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Intelligent Payment Routing: Comprehensive Guide

In today’s digitalized world, accepting payments in various currencies on a website is a standard expectation for every merchant. However, the true battleground for payment conversion and client satisfaction lies in seamless transaction processing, as a smooth checkout experience motivates customers to return for future purchases. To achieve frictionless payment flows, merchants leverage advanced payment technologies, with intelligent routing emerging as a pivotal component.

Intelligent Payment Routing: Comprehensive Guide

Check out this comprehensive article to explore intelligent payment routing technology, its main benefits, an operating principle, and effective strategies for harnessing its full potential to optimize your business operations.

What is Intelligent Payment Routing (IPR)?

To provide a comprehensive understanding of intelligent routing, let’s explore its function in transaction processing. When a customer opts to make a purchase on a merchant’s website, they select the preferred currency and payment method from the available options and make a payment. Here’s when technology takes over. The payment gateway, responsible for facilitating online transactions, then transmits the customer’s payment details for verification and subsequently forwards the transaction for processing to the bank or payment provider. Intelligent routing technology (if implemented) comes into action at this point.

If your system lacks intelligent routing, all transactions are routed to a single payment provider, exposing customers to risks of transaction failure in case of downtime. It also entails high fees for specific transaction types, such as international ones.

In contrast, intelligent payment routing, abbreviated as IPR, operates in systems with multiple payment providers. It is a technology configured to direct each transaction to the most suitable bank or payment provider, enhancing the likelihood of its successful processing.

How Intelligent Payment Routing Works

Intelligent routing serves as an internal engine that analyzes transaction parameters, such as transaction type and amount, currency, payment method, geolocation of billing address, provider reliability, etc. The technology automatically selects the optimal payment provider based on the criteria predefined by the user.

Modern financial technology providers allow users to set the routing path for different transaction types based on specific criteria, such as:

  1. Customer’s payment method
  2. Lowest processing fee
  3. Currency
  4. Transaction amount
  5. Bank Identification Number (BIN)
  6. Geolocation of billing address and others

These parameters allow users to define customized routing paths for different transaction types. For example, users can establish separate routing paths for local and international transactions by directing domestic transactions to local acquirers and global transactions to international acquirers. This strategy enables users to save on processing costs.

Aside from choosing the most suitable payment provider based on predefined parameters, intelligent payment routing dynamically evaluates real-time circumstances. The technology considers factors like provider downtime, processing delays, and exceeding predefined transaction limits to respond to provider performance dynamically. This way, routing technology determines which provider is most likely to process the transaction successfully on the most favorable terms for the client.

Benefits of using Intelligent Payment Routing for Business

Intelligent routing technology offers several benefits, including:

Multi-acquirer support

Global intelligent payment routing technology enables the system to integrate and work with multiple acquirers, specializing in handling specific payment methods and catering to particular industries. It allows users to adapt to changing market conditions and facilitates strategic business decisions by easily onboarding new acquirers or adjusting routing configurations.

Enhanced reliability

By distributing transactions among multiple payment providers, intelligent payment routing mitigates the risks associated with downtime or delays from a single provider. If one payment provider experiences issues, the routing engine detects them and seamlessly sends the transaction for processing to another provider with stable performance instead.

Optimized transaction success rates

Considering transaction parameters and real-time conditions, intelligent routing enables potentially failed transactions to succeed. The technology considers not only the provider’s downtime and processing issues but also its limitations in processing certain transaction types, such as from blocked countries or high-risk industries. Relying on this data, the routing engine does not send such a transaction for processing to providers that impose limitations on them in the first place, directing it to another payment provider instead.

Reduced processing fees

Merchants incur Interchange+ and Interchange++ fees for processing transactions. The amount varies based on card level, card type, issuer, issuer’s country, and other factors. By strategically selecting cost-effective options for specific transaction scenarios and routing transactions to providers with favorable rates, users can save a lot on processing fees.

Global reach

The ability to connect multiple banks and payment providers expands global reach, allowing you to connect numerous local acquirers in the targeted regions. International intelligent payment routing ensures that transactions from various locations are directed to acquirers who can provide the best service at a cost-efficient price and comply with local regulations.

Satisfactory customer experience

By directing transactions to the payment providers with the highest probability of successful processing, intelligent routing ensures a seamless checkout experience, fostering customer satisfaction. A hassle-free checkout encourages customers to return for future purchases, contributing to long-term customer loyalty.

Challenges and Solutions in Implementing Intelligent Payment Routing

If you are considering intelligent routing technology for your business, there are several common approaches to consider. The first option involves building your own payment system incorporating this technology from the ground up. While this approach offers the greatest degree of customization and flexibility, it is resource-intensive and time-consuming, requiring an investment of hundreds of thousands of dollars and approximately a year of development to create a system with intelligent routing from scratch.

In case you already have an established payment system that lacks global intelligent payment routing, you may consider updating it with this technology. However, it can be challenging, as not all systems are designed to support modern payment features due to outdated infrastructure and limited flexibility. Even for those capable of intelligent routing implementation, significant modifications to the system will be necessary, demanding considerable resources from both you and your team.

Alternatively, if you are looking for a more cost-effective solution with quick time-to-market, you can utilize pre-built white-label payment software. It is a system equipped with advanced technologies, including smart routing and many others, and multiple integrations with banks and payment providers worldwide. This state-of-the-art software, crafted by industry experts, can be leveraged as your own.

White-label payment systems are designed for rebranding under your brand identity and are easily configurable for your business needs. By opting for a white-label system, you can instantly access international intelligent payment routing and other up-to-date technologies without extensive time and financial investments in development, as the vendor assumes responsibility for these aspects.

Global Intelligent Payment Routing with Akurateco

Akurateco  is a reputable white-label payment software provider that delivers advanced fintech solutions to payment service providers, financial institutions, and merchants worldwide. Its system incorporates multiple cutting-edge payment technologies, with intelligent payment routing being among the most innovative of them, offering various routing parameters to identify the best path for each transaction. Plus, the company provides over 330 integrated global and local banks and payment providers, available via one integration to Akurateco’s platform. Check out more about Akurateco’s intelligent routing here.

In 2023, Intelligent Payment Routing by Akurateco secured second place in Product Hunt’s esteemed Product of The Day and Product of The Weekend awards:

Akurateco’s Intelligent Payment Routing Earns Second Place in Product Hunt Awards

Frequently Asked Questions

How does intelligent payment routing contribute to improving transaction revenue for businesses?

This technology can significantly enhance transaction revenue by directing transactions to payment providers most likely to process them successfully, eliminating false declines. Businesses adopting intelligent payment routing may improve their approval ratio by up to 20%.

What are the key challenges businesses may encounter when implementing intelligent payment routing?

When developing routing technology on their own, some businesses find themselves lacking the expertise and experience to build it from scratch. Additionally, it involves substantial financial investment, time commitment, and the allocation of resources within the team.

What types of intelligent routing are commonly employed?

Commonly employed types of payment routing include routing based on the user’s geolocation, transaction type, cost-effective processing rates, load-balancing, providers’ performance, and others.

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