The days of merchants relying on a single acquirer to handle their payments are a thing of the past. Today, merchants must work with multiple acquirers to optimize payments for cost, experience, and performance.
That’s where smart routing comes into the picture.
Smart routing allows merchants to dynamically route payments across different payment processors to maximize the chance of payment authorization.
Now, let's dive deeper into smart routing and explore its advantages for merchants.
Note: looking to set up smart routing right away? Reach out to one of our experts to learn more about how Primer can help you.
What is smart routing?
Smart routing allows merchants to route their payments dynamically across different payment processors. Through this approach, merchants can achieve several objectives, such as optimizing payment authorization rates and reducing transaction costs.
How does smart routing work?
When a customer pays at the checkout, the payment gateway sends a request to the merchant's payment processor. The merchant sets up the rules determining the payment processor receiving the request from the payment gateway.
Let’s look at a simple example to illustrate this point.
Say a merchant works with three different payment processors. Two of these are global processors; think the Stripes and Worldpays of this world. The other is a local processor in Greece. The merchant routes payments made by customers using cards issued in Greece through its Greek payment processor. It statistically delivers higher authorization rates for these transactions.
That’s a pretty simple example of payment routing. The power of smart routing comes in when that merchant starts overlaying one rule with another.
Let’s explain using the same scenario above, but say the transaction is worth €2,000. The transaction value is above the merchant's risk tolerance. Because of this, it's built a rule to route the authorization request to a global processor, offering better fraud prevention capabilities.
This shows how smart routing allows merchants to create a strategy that fits their business needs.
Cascading payments and their importance in smart routing
62% of customers, after experiencing a failed online transaction, never return to the website for another try. That’s why cascading payments, or fallbacks, matter.
Merchants who use a solution like Primer can implement a fallback mechanism. This safeguard automatically activates if the initial payment attempt is unsuccessful.
Let's continue using the previous example to illustrate this concept. If the initial payment authorization request fails, Primer will send a second request to a different payment processor. This could secure revenue that might have slipped away if this fallback mechanism hadn't been in place.
Benefits of smart routing payments
Using a smart routing strategy can deliver several benefits to merchants. Let's look at these in more detail.
Increase payment authorization rates
Smart routing improves payment authorization rates by routing each payment to the payment processor with the highest chance of success.
Deliver cost efficiency
Minimizing payment failure and realizing consistently high payment authorization rates can save merchants additional processing fees when retrying payments. Merchants can also use smart routing to build rules that route authorization requests to their most cost-effective payment processors.
Accelerate transaction times
Merchants can use smart routing to minimize latency by choosing the fastest processing routes. This is especially crucial for industries where rapid transaction processing is imperative.
Improve risk management
Global merchants are expected to lose over $362 billion to payments fraud between 2023 and 2028. Using smart routing, merchants can send risky or valuable payments to payment providers with strong fraud prevention measures.
Enhance the customer experience
An overly long or complicated checkout process can lead to cart abandonment. While failed transactions and false declines will see customers spend their money elsewhere. Smart routing reduces risks by making transactions fast and successful.
How to set up smart routing payments
Merchants looking to leverage smart routing typically have two options. They can internally build and manage the integrations with the different processors and conditioning logic. The adage was that this would allow merchants more control and meet their unique business needs.
This was incorrect and is incorrect today.
Building and maintaining connections with different payment processors is costly and complex. So is building the logic on top. Most merchants that go down this path often find themselves left with a solution that’s anything but smart.
Yes, they may be able to route payments. However, adjusting the rules in the backend conditions in line with changing market and business dynamics requires developer support and risk breakage.
That’s where platforms like Primer step in. Our solution helps merchants enjoy the advantages of smart routing and payment orchestration without hassle or expense. We do this by allowing merchants to integrate with all their different payment services through a single API. Users can then create customized payment processes using a drag-and-drop feature. They can also easily modify advanced rules with a single click.
But that’s just scratching the surface. As a Unified Payments Infrastructure, Primer gives merchants a vast array of tooling to optimize their payments and overall commerce flows.
Final thoughts
Smart routing isn’t just a tool. It’s a merchant's ticket to efficiency, performance, cost savings, and delivering superior customer experiences in today's fast-paced digital marketplace.
Reach out to one of our experts to learn more about Primer
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