If you are an e-commerce platform, then knowing about offering an efficient and smooth payment routing journey is crucial. In this article, we will be discussing the different types of payment routing and how these help in offering the right customer experience. So, keep reading the article till the end to decode everything about payment routing.
What Exactly is Payment Routing?
If you are wondering about understanding the way payment routing works and its different types, then let me tell you the process at first. Payment routing is essentially the process of sending an order’s payment information right from the payment gateway to the appropriate payment processor. This is what a payment processing stage looks like. Additionally, A payment processor is an intermediary, facilitating the transfer of funds between bank accounts, communicating with the customer’s bank and the merchant’s bank.
There are different variables that will be taken into account by the payment routing. This essentially depends upon variables such as payment method, card network, purchase amount, and currency; certain payment processors may be better options than others
In other words, payment routing will evaluate each possible processor and will select the option which will be charging the lowest fees, given the circumstances, and is also likely to be approved by the payment. Payment routing allows working with multiple payment processors to offer customers more options when it is time to pay. They can use a range of credit or debit cards, digital wallets, or payment services like PayPal or Venmo, and you won’t have to do anything special to make sure these options are viable. Payment routing functionality may be built into the payment service provider’s gateway, custom-built, a third-party integration, or part of an overarching payment orchestration platform.
Now that you have a good understanding of the payment routing process, hop onto the next section of the article to decode the different types of payment routing.
What is the Process of Payment Routing?
Before we share with you the different types of payment routing, here are the steps that you need to know about the way it works:
Entering the Payment Information
The first and foremost step which goes into the payment routing process is to collect the customer information. If you’re selling it to them from your in-person stall at the market, collecting their payment info is as simple as having them swipe or tap their card or phone on your card reader.
However, if they are buying from the online store, then they will be entering the billing info on the checkout page. Either way, the information is fed into a payment gateway, which encrypts the data before routing it to the processor.
The Payment Router will be Analysing the Information
The next step, once the customer information has been collected, is that the payment router will analyze the information. The gateway payment router will be seamless, analyzing the transaction, which will be based on the predetermined routing rules. These include factors such as payment method, currency, country, and amount, followed by the card network
The goal is to determine the payment processor that will have the greatest chances of approval and the lowest processing fees. You might think of this stage like an “if this, then that” equation.
Your payment router might start broad by determining what country the customer is from. Next, it might rule out specific card networks or purchase amounts that processors charge higher fees on.
Payment Router will be Sending the Information to the Best Payment Processor
The payment provider will then accept and process the transaction. However, if the customer outside does not have enough funds for the transaction, then the payment will lead to declined transactions because of fraud risk algorithms. There might also be technical problems on its side, such as an overloaded server, which prevents the payment from going through.
However, if there are any hiccups, then the payment routing service will recalibrate and will choose a backup provider instead. This will continue until the transaction is complete.
Now that you have a good understanding about the way this process works, hop onto the next section to know about smart payment routing.
What is Smart Payment Routing?
If you are wondering about smart payment routing, let me tell you that it is the process of using real-time payment routing data and historical performance to make routing decisions for improved payment acceptance.
Additionally, it is similar to the way a GPS might be analyzing your route for any real-time traffic and will also be sending you an alternate way to avoid it. Smart payment routing analyzes current network conditions with certain providers. It does all of this automatically, so you don’t have to configure anything on your end.
Here are some of the advantages of using the smart payment routing:
Better Approval Rates
By following the payment routing process, you will find better approval rates. Sometimes this is due to the customer or issues on the processors’ end, like an overloaded server or automated fraud detection denying a legitimate payment. Payment routing sends the transaction to the payment service provider most likely to approve it to prevent failed transactions.
Enhanced Customer Experience
The next advantage of the payment routing process is that it offers an enhanced customer experience. When their payment goes through without a hitch, customers will be much happier with the checkout experience.
Improved Revenue Recovery
With intelligent routing, the users will be getting to increase their sales and also raise the transaction rates
Conclusion
The payment routing process is one of the most important processes, especially for e-commerce businesses, to enhance their customer experience. Not only will the process of payment routing enable easy transactions, but it will also allow for offering a seamless revenue recovery and better approval rates. That’s all, folks. I hope the article will help you get all the information you need.
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