Orchestrating payments for merchant aggregators and platforms: use cases, benefits, and mitigating complexities

Friday 19 May 2023 11:40 CET | Editor: Raluca Ochiana | Interview

Randy Guard, Chief Marketing and Product Officer at Spreedly, got into the granular details of how merchant aggregators make the best use of payments orchestration in order to ensure flexibility, high authorisation rates, and retention.


Can you talk a little bit about the unique needs of payments within merchant aggregators/platforms? How do they differ from payments with a traditional Merchant of Record?

In order to properly identify these differences, it is often best to make sure one defines a merchant aggregator and narrow in on the types of merchant aggregators out there. That gives context into their unique needs as well as the value that they get from payment orchestration.

Merchant aggregators, sometimes called platforms or marketplaces, have two main types. First are those entities that are either vertical – industry-specific software platforms – that aggregate sub-merchants. They bring together hundreds, if not thousands, of sub-merchants operating in the same industry.

A good example is Fonteva, a large platform merchant aggregator. They have professional associations that bring all of their members together and their payments are processed through Spreedly’s payments orchestration platform. Fonteva supports a specific industry vertical, where they bring all of their merchants together and provide services around association management. 

The second type are those aggregators that are horizontal. From a horizontal standpoint, we are dealing with software platforms. They handle billing and ecommerce services that span across multiple industries. Great examples there are ecommerce providers like Volusion or Chargebee. Thousands of merchants use their services and they, in turn, leverage Spreedly for payment orchestration. 

In addition to the two models we discussed, merchant aggregators could also be operating as software platforms connecting Merchants of Record. Some of them operate as the Merchant of Record themselves, and we treat them like a large retailer, manufacturer, or an ecommerce provider – they're not really the merchant aggregator, but a Merchant of Record. Some of these platforms are also hybrid. One of our customers, SeatGeek operates in both modes: they'll bring sub-merchants together, but they also take ownership of some of the payments themselves. For this discussion, we will focus on those merchant aggregators that do not serve as Merchant of Record and can be both vertical and horizontal.

When it comes to the needs of the merchant aggregator, they really fall into two categories: orchestration and optimisation. Orchestration, for the merchant aggregator, is very focused on payments enablement. They want to understand how to get 20,000 restaurants connected to their platform, load their menu, load their location, and allow people to pay online, for instance. The enablement for that merchant, sub-merchant, or restaurant to connect to whatever gateway they want, that is all supported by payment orchestration. Orchestration is revenue enablement and connectivity to payment services.

Optimisation on the other hand is a set of processes applied at transaction time that allows the merchant aggregator (and their merchant customer) to increase their chances of a successful outcome. For example, customers who bypass a 15-day trial to pay immediately could be routed to a dedicated third-party fraud service for greater scrutiny. Prospective customers who run a full 15-day trial and pay at the last moment, can be routed via a smoother path, as that behavior is most closely associated with a legitimate customer. This can help improve outcomes and reduce friction for the customer. 

Unique to platforms is the need to grow and attract merchant customers – and then in many cases, serve those merchant’s customers. How does a flexible payments stack help with landing new merchant customers?

Approximately half of our customer base consists of merchant aggregators. There are hundreds of thousands of sub-merchants processing their transactions through our merchant aggregator customers. In this broader picture, having the right services available becomes pivotal. 

One important aspect in ensuring transaction success is the connectivity to the PSPs. For example, in Latin America, there may be four different PSPs across several countries that work best in those markets. In that case, we provide connectivity to all of them. If a business starts in Columbia and, as they grow, , they expand to Brazil, they are able to leveraging the breadth of Spreedly's network, so they can onboard new merchants without having to build more integrations. We know that for our platform customers speed to onboarding is significant. By building once and having access to a wide network of providers, this time to value is significantly reduced and gives them the opportunity to enter new markets quickly.

The other component related to the value of a flexible payments stack is tied to value. For any merchant aggregator, by adding thousands of sub-merchants – restaurants, digital goods providers, or professional associations – on a monthly basis, we decrease the cost of development because they don't have to do anything special for each one. We already have those integrations. They don't have to add Apple Pay specifically for the most recent 10 merchants, as we have that alternative payment method. And the same goes for the likes of PIX and iDEAL.

Another benefit is the ability for amerchant aggregator to pass through payment capabilities to their sub-merchants. Account Updater is a perfect example. Some platforms have merchant customers who want to vault their customers’ card so that when clients go back and reorder food for the 15th time, their payment method can be easily used.

