Untangling the payments ‘spaghetti systems’ in retail M&A with payment orchestration

The retail landscape is one that evolves on an almost daily basis as new brands are launched and established brands work to stay innovative, remain competitive, and keep a hold of their market share. A key element of ongoing evolution is through mergers and acquisitions (M&A), leaving stakeholders with an unsavory challenge on the menu – untangling the payments ‘spaghetti systems’ in retail M&A. 

Nearly every week, there is news of an acquisition within retail – whether it’s to expand a brand’s global footprint, add to a brand’s product range, bail out a struggling merchant that still has potential, or a strategic move to stamp out competition. 

Consulting behemoth, Bain & Co., this year published a report stating that it expects major retail players to “draw on record levels of cash amassed during the COVID-19 pandemic and take advantage of decades-low multiples” to pursue more M&A deals in 2023. Already this year, we’ve seen multiple household names announcing acquisitions across the world in various industries. This follows a busy period in late 2022 where we saw fast-growth companies like Gorillas, a groceries delivery startup, get snapped up by its competitor, Getir, in a deal that valued the new entity at roughly $10bn. 

The technology challenges of retail M&A for stakeholders

Of course, M&A is not without its challenges. Stakeholders are faced with the sometimes difficult task of aligning multiple company cultures and any necessary cutbacks or changes that must be made. On the back-end, they are faced with an entirely different set of challenges depending on the age and set-up of the company being acquired. 

This is further complicated when dealing with large parent companies acquiring multiple brands with multiple platforms powering them. In banking, this is often dubbed as ‘spaghetti systems’ whereby multiple M&As have led to numerous software environments that have been cobbled together over the years under one parent bank. On top of general business operations software, adding payments into the recipe can open up a whole new can of worms (or spaghetti…) for the parent company. 

While relatively small companies and start-ups can be an easier acquisition process from a technology perspective, the more established brands will have existing relationships and contracts with their chosen payment service providers (PSPs) and commerce platforms that can be tricky to unify. 

Take clothing giant Boohoo Group, for example, which over the past 5-6 years, has acquired multi-million dollar revenue-generating brands such as Debenhams, Pretty Little Thing, Miss Pap, and Dorothy Perkins, among others. Each of those companies will have been operating for years with its own chosen set of payment and risk providers, which Boohoo Group will then have to manage until each contract has been terminated. A problem the group will face with each new acquisition it makes. 

So, how can payment orchestration help brands unify on the payments front and untangle the ‘spaghetti systems’ post-acquisition? 

Data portability and tokenization – avoiding vendor lock-in

The security and management of sensitive card data remains a top priority for both businesses and consumers in the face of increasing incidents of data breaches and cyber-attacks. Each business should have implemented robust security measures to protect card data – typically through tokenization – but this often results in vendor lock-in with a merchant’s primary payment service provider (PSP). 

Storing card data with a PSP can severely limit the data portability of card data for a retailer, which is more of a significant headache during an M&A process, where a parent company now has multiple streams of PSP-tokenized card data that cannot be transferred from one service provider to another without any loss of functionality or security. This means the brands cannot easily switch between different PSPs without having to worry about the migration of sensitive card data which limits flexibility and means the parent company has less agility and control when it comes to its payment stack, workflows, and entire tokenization strategy. 

However, all is not lost. A number of payment orchestration providers can also give merchants access to an external vault. An external vault generates tokens that belong to the retailer and can be taken anywhere, anytime. These tokens can also be used in a vault provider’s system or externally with a service provider to ensure that portability and ownership coexist for optimal agility.

Keeping card data within an independent cloud vault also allows retailers to instantly process card data with any PSP without migration issues, as a cloud vault securely stores card data and helps guarantee PCI compliance. Retailers can also use this data to process payments with any PSP, routing card data on demand to a preferred processor based on cost, preference, location and a multitude of other factors.

For merchants that might not be ready for a full payment orchestration strategy, an external network tokenization vault is still an option for most businesses so they can take advantage of data portability in the meantime. 

