Achieving optimal efficiency: combining payment routing and payment rails

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.

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What is 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.

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How payment routing works

When a customer initiates a transaction by selecting their preferred payment method, the payment routing system analyzes the transaction details to determine the most suitable route. This may involve routing the transaction through different acquiring banks or payment gateways to ensure successful processing. If a transaction is declined or fails, the payment routing system automatically retries the transaction through an alternative PSP/acquirer, increasing the likelihood of success. Payment routing also helps minimize chargeback fraud by allowing merchants to implement additional authentication measures, such as 3D Secure, when necessary.

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Benefits of payment routing for digital platforms

1. Improved cost-efficiency: Intelligent payment routing helps minimize transaction costs by selecting the most cost-effective route, allowing businesses to save up to 20% on processing fees.
2. Increased conversion rates: A well-optimized payment routing system can lead to faster transaction processing times, reducing cart abandonment and boosting conversion rates by up to 5% for online businesses.
3. Reduced dependency on a single payment provider: Payment routing reduces reliance on one payment provider by diversifying the transaction processing across multiple providers. This ensures that merchants can still process payments in the event of network or technical problems with their primary payment provider, maintaining business continuity and minimizing potential revenue loss. We have written an article about maintaining business continuity even during emergencies. Click here to read more.
4. Retry Failed Payment Attempts: Payment routing enables merchants to retry failed payment attempts through an alternative PSP/acquirer, increasing the likelihood of successful transactions and improving the overall customer experience.
5. Minimize Chargeback Fraud and Enhance Flexibility: Payment routing helps minimize exposure to chargeback fraud by allowing greater flexibility on the payment page. Merchants can decide when to require additional authentication measures, such as 3D Secure, based on transaction risk levels and customer behavior, further improving security and reducing fraud-related losses.

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