The platform can offer this as a service to its merchants, i.e. the ability to keep those payment methods always up to date within the network. They can also offer them network tokenization that says Visa and Mastercard will provide an updated digital token. If the physical card in the PAN is updated, Spreedly is connected into the networks, retrieves the new network token or refreshes it as needed. These tokens are evergreen and we make sure the correct one is passed to each client and that the card is always refreshed and not expired when a merchant initiates a transaction.

So we’ve been talking about attracting new merchant customers but what about retention? How does orchestration help with adding value and making customers more 'sticky' for a merchant aggregator?

When merchant aggregators partner with Spreedly, they often have two use cases in mind. For example, they may want to connect through a US PSP and a Brazilian PSP, and we can accommodate that. Additionally, as their business grows, they may seek to expand and offer value-added services. By leveraging orchestration instead of building these services themselves, they can reliably scale their business, expand into new regions like Western Europe, the UK, and Ireland, and enhance their offerings. 

This flexible approach allows clients to start with us, pay as they go, and gradually transition their volume to Spreedly. For instance, they may begin by putting some of their volume on Spreedly and later expand to new geographies or verticals. In the US, we recently added Venmo for a large strategic merchant aggregator of ours because their clients are restaurants, and a lot of people in the US going out to eat want to pay with Venmo just like they would want to pay through a direct bank transfer in Europe and Asia. Our availability, geographic coverage, and value-added services contribute to the stickiness and retention of merchant aggregators' customers.

For Spreedly’s merchant aggregator customers, how are payments teams addressing improving authorisation rates and lowering costs and what results are they seeing?

One approach to improving success rates is through the automatic retry capability we have built. If a transaction encounters a temporary system glitch or an unavailable gateway, Spreedly can automatically retry the transaction on an alternative gateway. Another example is the implementation of routing and rules, allowing merchants to optimize costs. Depending on factors such as card brands or local payment methods, merchants may have better cost structures with certain payment service providers (PSPs). Spreedly helps by setting up rules to channel specific volumes through preferred gateways. 

One example that comes to mind is Ribbon, a smart platform for trade shows and showrooms. In a recent interview with Spreedly, Sanjay Garje, Co-Founder & CTO of Ribbon explained that hey've structured their orchestration solution so that, as soon as it's in place, it functions with real-time APIs. In the advent of entering a new geography, a new country with new payments gateways, Spreedly allows Ribbon to offer scalability and plug and play integrity. 'If you're going to be designing any meaningful SaaS platform. If you're going to be a SaaS provider, you have to be pretty much omnipresent and omnipotent, which we cannot happen without partners, which is why we have to partner with the right platforms and design this in a way that it really scales well,’ Sanjay explained in the interview.

Furthermore, we observe that merchant aggregators are receptive to offering alternative payment methods and local payment methods, including direct bank transfers, due to their reduced costs and consumer preferences. By providing access to these payment methods, merchant aggregators not only lower costs but also cater to specific customer preferences, resulting in a win-win situation for all parties involved.

Lastly, I can summarise the ideas mentioned above in three key takeaways. Firstly, with Spreedly, we abstract the complexity of payment processes, enabling merchant aggregators to swiftly onboard new merchants. Secondly, we offer flexibility in connectivity, allowing merchant aggregators to connect merchants to a wide array of payment services. Finally, in addition to gateway connectivity, we provide value-added services that merchant aggregators can offer either as standard features or as additional monetisation opportunities. These three points apply across all the various types of merchant aggregators we discussed and work with.

About Randy Guard

Randy is an enterprise SaaS veteran with over three decades leading teams in marketing, product and development. Prior to joining Spreedly, Randy was Executive Vice President and Chief Marketing Officer for SAS, a global provider of analytics and artificial intelligence.



About Spreedly

Spreedly's Payments Orchestration platform enables and optimizes digital transactions with the world’s most complete payment services marketplace. Hundreds of customers worldwide secure card data in Spreedly’s PCI-compliant vault and use tokenized card data to enable and optimize over USD 45 billion of annual transaction volumes with any payment service. 

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Keywords: payments orchestration, merchants, payments aggregator, marketplace, ecommerce
Categories: Payments & Commerce
Companies: Spreedly
Countries: World
This article is part of category

Payments & Commerce


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