Episode 237 – Is Orchestration the New Normal In Payment Operations? A conversation with John Lunn, Gr4vy

Yvette Bohanan

April 24, 2024

POF Podcast

In Episode 231, Samantha Gordon and Simon Skinner discussed the orchestration framework they developed to help our clients decipher a somewhat overused term in the industry. It was a great discussion, and if you missed it, I recommend you give it a listen. We covered a lot of ground in that episode that sets up this conversation with John Lunn, CEO and Founder of Gr4vy.

While preparing for this podcast, John observed that “every merchant has an orchestration platform; they just don’t call it that.” That struck a chord as incredibly insightful. Merchants, at least those with the engineering resources to do so, have been adding software infrastructure to their operations to improve authorization rates, handle tokenization, route to different networks, and a host of other capabilities that simply do not come with the basic developer API toolkit. Those without engineering teams to help automate these capabilities are left to manual or ad hoc means to manage their operations. Either way, operational gaps often lead to lost revenues, increased costs, and sub-optimal customer experiences. Using the orchestration framework to guide our conversation, we discuss how orchestration is enabling merchants to do things differently—with more latitude and agency over their payments operations.

We invite you to delve into this episode, which shifts the conversation from “What is orchestration?” to “Why is orchestration so powerful?” It’s a valuable discussion you won’t want to miss.

 

Yvette Bohanan:

Welcome to Payments On Fire, a podcast from Glenbrook Partners about the payments industry, how it works, and trends in its evolution. Hello, I’m Yvette Bohanan, a partner at Glenbrook and your host for Payments on Fire. In episode 231, Samantha Gordon and Simon Skinner discussed the orchestration framework they developed to help our clients decipher a somewhat overused term in the industry. The framework identifies four components of payments orchestration. Infrastructure to support multiple payment service providers, a single API connection to the orchestration service, transaction optimization features, and smart routing. It was a great discussion, and if you missed it, I recommend you give it a listen. We covered a lot of ground in that episode. Today, Samantha and Simon are back to pick up on this topic. Samantha, Simon, welcome back to Payments on Fire.

Samantha Gordon:

Great to be here.

Simon Skinner:

Great to be back. Thanks for the invite.

Yvette Bohanan:

You’re always welcome, both of you. Joining us in this conversation is John Lunn, CEO and founder of Gr4vy, an orchestration provider focused on merchant empowerment. John, welcome to Payments on Fire. Thanks for joining us on this episode.

John Lunn:

Thank you for having me.

Yvette Bohanan:

Wonderful that we’re getting back together. This topic, it’s got a lot of angles and dimensions to it. The one that I really wanted to pick up on as we kick this conversation off, I recalled that when we were preparing for this episode you commented that every merchant has an orchestration platform. They just don’t call it that. What a great observation. How did you arrive at that insight in your career and in your journey towards where you are today founding Gr4vy?

John Lunn:

Yeah, so I’ve been doing payments since the dawn of mankind it feels like. So since 1997 I’ve been in online payments, firstly with Cybersource and then with PayPal. This was just by talking to merchants, and I think it’s borne out of slight frustration from my part. I was busy trying to get merchants to adopt PayPal and Venmo and all the other types of payments out there and hitting roadblocks and roadmaps and all that kind of stuff. And really just sat down and started asking questions like, “Why is this so hard? It really doesn’t need to be. Why are people finding it so difficult?”

I think it’s that, what struck me is the problem is that everybody’s doing this independently, so they don’t call it an orchestration team, but if you think back when you first start is so one person does an integration to a Stripe or a Braintree or one of those, and then six months later they’re adding PayPal and then they’re adding maybe a buy now pay later provider, and then they’re going international and everyone is doing that or was doing that by just adding more people to that team. And that’s some very, very large merchants with the 300 people in their payments teams. And this struck me as one thing, they’re all building the same thing, basically an orchestration team, and they’re all building it independently and they’re all building it with custom code. And I was like, surely we can do that. We can build the tool that helps them get that done quickly without needing to build it in-house and in custom fashion.

Samantha Gordon:

John, you bring up a really good point about everyone doing some of these activities. And as we’ve been researching this area and trying to crystallize a definition of payments orchestration for ourselves, this is something we kept stumbling upon and coming into. We found ourselves differentiating between, on the one hand the activities of orchestrating payments, optimizing transactions, switching between payment methods, coordinating between providers, and then the integrated abilities of what we’ve been referring to as capital O orchestration, the orchestration platform that brings it all together and calls it by the name orchestration.

John Lunn:

Yeah. And I think, look, over the last couple of years since ourselves and others have launched in this space, I think a lot of people have decided they’re orchestrators, which they aren’t in the traditional fashion. I think that sort of confused people across the business. I think we’re starting to zoom in on pure play payment orchestration or orchestration as a tool. I think under that sits a lot of other things like optimization is part of orchestration, but it really for me or for us, an orchestrator or an orchestration platform, which is what we call this, is a tool that empowers merchants to do this for themselves rather than someone who does it for them. And that’s our view of what an orchestrator should be.

Samantha Gordon:

Yeah, I think we share a similar view that there are so many players in the payments ecosystem. Merchants, PSPs, gateways that are doing some element of orchestration, but the difference is it’s the orchestration platforms that are bringing all of this together in one place for the merchant.