To read more about PSP tokenization vs. network tokenization, the importance of data portability, and how to access a standalone Vault offering, check out this article

Deploy and test different payment methods immediately with a singular low-code integration

As mentioned, businesses going through M&A already have a significant number of challenges and unpicking to do, and may be tempted to not touch any systems for a while out of fear that tugging on one piece of spaghetti might bring the entire thing to pieces. However, payment orchestration does not mean businesses have to pull the proverbial shutters down to make mass updates and changes. 

Historically, if merchants want to deploy new payment methods or providers, they have to dedicate an entire team of payment engineers to code and test each change. This process might be complicated if each brand in the M&A process runs on different systems and platforms that might be unfamiliar to the existing teams, and even further complicated if a global aspect comes into play and the parent company is acquiring brands that have custom in various geographies with separate payment methods and local regulations. 

Payment orchestration is a modern-day equivalent to this that avoids the headache of technical debt and hiring huge teams of engineers. Payment orchestration is a layer that sits between a merchant and its partners in the payments ecosystem. It exists to help merchants to streamline, manage, and expand their partnerships with multiple gateways, processors, payment service providers, fraud/risk providers, and much more.

Merchants connect to a payment orchestration platform normally through an API integration, and, once connected, they have access to unlimited payment providers, payment methods, and anti-fraud providers worldwide. In some cases, merchants can leverage their existing e-commerce platform plugins, significantly simplifying the integration process.

By using a payment orchestration to access multiple payment providers, through one singular no/low-code integration, merchants can:

• Set up automatic failover and retries on the back-end so that if one PSP cannot process a transaction, another PSP automatically kicks in and the merchant does not lose the sale
• Avoid vendor lock-in with a centralized PCI DSS Level 1 certified vault, allowing merchants to securely collect and store card data and tokenize transactions while seamlessly migrating all data across multiple PSPs
• Get advanced visibility by using insights across all payment providers within the merchant’s orchestration ecosystem, so merchants can set up routing rules for the most efficient pricing
• Work with even more payment methods across the world – one integration with a payment orchestration platform will give you access to the payments ecosystem across multiple countries, with the ability to build more bespoke offerings if and when a merchant needs them
• Simplify payments management and reporting, consolidating all your payment reporting in one single place

To find out more about payment orchestration 101 and some of the frequently asked questions, check out this article breaking it down for merchants

Avoid having a single point-of-failure in your payments stack

As businesses going through mergers and acquisition seek to unify the experience on the front- and back-end, it’s important that there are no hiccups in the payment process that might negatively impact consumers – or indeed, revenue for the company and its brands. 

One key element all merchants should consider when auditing their payments stack – whether they’re sticking to PSP-only or moving towards a payment orchestration layer with either a platform partner or built in-house, is whether they will run into a single point-of-failure. 

While SaaS payment orchestration platforms (POP) may claim that having multiple payment service providers (PSPs) on the platform removes the risk of being a single point of failure, if the SaaS POP itself goes down, every single merchant loses access to payments, potentially resulting in a significant loss of revenue.

IaaS platforms, on the other hand, do not have a single point-of-failure. IaaS platforms have a highly reduced risk of downtime because it’s very unlikely any of the large cloud service providers, such as AWS and Google Cloud, will go down in multiple geographies at the same time. In fact, during the 2022 summer heatwave in the UK, Google Cloud experienced a local outage, and Gr4vy, an IaaS payment orchestration platform, was able to immediately move all merchants over to another region while remaining compliant with local data regulations, ensuring merchants did not lose a single transaction.

Interested in learning more about IaaS vs. SaaS in payment orchestration? Download our eGuide, ‘IaaS vs. SaaS: An e-commerce merchant’s guide to payment orchestration’, to discover which platform is best for your needs – including building a payment orchestration layer in-house

If you’re ready to get started, book a call with one of our payment experts to receive a bespoke consultation and find out why Gr4vy is trusted by Woolworths Group, Setplex, Mythical Games, Ding, and more. 

With a unique single-tenant, cloud-based infrastructure, Gr4vy makes scaling your business faster than ever through a powerful payments platform that allows you to deploy, manage, customize, and optimize your payments through one simple, universal integration. 

Built natively in the cloud, Gr4vy gives every merchant full control over the bespoke resilience, redundancy, and performance expected from a cloud service that integrates into their payment stack. To find out more about Gr4vy, get in touch with our team, or explore our platform.