Payment routing 101: definition, process, rules, and workflow

This is an ultimate guide to payment routing, covering everything from basics to expert tips on configuring your own routing scheme. Read it, share with colleagues, or bookmark it for later — this resource is carefully crafted and regularly updated for you.

What is payment routing?

Payment routing is a core smart payment processing function that determines the best path for each transaction in real time. Instead of sending payments to a single gateway, it evaluates multiple acquiring banks, payment processors, and service providers, then routes the payment to the one most likely to succeed.

This 'behind-the-scenes' logic uses predefined rules and dynamic data points such as card type, issuing bank, currency, transaction value, location, or historical provider performance. The goal is to increase the chances of approval while balancing cost, speed, and reliability.

For the customer, the intelligent payment routing process is invisible — they simply complete their purchase. For the business, however, it’s a powerful optimisation lever. By implementing smart routing, companies can:

The history and evolution of payment routing

In the early days of online payments, most merchants depended on a single acquiring bank or gateway. This setup left them exposed: when the acquirer had downtime, enforced strict risk rules, or lacked regional coverage, transactions failed. Cross-border payments were especially unreliable, and merchants had almost no ability to optimise outcomes.

As e-commerce grew, businesses started connecting to multiple PSPs and acquirers to build redundancy. But routing logic was still static and often hard-coded by developers, such as sending all Visa traffic to one provider and Mastercard to another. This added resilience but lacked agility. Updating rules required engineering time, and failures still meant lost revenue.

The breakthrough came with dynamic or intelligent payment routing. Instead of relying on fixed paths, routing engines began evaluating each transaction in real time, taking into account factors like issuer country, card brand, currency, transaction amount, risk score, and historical approval rates. This data-driven approach made it possible to send every transaction to the provider with the highest chance of success, improving acceptance rates and lowering costs.

Today, with AI and machine learning, routing engines can learn from billions of transactions. They can adapt to issuer behaviour, reroute instantly when a provider goes down, and balance between conversion uplift and cost efficiency. For industries with high payment volumes, like iGaming & betting, routing has evolved from a back-office function into a direct driver of profitability.

Types of payment routing

There are two primary ways businesses can route transactions: static and dynamic payment routing. Let's compare these options.

Bottom line: Static routing is a basic safety net, while dynamic routing is a revenue-optimising growth lever. For most businesses working with multiple providers, moving from static to dynamic routing is a must.

How does payment routing work?

The payment routing workflow decides which provider should process each transaction to maximise its chance of success. Instead of sending all payments through one fixed path, a routing engine analyses transaction details in real time and selects the optimal provider based on a set of rules and live conditions.

Here’s how the payment routing process unfolds:

Step 1. Forming the payment context

When a customer submits their payment, the system captures multiple data points:

• Payment method & card brand (Visa, Mastercard, local wallets)
• Issuing bank & country
• Transaction currency and value
• Transaction date and time
• Device, channel, and customer location
• Merchant- or product-specific metadata

This context acts as the foundation for routing decisions.

Step 2. Applying routing logic

The payment gateway routing engine then applies predetermined rules or algorithms to evaluate the best available path. For instance, route payment made with a European-issued Visa card to a local EU acquirer to avoid cross-border scrutiny, direct a high-value transaction to a provider with stronger fraud checks, or choose the lowest-cost processor for low-margin payments.

Step 3. Executing the transaction

Once the most suitable provider is selected, the transaction is routed to them for authorisation. The provider then passes it through the relevant card network or payment scheme to the issuing bank.

Step 4. Handling failures

If the first attempt fails, whether due to strict risk filters or technical issues, the system immediately attempts cascading. This means rerouting the transaction to a secondary provider, chosen either by predefined order or by live performance data. Smart retry strategies can recover up to 20-30% of initially declined payments.

Step 5. Continuous optimisation

Advanced setups don’t stop at fixed rules. They use historical payment routing data and real-time monitoring to refine decisions constantly, learning which providers perform best for specific card types, markets, or times of day. This turns transaction routing into a continuous cycle of analysis, decisioning, execution, and optimisation — all happening invisibly to the customer, who only sees a smooth checkout and a successful payment.

Rules, logic, and workflow in payment routing

Let’s take a closer look at how to route payments for your business.

Start by connecting all the merchant accounts you hold with different PSPs. With Corefy, this takes just a few clicks and entering your accounts’ credentials in the dashboard.

Then, define the payment routing logic that reflects your business priorities, whether that’s lowering processing costs, boosting approval rates, managing risk, or balancing traffic. With your goals in mind, you can build a routing scheme that turns them into actionable rules and workflows.

How to create a routing scheme

A routing scheme is a decision tree that defines which route a transaction takes. It consists of conditions, branches, and strategies that reflect your business logic. In short, it sets the rules for selecting routes based on the payment’s context.