John Lunn:

And the important bit there is for the merchant, right? And we talk about empowerment a lot at Gr4vy, and we want to empower merchants to achieve the things they need to get done. I think throughout payments, the merchant is usually the last in the food chain as it were. So there’s a whole load of people taking bites of the cake as we go along, but the merchant’s the one who ultimately is paying for this and should be the one who can make the decision. So we talk about empowering merchants to act on their payment strategy and do it in real time without being held back by the capabilities of providers or needing custom engineering custom code to make this happen. And we believe the merchant should be the one making the choices and not being given a limited menu as it were.

Yvette Bohanan:

Why do you think that now at this point in time in the industry, merchant empowerment is starting to become in vogue? As you mentioned, the merchants have been on the bottom of the totem pole for ages, I think since the beginning of all of this, which is interesting. What’s changing that’s bringing this to the forefront and making orchestration so popular?

John Lunn:

I think a part of it is a lot of the myths have been broken, but I think also there’s just a hell of a lot going on in payments right now and there always has been, but it’s getting to a point where a lot of those bells and whistles, you can’t necessarily depend on one or a few providers to give you everything that you deserve as a merchant. A good example of this is the network tokenization. It’s been around, people’s prices have been put up, but a very small amount of merchants who have embraced it at the core because of the difficulties around rolling it out as a merchant without help from an orchestration platform or directly through a PSP. The thing that’s part of it is that we look at the list of things coming through to merchants this year alone. You’ve got things like Click to Pay, you’ve got the new version of 3D Secure, you’ve got perhaps Delegated Orth starting to be launched. All of these have a definite merchant benefit, perhaps won’t be rolled out as quickly as can benefit a merchant right now.

So I think what’s happened is the merchants have said, hang on a second, why am I not driving? And I think that has also been driven by the choices out there that are cheaper prices that are perhaps being offered by a number of different PSPs, trying to take chunks of the market. And it feels like little bit of a buyer’s market for merchants right now. If you’ve got the capacity to move quickly, then you can get a really good deal on payments and that’s driving orchestration heavily at the minute. And of course the global downturn, whatever we want to call it, recession or not, is definitely also driving people to look at efficiencies, whether that’s efficiencies on the providers they pick or efficiencies around the teams that are doing the work. It is definitely driving people to look not only at cost-cutting but also at cost saving.

Simon Skinner:

Yeah, I think in some of the research that we’ve been doing, many of those factors and dynamics would resonate. So that kind of increase in complexity, whether it is that tokenization and scheme activity, whether it is regulator activity, the range of alternative payment methods that are coming on stream that merchants are increasingly aware that they need to make available for their end customers. And then that second group around the need for, or at least the pressure for increased efficiency. So I think that current macroeconomic climate and the drive for ever-increasing efficiency is definitely causing some merchants of scale to say, well actually is there a better way of doing this? And is an orchestration platform actually the better way of doing it? It can enable things that I might have done in-house, but it can enable me to potentially do it in a more efficient way now and going forwards.

John Lunn:

A lot of I would say the RFPs, RFIs that you’re getting last year, people were out looking for a new PSP for example, but now what we’re seeing is they’re coming in two phases. Most of them that’s coming is like we need a new PSP and also would like to look at an orchestrator. So now, for us relatively new business, we’re seeing those come through at a huge cadence there were before. I think there’s been a merchant acceptance that this is something you should definitely look at and it’s becoming mainstream the more bigger a bigger clients start coming in, more big brand names start signing up to orchestration. It’s a bit like Twilio, like in payments, right? In telephony a few years ago you built horrific connections into voice systems and then along comes a company like Twilio that gives you a nice simple API and why would you do it the old way? I think that’s really starting to become the realization.

Simon Skinner:

Yeah, and do you see with those RFIs and RFPs, I feel like building up the scale of merchants that are interested. So maybe from historically being perhaps more in mid-market, low end of enterprise merchants and now moving up at that spectrum.

John Lunn:

Yeah, we’re seeing the big brand names now asking about orchestration. So I think our first year of being in business it was really tire kicking or people wanting to understand what orchestration was, and now people know they need orchestration and they are the bigger brand names that you would recognize.

Yvette Bohanan:

Makes sense. So we’ve touched on the what and the why. Can we dig a little bit into the how here? What is it and how is orchestration dealing with things? It’s sort of that nuts and bolts level of transaction processing and helping dev teams arguably in these organizations. You mentioned the two to 300 person payments groups. I lived that dream a few times in my past as well and they’re definitely huge organizations out there. And a lot of times they’re with retailers or enterprises saying, why do we need 300 developers in our engineering team focusing on payments? That’s not our core business. We’re just trying to get paid, simply. So what is it that’s allowing the dev teams to sort of get freed up? Is it removal of technical debt?

John Lunn:

A number of different things. Architectural debt is one of them and that’s why I went and started Gr4vy. One of the biggest impacts we’re seeing in payment teams is the butterfly flaps its wings in China and takes down payments, and literally to a point where these in-house custom built solutions, as they basically just evolved through time, you end up with spaghetti code and it’s pretty common in engineering to end up with trying to pull one string and see where it ends up. And I think people were discovering that honestly this was slowing the business down if everything you do is custom and frankly a lot of engineers, and one of the funny stories is one of our clients on computer gaming side as well, so games rather than gaming, when they implemented Gr4vy, a number of their engineers wrote us a thank you email saying “we joined this company to write computer games, not do payment systems. Thank you so much”. I think that’s part of their look.

