Fintech & Ecommerce

Smart payment routing: essentials & how-to

Let’s find out what smart payment routing is (also known as intelligent routing)

Smart payment routing

Smart payment routing: essentials & how-to. Source:

The online payments world has been evolving really fast during recent years. Indeed, local payment service (PS) companies are becoming more and more commonly used and new regulations (especially the most recent PSD2) do not make the task easy when it comes to accepting payments online with great efficiency.

We have come to a point where today, online retailers have a large panel of choices when choosing PS providers and the PS they want to work with.

Online payments and principles of their work

The old setup

When setting up their payment infrastructure, online retailers usually want to start accepting payments quite fast without having to worry about building complex infrastructure. Thus, most of the time entrepreneurs integrate a single PS company in order to start accepting payments straight away. In most cases, the usual setup is then composed of a single PS provider working with a single acquirer.

Smart routing

Working with a single and global PS provider is great to start accepting payments quickly. Source:

The limits of this setup

Working with a single and global PS provider is great to start accepting payments quickly. It has a few benefits as all the transactions are in the same format, reconciliation remains simple and it is technically easy to maintain. However, payment in local and emerging countries can sometimes be harder to develop. Some countries or specific markets (such as Latin America countries or Asia) feel it necessary to have local PS providers in order to achieve adequate payment performance. This setup is also exposed to technical downtimes from the PS companies’ side.

Why payments fail

There are lots of reasons why payments can fail, but we can split them into three main categories:

  • Tech reasons
  • Financial reasons
  • Risk assessment reasons

Economical reasons are generally the easiest to understand. In most cases, the card limits have been reached or the cardholder account doesn’t have enough money to authorise the transaction. On the other hand, tech and risk assessment reasons are much more complicated. Indeed, transactions can fail because of a technical downtime from one of the key entities involved in a transaction, but it can also be because of a bad acquirer/issuing bank connection or even fraudulent and risk assessment reasons.

payment routing

Intelligent payment routing consists of working with several PSPs. Source:

Overall, it is not always easy to spot the reason a specific transaction has failed, but actions can be taken in order to lower their impact and frequency.

Why retailers should dig into payment routing

Nowadays, more and more payment services are talking about payment performance and payment routing. While building flexible payment architecture can seem hard and complex, efficiently routing online payments can help a lot regarding failed transactions. Basically, retailers want to start working with several PS firms in order to avoid technical downtimes, work with local companies and multiple acquirers, or even try new PS providers with different fraud scoring algorithms to increase their authorisation rates.

How to do intelligent payment routing

Intelligent payment routing consists of working with several PS providers in order to be able to use the most relevant one for a single transaction. All of this is made for live transactions and with it being fully transparent to the buyer.

It’s important to understand which transaction parameters retailers can play with to choose which PS provider to use or to optimise a transaction for a specific PS provider. It will help considerably to take full advantage of intelligent payment routing.

Parameters retailers can play with

There are obviously some parameters that nobody can optimise, such as the country in which the card has been issued or even the bank that has issued the card with which the buyer is trying to pay. Furthermore, there are also some parameters issued by merchants which can’t be changed, such as the transaction amount or currency (except using some specific solution providers or playing with several merchant accounts with different currencies). So, what is important with those parameters is that they can be used in order to determine which PS provider is the most relevant to handle a specific transaction.


Having a local PS firm with a local merchant account in emerging countries will help a lot. Source:

Once a transaction has been fully analysed a merchant is now in a position to play with the different parameters, and these can be changed without having the buyer interact with the payment page again. Thus, it helps to choose the PS company, the merchant account, or even the acquirer that should be used to handle the transaction. In some cases, for instance, having a local PS firm with a local merchant account in emerging countries will help a lot, increasing payment performance.

Additional routing possibilities

Once a merchant is able to determine which PS provider should be used and with what parameters for a specific transaction, there are still a few options that can be really helpful when routing payments in order to increase payment performance.

One of the major benefits of working with several providers is the ability to use cross PS provider retries for failing transactions. Indeed, instead of just determining which PS company will be the most relevant for a specific transaction, doing intelligent payment routing is more than that. When dealing with multiple PS firms, one of the major advantages is the possibility to do cascading.

Also, using intelligent payment routing strategies allows merchants to split their transactions to different merchant accounts depending on some parameters like the transaction currency or its risk level.

The bottom line

So, doing intelligent payment routing allows online sellers to increase their global authorisation rate through cascading and smart retries, lower payment fees by determining the best PS provider to handle a specific transaction straight away and improve their user experience by decreasing payment failures and user manual retries.


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