Payment routing 101: the essentials you must know
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Payment routing 101: the essentials you must know

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If you work with a single payment service provider, every decline, glitch, or downtime on their side will result in your losses. That’s why it’s reasonable to work with multiple providers, and this is where you need to route your payments in the wiser way possible.

This article will explain the concept of payment routing, the reasons and best practices for routing, and how to take the pain out of it.

What is payment routing?

Payment routing is an essential payment processing feature for businesses working with multiple payment providers. It allows sending each transaction to the optimal payment gateway based on selected parameters.

With payment routing, a business can reach its processing goals: transaction costs optimisation, acceptance rates increase, provider downtimes protection, or payment load distribution.

The evolution of payment routing

The process of payment routing has a dual essence. For a customer, it’s completely seamless, with a transaction swiftly winding its way to successful completion. Meanwhile, under the hood, the complex system of connections between issuing & acquiring banks, payment systems and service providers synergises, making it all work like a Swiss watch.

Historically, most PSPs connected to a single regional acquiring bank, sometimes requiring merchants to find their own merchant account. It resulted in slow processing and many declines, thus low efficiency of traditional payment routing.

The emergence of smart or intelligent payment routing fixed all these issues by identifying the most efficient route between all the available banks. Routing became a true gem of the payment processing, making it possible for each transaction to go directly to the bank that will most likely accept and complete it.

This way, millions of merchants and shoppers worldwide can have their transactions processed through the path of least resistance.

How to route transactions

A business can route its transactions in a desirable way by creating static routing schemesStatic payment routing implies sending transactions to payment providers through manually configured routes that are fixed and unresponsive to any occurrences. If your pre-defined route becomes unavailable, you can’t process transactions and therefore lose sales.

In its turn, dynamic routing allows adapting to changes and selecting the most efficient way to ensure each transaction’s successful completion. Setting up various dynamic routing rules paves the way for continuity of your operations, leading to an increase in approval rates. For instance, our smart processing engine can select the best route based on multiple parameters, such as card issuer/type/brand, auth mode (CVV/3DS), geolocation, store, currency, amount, date & time, metadata, etc.

Why is payment routing worth a shot?

Payment routing helps merchants working in a multi-provider setup address three main challenges:

  • Increase success rates. By routing each transaction to the gateway offering the highest authorisation rates for such type of transactions, you can significantly increase your acceptance rates. Routing engines also allow merchants to implement retry strategies for “soft declined” transactions, which restore otherwise lost sales.
  • Reduce transaction cost. By leveraging multiple PSPs, you can send each transaction to the provider that offers the best price. The ability to find the lowest-cost way for each transaction can save you up to 30% in payment fees.
  • Maintain payment process redundancy. Integrating a few different payment gateways would help you improve customer experience and ensure operational continuity no matter what with the help of routing and cascading.

Drawbacks of payment routing

While the potential benefits of payment routing are indeed great, there are also some severe drawbacks worth considering.

Payment routing increases the complexity of all payment-related processes, as you have to deal with multiple PSPs and their specificities, from fees they charge to their format of data settling and reporting. Instead of a quick win, you can find yourself in the payment management and reconciliation nightmare, putting way more efforts towards handling your transactions than you expected.

With this in mind, try looking for a payment orchestration platform that will help you handle not mere routing but the whole process of working with multiple payment providers. For example, Corefy helps businesses manage the entire payment and payout lifecycle.

Route your transactions hassle-freely with Corefy

Corefy’s smart routing engine maximises payment performance and enables the highest success rates by optimising all incoming and outgoing transactions in real-time. With this powerful tool on board, you can quickly implement and alter various flow strategies.

To make routing a piece of cake for you, we offer:

  • An intuitive graphical interface, allowing you to edit routing schemes easily, without any coding.
  • A single-window system for processing both payments and payouts, regardless of methods, flows, and currencies.
  • The ability to create as many various routing schemes as you wish for greater flexibility. You can revise them to define the most efficient ones.
  • A powerful toolkit of accompanying features designed to boost your revenue.

Get in touch with us to book a live demo, try out our routing capabilities in action, and have all your questions answered by our payment experts.

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