Yvette Bohanan:

You should start a wall, John, you should start a wall of thank you letters from tech teams. That’s great.

John Lunn:

It is also part of it. And if you’re a developer, and I’m a former developer, so I guess I’m recovering developer, you should call it, you are very used to using tip tools to make your code go quicker. You’re very used to using third-party libraries, SDKs APIs, and it’s very common for you not to rewrite everything from scratch. So with Gr4vy, the way that we architecture and build, that’s the tools we give these development teams. They can do a lot of the stuff they would’ve had to build from scratch and move quicker and frankly not need to deal with all the upgrades and changes that happen.

And what a lot of people forget is you can’t grab a dev, get them to write a connection to a PSV and then send them off to do something else because there’s a good chance a month later there’ll be a change or something additional, and it goes on and on. And more connectors you add to it, the more that ends up you constantly maintaining, upgrading and keeping things running. And it’s not a simple case to do it once and hope because especially at the moment, it’s pretty much every couple of months something new comes in that you need to implement.

Yvette Bohanan:

I don’t think that people, when they start down the path of oh, we just need to implement, pick a company, any which one, in order to accept cards or alternative payment methods or whatever, I don’t think they really understand that down the road what that’s going to turn into and the plethora of reason codes and formats out there for this stuff that’s very-

John Lunn:

Yeah, every API is different. Every API does it in different way and part of our goal here is simplifying it but also trying to put a standard layer. If you’re going to do network tokens, it should work in a certain way. It shouldn’t work differently from discovery than it does from AMEX and Visa, and that shouldn’t be a complexity a merchant has to deal with.

Yvette Bohanan:

Right, absolutely.

Samantha Gordon:

John, you’ve described so many benefits for merchants and we agree we’re of the same perspective that used to the fullest there’s such a wide range of areas that orchestration can improve merchants lives, economics. From your perspective though out in the field anecdotally, where do you think merchants are actually deriving the most value, deriving the most return on investment? Is it the cost benefits internally? Is it optimizing processing costs, revenue uplift, improved auth rate performance? Is it being able to enter new markets more easily? What are you seeing in practice?

John Lunn:

We have all of those and before we even give a merchant a price, we’ll sit down and we’ll do an ROI analysis to show them where cost cuttings can come from, but also where cost savings can come from. We’ll do all of that. But honestly when I sit down, and we have very happy customers, and I sit down and talk to them about what they love, what they love is the freedom to get stuff done. And I know that sounds ridiculous, but most people in payments teams have spent many years frustrated that they can’t get anything done and they’ve probably got an arm list with 30 or 40 things to get done that have been there for eight years because every time they try and do something that is nice to have, they get something need to have that gets put in front of it.

So I think when we talk to our merchants, we sit down, it’s about speed to market. Whether it’s a new market, whether it’s a new payment type, we’re making changes to their business models or how they’re accepting payments, giving people the freedom to do that and test it and try it without years of engineering resource is what makes head of payments most happy.

Samantha Gordon:

What about leadership? We’ve talked a lot about what makes engineers happy, but when you’re pitching this to payments ops people or CFOs, leadership, what’s the problem they think they need to solve? Again, is it that minimizing CapEx spend to invest in a new region or a new channel? Is it OpEx savings? Is it revenue growth?

John Lunn:

Yeah, so we generally are selling to one of two persons that’s in a business, so a CFO. Very much everything you just mentioned is really bottom line, top line where their savings, et cetera. Also, one of the most common places a merchant will engage with us is when they’re reconsidering their acquiring contract or their PSV contract. At that point they’re like, I need to shop around. And a lot of the time the CFO is, “Look, I want to move from here to here but I can’t do it because of all this other stuff.” And that’s a great place for us to come in.

From when we’re selling into payments manager, it is basically I have a list of things to get done, I can’t get them done or I’ve just laid off 20% of my team, I can’t get even the stuff I had done before. And it’s really that conversation is look, give us your list of 30, 24 of those you put in Gr4vy will be done for you, so look at the other six. And it is that. It’s really a economic way to get a list of things that have to be done and some of these things that are needing to be done for regulatory reasons or some pressures coming or the price is being put up because they haven’t done it and that’s not a nice to have. That’s like you have to do it and if you haven’t got any engineers to do it or even the in-house knowledge to know what you need to be done, then you can end up in trouble.

Yvette Bohanan:

There’s a lot of emphasis obviously on removing complexity, driving operational efficiency and it’s largely around card processing activities, card transactions. Do you see orchestration empowering merchants in other ways beyond cards per se?

John Lunn:

Cards are the biggest, still 27% of transactions going through cards, but absolutely. One of the biggest things we hear that people love about our platform particularly is the ability to A-B test stuff. So you don’t know if you need something, but being able to put some of your transactions through one flow and other transactions through another flow, whether that’s enabling particular payment types with [inaudible 00:18:27] of businesses is hugely valuable. So with our platform for example, you can send through any set of metadata and customize the checkout for that consumer plus customer outflows in the background. And so say you are doing holiday rentals and the difference between what payment preference you would push a consumer towards, it’s really based on risk. So if it’s a month out, then maybe you do want to use debit cards or open banking or perhaps a cheaper, slower platform because there’s a lower risk. Whereas if the rental is for tomorrow, perhaps you do want to preference credit cards or something with fraud protection.

