Simplifying E-Commerce With SOA for Payments

Service-oriented architecture (SOA) is a technology that simplifies integration. SOA has received a lot of attention in technology circles over the last few years with both avid supporters and skeptics illuminating the pros and cons of implementing SOA. In many cases, the skeptics pointed out the lack of specific business cases for implementation. While that assertion is arguably true in many cases, payment integration represents an excellent business case.

Why is this important? Because there are more and more locations (i.e., channels) that require electronic payments which exponentially increase the cost associated with integrating more and more services across more and more acceptance points. A great example is e-commerce. In July, comScore released a report that details that the “total U.S. e-commerce spending climbed 19 percent to (US)$47.5 billion” during the second quarter of this year. In addition, it states: “Based on first-half growth rates, total U.S. online consumer spending is on track to reach $200 billion in 2007.”

Business customers today demand flexibility and choice in commerce services. Unfortunately, adding new payment services or accepting new payment types is difficult and costly. Also, for those customers who do manage to offer multiple payment options, transactions are not consistently implemented resulting in the lack of payments-related data in back-office accounting, financial management and business workflow.

This directly impacts business productivity and limits visibility to and control of cash flow. Such inefficiencies also highlight the persistence of a legacy payment industry infrastructure that does not allow the flexibility to add new services to new transaction origination points.

SOA provides a solution that can reduce integration expense by 10 times and, as such, reduce barriers to providing consistent customer interaction across channels. In turn, these advancements benefit payment service providers by increasing transaction volume and provide other value-added utility for the user and business.

What Is SOA?

SOA is a technical architecture methodology that allows business functionality to be exposed as a service. Services — whether existing or new — then interact, or interconnect, to the benefit of the business and the consumer. SOA has been typically associated with connecting back-end systems inside of the enterprise. Companies in multiple sectors have been searching for a flexible approach to better support connecting and sharing data with their customers.

SOA offers a solution. Applications that leverage the services exposed via SOA enjoy greater flexibility than those that are developed using traditional point-to-point connections.

Leveraging this SOA capability becomes particularly interesting when used for providing service accessibility across multiple participants in the payment value chain. SOA enables the consumer of the service to build new, rich experiences leveraging a common interface that connects to multiple services, while maintaining a similar look and feel across both services and service providers. Ultimately, this represents an evolution of existing architecture and business functions through simple Web service interfaces.

A SOA Just for Commerce?

As commerce begins to close the gap from traditional dial interfaces to the existing world of broadband access and e-commerce Web sites, associated technology largely did not adapt to the new software-centric paradigm. This legacy infrastructure represents one of the more complex interactions in modern software development.

There have been numerous attempts and businesses developed to address this gap with varying degrees of success to date. None of these companies have provided a holistic solution.

For example, consider the transactions that are prevalent in just online payments:

  • Credit/debit
  • Gift
  • Loyalty programs
  • ACH (e-check)
  • Online tenders (PayPal, Google Checkout, Amazon Flexible Payment Service, etc.)

Each of these tenders has a unique workflow, unique security requirements, and a unique interface. While there are some providers (e.g. PayPal) that provide support for more than one tender, ensuring that the e-commerce business has the widest range of available tender quickly becomes a daunting task even before considering the businesses other channels. Not only is it necessary to learn multiple interfaces and methods of integration, it is also necessary to certify multiple times. This issue alone can be solved with SOA adoption while protecting the unique value and integrity of each individual service.

However, the complexity of commerce does not end with just payment acceptance. Each additional provider — or additional service — comes with its own method and format of providing reporting data. If a business is not transacting, it will not remain in business for long. However, if a business is not able to properly identify where they are transacting, and who those customers are from a customer relationship management (CRM) perspective, they limit their ability to grow cost-effectively.

The ability to simply integrate reporting, through a single interface, adds immediate value to the business consumer. Moreover, non-sensitive metadata from the SOA can provide valuable insight when combined with business analytics and CRM engines which can reduce customer acquisition costs and increase share of customer.

How Does This Impact the Industry?

SOA adoption has benefits for all members of the commerce value chain, including service providers, software firms and merchants.

For the payment service provider, there is an inherent difficulty in selling their service. Competition within the industry has become focused simply on pricing. However, through adoption of a SOA methodology for exposing their service, the provider is able to drive competitive differentiation by partnering to help create, or support, value-added solutions. In addition, by participation in the SOA, they are able to bundle additional services to their customer base. This multi-service delivery has substantive and immediate value to their customer base.

Simplification of the integration of payment services into software provides immediate impact on the cost of doing business for a software company. The “write once, use many” approach of a SOA enables the software company to focus on its core business and not solely on commerce service integration. As a result, the features and functionality of their application are able to be tailored to the company’s target market. Development spend becomes focused on core application capabilities rather than just integration activities.

The ability to have consistent payment tenders and experiences across all sales channels satisfies the goal of increasing customer spend. In addition, a SOA allows the merchant to utilize integrated reporting and settlement across sales channels. At this point, the SOA is simply the “technology enabler” rather than the prime focus of the merchant experience.

New Customer Experiences

Ultimately, the proper SOA platform partner can complement service providers by enabling them to reduce the friction associated with payment enablement by virtue of which increases transaction volume, enables the rapid provisioning of new services and value-added capabilities like integrated reporting. SOA is not designed to replace existing processes, but to augment and extend where necessary. This drives both dynamic availability of services and greater choice in service offering to customers.

SOA adoption provides the opportunity for new customer experiences and the creation of new tenders. These experiences and tenders will drive the future of e-commerce for years to come.

Alfred ‘Chip’ Kahn IV is founder and CEO of IP Commerce, an open commerce network provider that delivers on-demand access to commerce services. The company connects financial institutions and service providers, software developers, and the commerce solutions created through these relationships to established distribution channels.

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