The vital role of payment routing for business continuity in emergencies

The troubles of several large financial institutions in recent times have sent shockwaves through the financial industry, leaving many businesses scrambling to find alternative banking partners. These events also highlight the critical importance of robust emergency payment routing protocols in ensuring business continuity even during disruptions. As e-commerce continues to grow, more and more businesses are relying on digital payment systems, and having multiple payment providers to reduce dependency is crucial. In this article, we'll explore how a diversified payment strategy and effective payment routing can help merchants mitigate risks and ensure that payments are processed without interruption.

The risks of relying on a single payment provider

Having a single payment provider may seem convenient, but it also creates a single point of failure that can be very damaging to businesses in the event of a disruption. This applies not only to small but also to large financial institutions that can suddenly fail, leaving their clients scrambling to find alternative payment solutions in a rush. For businesses that heavily rely on digital payment rails, such disruptions can lead to significant financial losses and reputational damage. If a merchant relies on a single payment partner and that provider experiences technical issues or downtime, it could result in all transactions being declined, leaving merchants unable to process payments.

Implementing a diversified payment strategy

Diversifying payment partners requires investments, but it's one that will always pay off in the long run. E-commerce businesses should start by evaluating their current payment providers to understand their capabilities and potential risks. Additionally, they should consider the types of payment methods their customers use and which new payment methods are emerging in the market to rely on different types of payment rails like alternative payment methods and instant payments. 

To identify potential payment partners, businesses should start by researching payment providers that offer desired payment methods and required value-added services. It helps also to consider which providers have the most experience in the industries and geographies in which the company is operating. There are some general criteria that apply to all cases, like compliance, payment method coverage, and fees, and additionally, merchants should also consider criteria specific to their needs and business. 

Recent events also have highlighted that convenience and cost-efficiency shouldn't be the only factors considered when evaluating payment partners. Before selecting a payment partner, a comprehensive risk assessment should be performed, which includes the payment partner’s network stability, failover mechanisms, security measures, disaster recovery, and adherence to compliance standards according to industry regulations. To address this challenge, companies must implement payment routing as a key strategy for maintaining business continuity during emergencies.

Payment routing: a key strategy for maintaining business continuity in emergencies

For businesses, especially digital platforms catering to customers worldwide, seamless and hassle-free payment processing is essential. A highly effective solution to achieve this goal is through payment routing. 

Payment routing is a product feature that allows businesses to intelligently direct payments to the most appropriate partner or channel by applying predefined rules and considering factors such as processing fees, location, transaction value, risk factors, and more. As a result, payment efficiency and security are significantly enhanced, leading to increased acceptance rates and minimized fraud.

In addition to enhancing payment efficiency and security, payment routing provides a vital safety net for businesses in case of unexpected disruptions. For instance, if a primary payment partner encounters downtime due to technical issues or network problems, a payment routing system can automatically redirect transactions to an alternative partner. It is also possible to configure this manually if the businesses prefer human intervention and additional approvals before key decisions, such as where to route the transactions, are implemented. This adaptability enables e-commerce companies to safeguard their revenue streams and continue serving their customers.

How Payrails can help

If you want to reduce your dependency on a single payment partner, our team of experts is prepared to help. Payrails' payment operating system allows digital platforms to take advantage of working with multiple payment partners, ensuring cost-effective and continuous payment processing, even when your primary partner faces network or technical issues. This helps to significantly accelerate the time to introduce new payment providers without significant in-house investments each time while keeping full flexibility in choosing your payment partners. 

Contact us today, and let's work together to build your payment routing strategy and ensure that you have a reliable backup plan ready and implemented.