So I think having that choice, the ability to try different things, see what works from a consumer perspective but also works from a flow perspective is usually valuable. If it is an eight-month investment to do an experiment, you’re going to do a lot less experiments. If it’s a 10-minute configuration, some rules and setting up A-B test, then you’re much more able to experiment and benefit from a lot of the changes that are out there. So that’s a big part.

And tokens, of course tokenization. A lot of people find out if we ignore network tokens for now and just stick to standard tokenization, a lot of merchants find out way too late that they’ve sold their souls as it were to a particular provider and now they’re stuck. And we’ve seen over and over again when a merchant moves from PSPA to PSPB, the migration of PSPAs tokens to PSPB tokens, you can lose 60% of your customers. Never click on the renew button. They never come back. They don’t do their subscription and that’s hugely important. And we’ve seen some very, very large companies where the token provider’s gone down for example, and they’re offline, they can’t do anything about it. So being able to own your own tokenization set up and having it be agnostic is really, really valuable. Just call it just an insurance policy, right? But having something as big non agnostic is very, very valuable to merchants network tokenization, I could talk about this all day.

We have merchants having amazing auth rates with the use of network tokens, but they’ve had to learn over time about what works and what doesn’t work. And some of the delays you get when you first issue that network token for a first transaction, it’s painful, right? But if you get it right, you are getting auth rates in 10 basis points higher than everyone else. So it’s valuable but hard. And so a platform that allows you to try it, see what works for you in which market, really important, because if you make a decision based on the paperwork, you’re not going to get it right. If you make a decision based on your own data and your own environments, you can actually get some huge, huge benefit.

Yvette Bohanan:

And there’s tremendous, as you’re indicating, tremendous unevenness not only in the how each network has implemented and the rules around use and implementation and everything else, but the fact that not all of them have, here in the US we see that and, not all countries have it sort of nailed down with the issuers.

John Lunn:

And some have it with some of the issuers and not some of the other issuers.

Yvette Bohanan:

Issuers. Yeah, exactly.

John Lunn:

Unless you’ve got an orchestration platform, how are you going to work that out? You’re just going to have to hope. And I think what we built, a good example of this is what we’re doing with debit cards for example. So all the furor around debit cards and network tokenization, like what you do with a co-branded debit? That’s hard to do, right? One, you have to identify it’s a co-branded debit. Two, you then have to route it directly to a debit network without using a network token, which means you need a proper vault. Then if it doesn’t work for some reason, you need to pull it back, get the Visa MasterCard token and then send it through that network. That’s not something that a non-payment developer or someone with a team of payment experts could work out and get right. And I think an orchestration platform allows you to do that.

Yvette Bohanan:

Absolutely. Anything else that comes to mind that you’ve observed in terms of benefits?

John Lunn:

Data. Where data sets is becoming more and more common and I think maybe it’s a sad state of the world, but really data localization or residency is becoming much more important in payments. So India is probably the classic example here where payment data is not supposed to leave India if it’s for an Indian payment. Having a platform that allows you to keep your data resident, your local regulations or a platform that allows you to be flexible around that is getting more and more important. So China, India, Indonesia, we’re starting to see the Australian data protection laws were strong in Australia, it’s important in Europe and other countries are following suite.

So I think being able to still process payments in market without one, getting into problems with regulators, but two, keeping the speed-up transparency is all a part of it. And we are four times faster than a lot of PSPs. In somewhere like Australia because we can put the servers in the same data center as our merchant and data sets close to where they are, it’s what they were calling edgy a few years ago but is actually much more important in payments.

Yvette Bohanan:

It’s a great point, a great call out, and not something that people always talk about first when they’re talking about orchestration.

John Lunn:

Yeah.

Yvette Bohanan:

Because you usually gravitate towards network tokens for some reason, but that’s all good points.

John Lunn:

I think it’s just generally it’s the infrastructure outside of orchestration, it’s why we call ourselves a platform, not an orchestrator.

Simon Skinner:

So John, just coming back to one of the benefits you mentioned there around tokenization and that ability to be processor agnostic or kind of PSP agnostic. So benefit there of moving tie-ins and complexity of switching processor. And I guess similarly that multi-acquire or multi-PSP setup gives you a failover processing piece and adds to your resiliency as a merchant and some redundancy. However though, although maybe sort of the question and being a little bit devil’s advocate for a moment, we do hear from some merchants that if integrating with a single orchestration platform might create a equivalent or a bit maybe in a slightly different part in the payment processing chain, but a singular point of failure, isn’t it, as a kind of single provider. So does that create a bit of a barrier for adoption for some kind of merchants as they’re looking at that?

