.

So, get in touch here to start streamlining your payment process and take back valuable time and money to focus on your business.

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