At Corefy, you can build routing schemes either in a visual editor or a JSON editor, depending on your preference.

Every scheme starts with conditions — payment routing rules or sets of rules. A simple condition might look like: ‘Issuer country is the UK’. A more complex set of conditions could be: ‘Issuer country is the UK’ AND ‘Transaction amount is greater than £100’.

Each condition is made up of three elements:

1. Attribute — the data point used (e.g., issuer country, card brand, currency, metadata). Corefy’s smart payment routing solution supports 100+ attributes, which allows for extremely fine-tuned custom routing setups and opens up countless possibilities for optimisation.
2. Operator — the logic applied (e.g., is, greater than, contains).
3. Value — the exact parameter the rule checks against (e.g., the UK, £100).

Every condition has two branches: a positive one, triggered when the condition is met, and a negative one, triggered when the condition isn’t met. Each branch can lead either to another condition for further refinement, or directly to a strategy, which determines the actual payment route.

Payment routing strategies

Once a transaction reaches the end of a branch in your routing scheme, a strategy determines how the final payment route is chosen. Think of routing strategies as the ‘decision method’ that translates your business logic into action.

Here are the strategies Corefy offers:

• Blank (fail intentionally). No route is selected, and the transaction fails. This is useful for setting up dead-end branches in your scheme. For example, if you only accept traffic from the UK and want to block payments from other regions explicitly.
• Direct (fixed route). The transaction is always sent to one specific provider. Best when you have a trusted partner for a certain payment method or region.
• Priority (ranked choice). You set an order of preference across multiple payment routes. The system will always try the highest-priority route first and move to the next only if it’s unavailable. This ensures predictability while adding a safety net.
• Weight (controlled distribution). You define what percentage of transactions should go to each provider. For instance, 70% can flow through your lowest-cost PSP, while 30% goes to another to maintain redundancy.
• Random (even distribution). A random route is chosen from the available pool. This helps spread transactions evenly and is essentially a ‘weighted’ strategy with equal weights.

By combining these strategies with conditions and branches, you can design routing schemes that reflect your business goals, whether it’s maximising approval rates, cutting processing costs, testing new providers, or controlling risk exposure.

Payment routing allows you to process all your transactions in the most optimal way based on various parameters and conditions. Actually, some of our clients have carefully crafted payment routing schemes with hundreds of rules. And it’s not just nerding out. It’s how you achieve the most striking business results.

Denys Kyrychenko

Corefy Co-founder & CEO

Additional solutions for advanced payment routing

As you scale, routing logic often grows from a handful of basic rules into a sophisticated web of interdependent conditions. Managing that complexity efficiently requires more than simple rule-setting. That’s why we offer an advanced toolkit to help you maintain full control while automating the decisions that don’t need human input.

Apply modifiers for dynamic conditions

Modifiers let you fine-tune authentication and risk logic directly within your routing flow. For example:

• Require 3DS authentication for transactions from high-risk countries.
• Disable CVV checks for small, recurring payments to reduce friction.
• Adjust authentication dynamically based on transaction type, value, or user profile.

These micro-adjustments ensure every payment meets the right balance between security, cost-efficiency, and conversion.

Enable cascading for failover protection

Even with the most optimised routing logic, occasional provider timeouts or issuer declines are inevitable. Corefy’s cascading feature keeps your revenue safe by automatically retrying failed transactions with alternative providers according to your pre-set scheme. You define the order, conditions, and retry logic — the system handles the execution in milliseconds.

Use routing filters to simplify complexity

Routing filters bring structure to large, data-heavy routing setups. Instead of managing long lists of manual rules, you can create filters based on transaction attributes, such as country, currency, payment method, BIN range, or customer segment.

Once filters are in place, Corefy automatically channels each transaction through the right path. For instance, payments from European cards can be directed to local acquirers, while recurring subscriptions can be routed to PSPs with higher recurring approval rates. This approach not only declutters complex schemes but also enhances flexibility — you can update a filter once, and the change applies across all relevant routes.

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Benefits of payment routing

Global intelligent payment routing system helps merchants working in a multi-provider setup address four main challenges:

Drawbacks of intelligent payment routing

Payments routing is not a silver bullet. Implementing and managing it comes with real challenges that businesses should weigh carefully.

Case from our practice

If you are a high-risk business and your conversion rates are suspiciously low, check out this case our team solved recently.

To sum up

Payment routing is a strategic lever that directly impacts your revenue, approval rates, and customer experience. By applying data-driven logic instead of static rules, you can make every transaction count, reducing declines and processing costs while keeping operations stable across providers and regions.

However, building and maintaining intelligent routing on your own can be complex and time-consuming. That’s why many businesses rely on Corefy’s industry’s best payment routing engine. Our platform gives you the tools to design, test, and optimise routing schemes effortlessly, and our team supports you every step of the way. Together, we translate complex payment logic into measurable business outcomes.