John Lunn:

Before we launched, we talked to a lot of large retailers and said, “Look, we build this as a SaaS essentially.” Software as a sale would use it and the larger they were the louder they screamed no, for exactly that reason. Like no way will we introduce a single point failure into our payment system. The way we’ve architected Gr4vy is we’re a cloud platform, so we look much more like an AWS or a Google cloud. So we spin up instances of Gr4vy for our clients wherever they need them and that can be one or many instances. So there’s not one Gr4vy, there’s thousands of Gr4vy’s.

So our merchants will implement an instance of Gr4vy as redundant as they are. So the America east, America west, that’s where the instances of Gr4vy sit. And that means if that instance of Gr4vy goes down, the one in the other part of America won’t go down. Good example of this, you have a British accent so you probably remember. A couple of years ago we had a heatwave in London and it took out the Google. I remember Google went down for a day.

Simon Skinner:

I do remember that.

John Lunn:

We remember any of our clients who had Google instances, we moved them within three minutes to a different part of the world and they’re up and running again. And that’s how we designed the platform. There is no single point of failure with Gr4vy because every merchant has their own single tenancy instances. We do multi-regional instances and we can scale horizontally and vertically, and it was directly to address that problem and I’m very glad we did it. It means we can work with a larger merchants than it would be a SaaS and we’re going to be restricted to I think smaller merchants.

Yvette Bohanan:

So payments is a two-sided system, just like we always talk about. In this case, it’s not point-blank obvious to the consumer or a business on the other side sitting in there and sort of working with a merchant that has put orchestration in place. It’s under the hood. But does it show up in terms of consumer benefits? If someone’s looking at the customer journey here and putting the customer first, are there clear benefits that you’ve seen come out of this when people have implemented it for their customer?

John Lunn:

The first thing is of course choice. So there’s stats all over the place and I’m a former PayPal, so it’s drilled into me from birth as it were. But it’s real, if you have the payment options that your consumer wants, they’re much more likely to check out. I think there’s also the removal of friction, which is very important. So I’ll give you an example. One of the reasons we implemented our own 3-D Secure service was because we realized that if you used the PSP’s 3-D Secure service, what could happen is a consumer would go through 3-D Secure and then for some reason the payment would fail. Then if you had a backup PSP in that model, the poor consumer would have to do 3-D Secure a second time, and you’d lose X amount of people per page and all the rest of it.

So we implemented 3-D Secure ourselves so that we could do it independently of the PSP so the consumer would have a better experience. I think another one of these is what we’ve done with MasterCard in Australia with Click to Pay, like going straight to the source, going directly into MasterCard and allowing consumers to have that sort of one-click checkout without it needing to be supported necessarily by the PSPs and a consumer essentially being able to use Click to Pay irrespective of how that payment’s going to run. So that’s kind of core to us.

Ultimately the merchants are trying to get that checkout conversion and that’s really important. So having choice, having lower declines and also causing as least pain as possible to the consumer is really important and I think an orchestration can help with that. But also being able to customize checkout for that consumer, for that product at that time, which is part of our service, also makes a different. You don’t want to present a consumer a thousand different checkout options if they’ve only ever used two for the last two years. Make sure those are up in front and maybe you do want to offer them something else, but really tailor it for the consumer. So often I’ve seen merchants with uni checkout or whatever you want to call it, offering buy now, pay later for a $4 item. I’m like, why would you do that? But it’s on the painstaking real estate and it’s distracting the consumer. So make it simple.

Samantha Gordon:

I think that’s so interesting, John. Because we tend to in payments world, think of card abandonment and checkout flows as this is a marketing, this is an acquisition growth checkout product, this is their problem, right? But presenting the right payment methods is part of that. And then we think of our problem is auth rates and insult rates, which is a technical term for a customer wants to give you their money and you’re going to be disappointed when they can and they’re going to be disappointed when they can’t.

And it’s been interesting recently to hear even risk platforms start to talk about we’re improving auth rates, we’re minimizing false declines, as opposed to we’re blocking all of your fraud. I think we’re all becoming so aware that of course there’s going to be good reasons for declining payments and stopping genuine fraudsters, but you really don’t want to interrupt that customer journey and create a bad experience, lose that sale, probably lose that customer. And chipping away at this is really the problem that when we talk about payment optimization and performance optimization, this is concretely what we’re talking about.

John Lunn:

And I think there’s a lot in there, right? There’s, there’s an argument where if a customer has shot with you consistently for the last five months with no problems, why are you even putting them through an anti-fraud product? Why are you even putting them through 3D Secure? So when I used to sit with clients and doing payments, they say, “I want reduce fraud to zero.” I’m like, “Absolutely, I can reduce fraud to zero, I’ll just switch off your payments.” No fraud. But it is always going to be balance between consumer experience and risk. And I think that’s unfortunately how we’ve ended up with higher interchanges for online payments than we should perhaps have. But I also think consumers are getting increasingly more keen on frictionless experiences and the likes of PayPal or [inaudible 00:31:39] will push people that way. I think as soon as you start introducing friction, people will give up and just go and shop on one of the big marketplace sites. So it is really important to have a smooth checkout flow.

Yvette Bohanan:

So one of the games we play in our workshops is what do they think? And we’ve done this a little bit here already. We’ve talked about the merchants, we’ve talked about the consumers, but we like to walk around the block of all the different stakeholder groups and discuss what they might think of something. So when you think about the networks, their processors at the banks, the banks themselves, the regulators, what are you hearing when you’re out there talking about orchestration with those constituents? Are they happy about this? Are they sad about this development? Is it a threat? Is it an existential threat? Is it a new long-lost friend or a newfound friend or what is it?

