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How payments routing can boost payment success

James Hayward
Content Marketing Lead

In the world of payments, the name of the game is all about finding that sweet spot: Maximizing payment success while keeping costs low and fraud at bay. It's a tough game to play. The board is constantly changing and evolving—what works as a winning strategy today might not hold up tomorrow.

Yet payment leaders have an ace up their sleeve: payment routing. By effectively routing payments across the different players in the payments game, merchants can boost payment authorization rates and increase their overall payment performance.

In this blog, we'll explore why payment routing is essential to boost approval rates and give your business the best chance of success in the payments game.

What is payments routing?

Payment routing is like mapping out the perfect journey for your payment from start to finish. When a customer initiates a transaction, payment routing steps in to figure out the best and safest path for that payment to follow; think of it as a GPS for payments.

Finding this optimal route is more complex than picking the shortest distance on a map. It's more like solving a puzzle. Merchants must consider many factors, like the payment methods used, where the transaction is happening, its worth, and what's being purchased.

Why do payments fail?

There are many reasons why payments fail. Let's break down these reasons into three categories: technical, financial, and risk-related.

Technical reasons for payment failure

Picture this: a complex web of parties involved in every transaction, from the payment gateway to the acquirer, card scheme, issuing banks, and even specialized fraud prevention providers. It's like a well-orchestrated dance, but sometimes, someone misses a step. A technical glitch might rear its head—maybe one of these parties may be temporarily down, or they didn't pass on the data correctly. When technology falters, a merchant's transaction success rates will falter also.

Financial reasons for payment failure

The most common scenario is when the customer doesn't have enough funds. But it can be more complicated. They may have hit their transaction limit or maxed out their credit card. Insufficient funds or exceeding credit limits account for 44% of card declines.

Risk reasons for payment failure

Payments can also hit a roadblock due to suspicions of foul play. Throughout the payment process, various alarms can go off. The merchant might use a specialized fraud prevention tool that raises a red flag. The acquirer will have its anti-fraud measures in place. The issuing bank may also decline the transaction due to suspicion of fraud. After all, they often bear the responsibility if a transaction turns out to be fraudulent.

See how Primer helps merchants prevent payment fraud.

Using payment routing to increase approvals

How a merchant routes a payment directly impacts their payment success. By selecting the most suitable processing network, considering factors like card type, transaction amount, and location, routing can increase the likelihood of approval by directing transactions to networks that are likely to accept them.

The importance of data in payments routing

Data is the lifeblood of an intelligent payment routing strategy. It's not just important; it's critical. Without data, merchants are essentially navigating in the dark, playing a guessing game when choosing the best route for their payments.

And it's a problem. Many merchants have limited access to their payment data, especially across various payment systems. And when they get their hands on it, it's often a mishmash of different formats. They must invest significant time and effort to create a coherent picture of their payment performance.

That's why more and more businesses are turning to a Unified Payments Infrastructure like Primer. As a single layer that connects a merchant's entire payments ecosystem, we have access to the data merchants need. And we've made it readily available with our Observability platform, which gives merchants a single source of truth and a 360 view across their payment performance.  

With these insights, merchants can now make informed decisions based on data. They can strategically and dynamically route transactions to maximize the chances of approval.

AI-powered smart routing: the next step in payments evolution

There have been types of payment routing over the past two decades. The latest is smart routing, where merchants can use a platform like Primer to easily build complex payment orchestration workflows and conditioning logic to route payments to meet their overall business goals.

And we're starting to enter a new era: smart routing powered by AI.

Picture payments flowing in real-time through the path statistically considered the most likely to ensure success. These decisions will come from a vast data pool built from millions of transactions worldwide.

The potential of this technology is enormous. Merchants can expect an immediate surge in authorization rates, translating into a significant boost in revenue. But it's not just businesses that stand to gain; customers will reap benefits, too. Fewer false declines mean less frustration during transactions, backed by statistics showing satisfied customers are more likely to return and increase their lifetime value.

Let's also consider the financial implications. Fewer payment retries can substantially trim a merchant's overall cost of processing payments, not to mention the time and effort saved on troubleshooting failed transactions. It's a win-win scenario for all parties involved.

Final thoughts

AI-powered smart routing is a game-changer. With a simple flip of a switch, merchants can unlock substantial financial and operational improvements.

Get in touch to learn more.


What's the difference between traditional payment routing and smart routing?

Static payment routing relies on fixed rules and manual interventions, whereas smart routing is dynamic, adaptive, and, when enriched with AI, uses real-time data to optimize transaction outcomes. Dynamic payment routing is better equipped to handle the complexities of modern payment processing and can lead to higher approval rates, cost savings, and improved customer experiences.

Is there a significant difference in payment routing for domestic vs. international transactions?

Payment routing for domestic transactions tends to be more straightforward, while international transactions require careful consideration of various factors, including currency, regulations, and risk mitigation. These distinctions in routing are essential for ensuring the smooth, cost-effective, and secure flow of funds across borders.

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