What are merchant services and where does orchestration fit?

• Merchant services cover several different parts of accepting payments, including acquiring, processing, gateways, merchant accounts and payment terminals. Adding providers can mean more integrations to maintain, fragmented reporting and greater complexity across the payments setup.
• Adding another acquirer in-store can involve terminal integration, encryption and key requirements, and certification, making it a different job from adding an online connection.
• Payment orchestration connects providers through the same layer, giving businesses greater visibility and more control over how payments move between them.
• Orchestration becomes particularly useful as businesses work across multiple acquirers, markets and channels, where managing each provider as a separate setup becomes harder.

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A business starts with a straightforward payments setup. One provider handles the acquiring, the gateway connects the payments, and the terminals are ready to take transactions.

Then the business grows. It expands into another market and starts supporting more ways for customers to pay. Perhaps another provider offers better coverage in a particular region, or a different acquirer offers more attractive rates, and gradually the payments setup looks very different from the one the business started with.

Merchant services, by definition, are the products, infrastructure and provider relationships a business relies on to accept and manage customer payments, whether they happen online or in person. The merchant services industry covers banks, ISOs, processors, POS vendors and payment providers, with some providers offering several of these services as part of the same setup.

The main parts of merchant services include:

When merchant services are offered through a bank, the bank becomes the merchant’s route into some or all of the services needed to accept payments. Depending on the bank, it might provide the acquiring and merchant account itself, while other parts of the payment stack are provided through partners.

Many merchant service providers are large acquirers or processors that bundle several services together. A single provider might handle the acquiring relationship, processing, gateway and merchant account all under one contract. 

One of the main benefits of merchant services is that a business can accept payments without having to build all of this infrastructure itself.

Merchant acquiring services are what allow a business to accept card payments. The acquirer processes the merchant’s card transactions through the card networks and settles the funds into its account. It also takes on some of the risk, such as chargebacks, if something goes wrong.

Before a business can start taking card payments, the acquirer needs to approve it and agree the terms, including transaction fees, when the money is settled and how certain risks are handled. For a closer look at how that relationship works, read our merchant vs acquirer guide.

The acquirer is crucial to accepting card payments, but it’s only one part of the wider payments stack. How do all of those parts work together when a customer makes a payment?

The easiest way to understand it is to follow a typical card-present payment:

1. A customer taps their card on the terminal.
2. The payment data moves from the terminal to the acquirer’s processor, sometimes via a gateway depending on how the merchant’s setup is built.
3. The authorization request reaches the acquirer, which sends it through the card network.
4. The card network passes it to the issuing bank.
5. The issuing bank approves or declines the transaction, and the response travels back through the stack to the terminal.
6. The customer gets an answer in seconds, but the money doesn’t reach the merchant that quickly. The transaction still needs to go through clearing and settlement - which often takes one to two business days before the merchant receives the funds. 

That’s a lot of moving parts for a transaction that appears to take a couple of seconds. And when something goes wrong, where it happens determines which part of the merchant services stack is involved.

A merchant services bill brings together several different costs, rather than one single fee. These include:

• Interchange - the fee paid to the cardholder’s issuing bank.
• Scheme fees - fees charged by the card network.
• Provider or acquirer margin - the amount the provider charges for its services.
• Additional service fees - separate charges for things like terminal hardware, gateway access and chargeback handling, depending on the provider and the agreement.

Interchange and scheme fees are set by the card networks (and capped by regulation in some markets, including the UK and EU), but the provider or acquirer sets its own margin - making this the part of the cost that varies between providers and can be negotiated.

Once a business starts working with multiple providers, managing those services as part of the same payments stack becomes more complex.

That can create problems in a few areas:

• Fragmented reporting - performance and costs are split across different dashboards, with no single view of online and in-store payments.
• Fragmented risk controls - different providers can handle fraud and authentication differently across the same stack.
• Different contracts - each provider has its own terms, pricing and renewal dates.
• Separate integrations - each connection needs to be built and maintained independently.
• Reconciliation - settlements from different providers need to be matched and reconciled.
• Limited control - payment routing is often determined by individual providers rather than business rules.
• Difficult provider changes - replacing one provider can mean another technical integration project.

As more systems and providers are added, information can become fragmented across the payments stack, making it harder to get a consistent view of what’s happening. We explore this in more detail in our whitepaper: The truth about your fragmented payment data.

Adding an acquirer online usually comes down to the payment integration. Add the connection, route transactions through it, and the technical work largely sits behind the checkout.

In-store, the payment terminal is part of that connection. The stack and device need to support the acquirer and meet its encryption and key requirements, while the integration may also need to pass certification before it can take payments.

For a physical terminal estate, that can mean:

• Terminal integration that may need EMV Level 3 certification to work with each acquirer
• Encryption and key requirements that can vary between acquirers and payment setups
• Domestic scheme requirements in some markets, such as Germany’s Girocard, with their own approval requirements
• All of this at scale across every device already out in the world 

For a merchant with thousands of terminals in the field, adding an acquirer means getting those devices ready to use it too. That’s a very different job from adding another connection to an online checkout. It’s also one reason the terminal estate can make changing acquirers harder than it first appears.

Payment orchestration connects the different providers in a merchant’s payments estate and gives the business one place to manage those connections, without treating each provider as its own isolated stack.

With payment orchestration, a business can connect multiple providers and decide how payments move between them. That includes:

• Routing across providers - based on cost, performance or geography
• Failover and retries - where scheme rules and decline reasons allow
• Greater visibility - a clearer view across providers and channels
• Easier provider integrations - connect new providers through the same orchestration layer
• Less dependency on any single provider - more room to change as the business does

When the terminal estate runs into the thousands, orchestration also changes how acquirers are added. Instead of integrating each acquirer with every terminal, the terminals connect to the orchestration layer and new acquirers are added through it. That makes adding or changing an acquirer across the estate a much smaller job.

The business keeps the benefits of its existing merchant services, while orchestration gives it more control over how those services work together.

Orchestration isn’t necessary for every merchant. If a business operates in one market with one acquirer and a relatively simple payments stack, its existing merchant services may already give it everything it needs.

It becomes useful once a business, or a PSP, ISO or bank supporting many merchants, is working across multiple acquirers, markets, channels and terminals.

At that point, orchestration gives the business one layer to manage those providers, so they can decide how payments are routed without rebuilding their stack each time.

That’s where Aevi comes in. As the only independent in-person payment orchestrator, our platform connects acquirers, terminals and payment infrastructure through one layer, giving businesses more control over how their payments work as they grow.

If you want to connect more providers without adding more complexity to your payments setup, talk to Aevi today.