John Lunn:

From a networks side, we have a very strong relationship with MasterCard, as you’ve probably seen. MasterCard very early on realized, hey, this might be a way to get our products to market quickly is going through an orchestrator. So we can get an orchestrator that’s connected to all the PSPs, then maybe we roll out the product with the orchestrator, that will get it to consumers quicker than if we go by the PSPs. And that’s what we’ve done with Click to Pay in Australia, New Zealand and now spreading out through Asia. Because we are doing that, all independent of the PSP and we do network tokens, we can essentially help MasterCard get quicker to market. And I think that has followed up with some of the other card schemes now going, hang on a second, this is another way of getting our products to market and perhaps having a better consumer experience.

From a crisis PSP perspective, of course when we launched, the general comment was, “Why does anyone need orchestration? You can get everything you need from us.” But as it’s become more commonplace and the conversation I’ve had with most of them, if not all of the senior leaders, is like, “Look, we’re just doing exactly what your customers are already doing today. We’re just doing it more efficient way. So yes, is it easier for your customers to leave you? Maybe. But it’s also easier for you to win your competitor’s customers over. So we can have partnerships with everybody that we work with, like official partnerships. We are very independent. We don’t take referral bonuses from anyone. So we’ve come out straight to market. We’re saying I’m from Switzerland and we talk about being the Switzerland of payments here, even went offered by a payment processor or a PSP rev show or anything like that, we’ve said, “No, we’d rather you just give a better price to our merchants.” Because I think it’s important for an orchestrator to sit in that place. So that’s part of it.

And then interestingly now we’ve got a number of banks or processes that are starting to use the Gr4vy Suite in white label fashion to get their products to their merchants. And we’ve got a couple of PSPs are now going to be using the Gr4vy tools themselves to get their products to market. Someone like Wave in Australia, which are open banking provider, their API that their merchants implemented is our API co-branded with Wave. So I think that whole ecosystem has realized this might be a more efficient way to do things and we don’t sell only direct to merchants, we white label to shopping carts, payment processors, banks and PSPs themselves.

Simon Skinner:

Yeah, I think that’s broadening of parties that are using orchestration platforms to include PSPs or traditional bank acquirers is something that we’ve sort of witnessed as well in various conversations. And it almost kind of feels like we might see a blurring between what was a very clear traditional PSP role and a very clear orchestration platform role into more of a continuum I guess, in that space.

John Lunn:

Yeah, I think look, if you are perhaps a more traditional payment processor, PSP, you’ve been around a while or you’ve grown by acquisition, which a number have. There is a bit of spaghetti in the background there that you perhaps don’t want to share with your merchant. And I think adding an orchestration layer on the front, and as I said we’re happy to white label that essentially takes that complexity away from a merchant will help you compete with people that are a bit simpler.

Simon Skinner:

At the end of the day that enables those perhaps older, more established players with their spaghetti to offer a better service to their end merchants. So they might forego a little bit of acquiring revenue potentially, but at the benefit of a better merchant experience.

John Lunn:

I think that’s one thing that struck us earlier when we talked to merchants in the beginning and we asked, “How would you want to pay for a service like Gr4vy?” And really they said, “No more payment tax. Please don’t eat into our margins.” We don’t charge basis points, we don’t charge a percentage of the transaction and we don’t even charge a transaction fee in most cases because we view an orchestration as a platform, as a tool that sits in the middle. So our model looks much, again like a cloud platform. We look much more like a GCP or an AWS in how we build customers than we do the traditional interchange model.

Yvette Bohanan:

The points you’re raising about these different stakeholder groups… Oh, we didn’t mention regulators. You talk to any regulators, John? Directly or indirectly? Any points of view you can share there?

John Lunn:

I think very much that when we have sat down with some of the regulators and talked about what we do, the fact that we keep merchants data separate for that merchant, it gives them some level of comfort. We’re not adding another reachable layer in the middle. We keep our data very specific for that merchant, only accessible by them, not shared with other people, so that we can step up quickly. We also don’t touch the money. So every single one of the merchants that works with Gr4vy has their own contracts with PSPs, acquirers, et cetera. So the actual money isn’t flowing through us and essentially we’re operating as a tool or a piece of software in the middle. So it keeps us away from the problems or issues the regulators are trying to avoid.

Yvette Bohanan:

Right. So just strictly better infrastructure. Listening to you talk about all those stakeholders though made me think, and then reflecting on your earlier comment about the first thing people said was, Why do we need this? We already have one? Or nobody needs this.” When you have something that slips into the overall system and more than one stakeholder sees value or benefit in it, that’s sort of a testament to the whole concept having legs. I think that this is not a flash in the pan sort of orchestration was important in 2022 to 2025 and then it wasn’t anymore. I think we’re going to see this kind of sticking around.

John Lunn:

Yeah, I feel like it’s getting to a point where people don’t question why it should exist. They understand it should exist and it’s more to a point of should I keep building this myself or should I start bringing in a third party to help with the tools? And that’s the same in software and evolution of internet software over the last few years. It’s always been that it’s like build in-house or use a third party tool, and it usually starts slow with building in-house and eventually people realize it’s more efficient to use a third party tool.

Yvette Bohanan:

It’s just not merchant empowerment, it’s just general empowerment really is what it’s going to. But ironically from roots in the merchant side of things, which is not normal. It feels a little bit like all singing, all dancing, though too to some folks. Is there anything that you should not rely on orchestration to do?

John Lunn:

Maybe it’s my own personal feeling, but I like to learn from their mistakes of the past and I really don’t think an orchestrator should handle the money. A number of cases, of course investors and others have come to us and said, “Why don’t you get an acquiring license? Why don’t you start doing pre-transaction processing?” And my view of this is if we did do that, then we’ve just gone back to where we were before there was an orchestrator, right? Inside. And so I don’t think orchestrators should be handling money. I don’t think they should be sitting in the middle. I personally don’t think they should even be taking referral bonuses from PSPs, et cetera. I think orchestrators should be independent, should be a tool that is usable by merchant and it really should be on the merchant side. So that’s just my fundamental beliefs and why this should exist and how you keep it growing in neutral because otherwise we’re going to lose the trust of merchants and that ruins everything.

Samantha Gordon:

John, I’m curious to dig into that more. Especially as we talked earlier, a lot of PSPs and acquirers are starting to step into the orchestration space and doing a lot of orchestration activities. And you bring up an interesting point to paraphrase, that once the orchestration platform has a vested interest, whether it’s a referral bonus, whether it’s their own acquiring, it is putting the thumb on the scale for optimizing your decision making. Do you think it’s truly critical to in order to be an orchestration platform, you must stay out of the flow of funds?

John Lunn:

I think if you want to be a truly neutral orchestration platform on the side of merchants, I don’t see how you could do it otherwise. I think that what we’ve seen over time is even with growth of the PSPs, sometimes the decisions are being made on behalf of the PSP or other stakeholders and not necessarily the merchant. And I think that’s why we talk about empowering merchants and I’d want us to stay in that space where we’re empowering merchants and not the other way around.

Yvette Bohanan:

I like the way you put it when we were chatting before we did this recording here. You said if you’re building on interchange, you’re headed for trouble. I thought that was very succinct and precise in the way you said it.

John Lunn:

Interchange is going away, whether people like or not, it’s going to go away over time. And I think there’s a whole combination of different things happening, both from a regulation side but also open banking is still early and is growing and more and more merchants are starting to talk about trying it and trying different ways of doing it, and ultimately that and potentially buy now pay later and other things out there are starting to put pressure on the interchange model and ultimately it becomes a commodity. And if it becomes a commodity, if you’re a payments company, you need to be doing the stuff around interchange, not just purely interchange.

Yvette Bohanan:

Right. What other predictions do you have about orchestration and where things are headed here?

John Lunn:

My ideal prediction is I think everyone use orchestration at some stage in the next three or four years, whether it’s us or someone else. I think you’re not going to end up with one winner in the orchestration place. I think you’re going to end up with people like yourselves that specialize in larger merchants and platforms. You’re going to end up with others who perhaps have earlier stage merchants and you’re going to end up with some vertical orchestrators. I think things like travel and perhaps online gambling, gaming, they will need particular orchestration models that doesn’t make sense the likes of us to go into and it might make sense for other companies to concentrate on. So I think the orchestration in a few years time it will just be expected that you have an orchestration layer. You’ll also have a PSP, you’ll have a processor, you’ll have all the way down, but I think that’s where we’re going with orchestration.

I think the other side of it is what happens with delegated auth and what happens with the changes that are going here. I think fundamentally my view are going to change a lot in payments. I think it’s going to change the risk levels, it’s going to change liability. You look at subscriptions for example. If you look at what’s going on with these at the moment, if you accidentally sign up to dog toy of the month or whatever, it’s a massive pain in the arse to end your subscription and go through that whole process. But with some of this new stuff coming out, we’ll just essentially be able to go into your online bank account and have a look and just go click, click, click, click, clear. Now what does that do to the subscription model? Generally it changes everything because a lot of subscription companies have passive revenue.

Yvette Bohanan:

That’s right.

John Lunn:

And when that suddenly goes away, what happens to that? I understand in the old days why an online transaction would cost more than an in-store transaction because of risk, but I would argue with delegated doors that it done properly by metrics, online transactions are potentially even less risky than in-store payments. So why are we still paying that much more for an online payment? And that then changes the whole setup all the way through. If the liability shifts away from merchants, why do you need to be using anti-fraud companies for those types of transactions? They will always exist, but actually identity gets much more important. And really, as the payments evolve, as these things change, you’re going to need an orchestration platform because there’s no way in hell that a five-person dev team are going to keep up. It’s just not going to happen.

Yvette Bohanan:

That’s right. That is very true. It’s very true. I’ve seen a lot of teams that are far more than five devs quite stressed trying to do something, especially at a global level, which it’s sort of the interesting thing about all of this is, over the last 15 years when you and I were starting out in ’97 in different areas, but yes, and you look at how long it took back then for a company to go global? A merchant launching to go global. And now people are coming literally online, global, and that is wonderful for their customer acquisition and all of their go-to-market strategy and so forth. But from a payments perspective, with all this change and the different regulatory perspectives and paces in each country, that’s where I think it really starts to go exponential in terms of level of effort to do this.

John Lunn:

I’ve sent them out. I’ve spoken so many merchants in the past who have tried to launch in Europe with just cards and you’re like, “It just isn’t going to work.”

Yvette Bohanan:

First of all, when you talk payments, you don’t say Europe, you might say EU in some cases, but the proclivities of people do not necessarily follow a common-

John Lunn:

It’s not easy. The truth is it’s not.

Yvette Bohanan:

That’s right.

John Lunn:

Groups like yourselves and others who are helping spread the message, but honestly, amount of payment experts out there is quite limited. And especially if you’re a company that needs to expand quickly, it’s like finding the right talent, the right skills, and people actually know what’s going on and can help you get there is really hard. And then you need a team to do that work. So you can go out with a great strategy, but if you can’t execute on it, how’s that going to help you?

Yvette Bohanan:

That’s right. And I have to ask about AI and all of this because there’s so much business logic, if you will, or payments logic within an orchestration with the routing and the retry and the tokenization management and 3-D Secure, all the stuff you’ve been talking about. Where do you see AI fitting into this longer term?

John Lunn:

Well, first thing is I was working with AI and anti-fraud or payments 15 years ago. That is not a new thing when it comes to anti-fraud and payments, it has been around for a while. I think when we talk to our clients about AI based decision making, what we get back is I’m not quite ready to let an AI make decisions on behalf of me, but I would like to know what the AI would’ve done and why they would’ve done it. And I think while we roll some of the AI out this year, we’re doing a particular form of AI, which basically tells you how the AI gets to that decision and allows you as a merchant to tweak that left or right based on your preferences. Every merchant is going to be individual. Every choice is going to be depending on where you’re selling to, who you’re selling to, what you’re selling, how, et cetera.

So we’re building our AI very much on the point of like this is the best route for best auth rate. This is the best route for least cost, but you can tweak this and you can tune it based on how you want to behave to your customer. So exactly what we talked about before. An AI could make some really nasty decisions based on logic that’s not great for a consumer. And some merchants will care more about customer experience and some will care more about risk or fraud or cost. So having an AI that fits into what you want to do and how your business likes to run itself is going to take time and it’s going to have to be very customizable and it’s going to have to interact with the merchants, not just with the payment systems.

Samantha Gordon:

John, I just want to pull a thread on something interesting you said to me that, if we’re thinking about traditional machine learning, which is where risk AI started, hearing a merchant say, well, I want to make the decision, but then I want to know what AI would’ve decided. Are we essentially training ourselves on AI instead of the other way around?

John Lunn:

It’s always going to be the case with AI, right? I think most of the fear around AI is a little bit about loss of control, and we’re dealing with money here and people really care about their money. There’s a reason we have all the regulations and everything around it. It’s important to have some control on it. And so I think it’s going to be slowly, slowly when it comes to payments. Someone’s not going to release a magical AI that makes everything work amazingly tomorrow because just one size doesn’t fit.

Simon Skinner:

Yeah, I think that resonates with what we hear when we’re talking to merchants and retailers. The giving up of control definitely doesn’t feel comfortable to some or many. And so I think as we’re thinking about AI, whether it’s in a routing logic context or elsewhere, that adoption curve is always going to be quite lengthy for the AI driven decisioning to take the primary route rather than the secondary or advisory route.

John Lunn:

Yeah, I think the other thing that where we will start to see AI is more in the payment consulting world as it were. So there’s a lot of data out there, but very few merchants doing a lot with that data because it is very hard to consolidate it. Also, having a way to ask the right questions could be a part where I think you’ll start to see AI coming more and more, so that the ability to say, “Well, why are my Visa cards getting a lower auth rate in Brazil than they are in Argentina?” I think an AI could format that quite nicely and provide strict data through. So I think you’ll start to see AI in that case, it’s more sort of larger language models asking questions rather than trailing through loads and loads and loads of different reports.

Yvette Bohanan:

Makes a lot of sense. Well, this has been an absolutely delightful conversation. So John, thank you so much for joining us.

John Lunn:

Been a pleasure.

Yvette Bohanan:

And Samantha, Simon, you’re welcome back anytime to co-host with me. This is so much fun. You guys are always so prepared with your observations. I love it. And you’ve done a lot of work in this space. I think we’re going to continue to see a lot of developments here, especially as things mature. So it’s wonderful. And John, on behalf of all of the merchants out there who are listening today, best of luck to you in your ambitions for merchant empowerment.

John Lunn:

Thank you so much.

Yvette Bohanan:

Please carry on. To all of you listening, thanks for joining us, and until next time, keep up the good work. Bye for now.

If you enjoy Payments on Fire, someone else might too. So please feel free to share this podcast on your favorite social media outlet. Payments on Fire is a production of Glenbrook Partners. Glenbrook is a leading global consulting and education firm to the payments industry. Learn more and connect with us by visiting our website at glenbrook.com. All opinions expressed on our podcast are those of our hosts and guests. While companies featured or mentioned on our show may be clients of Glenbrook, Glenbrook receives no compensation for podcasts. No mention of any company or specific offering should be construed as an endorsement of that company’s products or services.

 

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