Optimizing eCommerce Payments Demands Dynamic Routing

Payment routing is simple — until something goes wrong.

In the simplest scenario, customers purchase items and enter their payment details on a merchant’s point-of-sale (POS) system or website. This payment gateway passes that information to the card network and issuing bank — in the case of a credit card transaction — for approval, generating a receipt upon completion of the transaction.

However, in the case of an outage, a payment can be stopped in its tracks without warning. What happens if the payment gateway experiences an outage, possibly with extended downtime? The inability to reroute a transaction at this juncture can lead to a loss of revenue and business that, depending on the merchant and the gateway, can be substantial. Digital and online payment systems afford flexibility to reroute payments — in particular, via the option of “transaction retry.”

Transaction Retry: From Outages to Soft Declines

Transaction retry is a basic must-have for any merchant wishing to capture all potential sales, as it offers an automated way to turn stalled transactions quickly and easily into revenue.

There are no impacts to the users [of dynamic routing], and the transactions can keep flowing — and it’s a seamless transition.”

‘Transaction retry’ saves lost revenue due to payment gateway outages.

A payments orchestration platform has the building blocks in place to reroute payments stalled by outages. Through its multiple payment gateway partners, the orchestrator has at its disposal alternative routes to which a merchant can swiftly shift payment traffic in the event of an outage or a downed gateway. This takes the form of automatically retrying the transaction using a different gateway — a simple detour that quickly and seamlessly can prevent lost revenue and customers.

Merchants can reverse ‘soft’ declines.

Other instances that can benefit from transaction retry are the so-called soft declines with which merchants are all too familiar, such as “Do not honor” codes. A soft decline results from a sporadic error affecting a particular transaction — for example, a processor issue or a flag indicating an unusual purchase — rather than a lack of approval of the customer’s payment or a gateway that is malfunctioning altogether. Ultimately, merchants can salvage many of these transactions.

With transaction retry, if a preferred gateway declines the transaction, it can be retried via a secondary gateway, often allowing an apparently failed transaction to succeed. Such alternatives offer simple avenues for turning soft declines quickly and easily into revenue.

Transaction retry is a must-have for any merchant wishing to capture all revenue in the event of outages and soft declines. Dynamic routing, however, encompasses far more than this basic need.

Leveling Up: Dynamic Routing for Payments Customization

From basic failover to customization based on cardholders’ preferred payment methods, dynamic routing ensures that merchants are always online and maximizing authorization rates while minimizing costs in any market.

Dynamic routing helps serve the ultimate ambitions of any merchants operating online. [They want to] get as many transactions through with the lowest amount of fraud possible.”

Routing sophistication often evolves over time.

Routing may not be on a company’s radar early in its life cycle, instead developing as a business grows. For example, a small brick-and-mortar shop might at first be accustomed to working with a single PSP to accept card-present (CP) transactions from its local in-person clientele. With the widespread digital shift, the business may then expand to selling online, but it may continue to use the same PSP for its card-not-present (CNP) transactions.

However, as demand drives a business further into eCommerce with new markets and customers desiring to use any number of local and alternative payment methods, that single PSP likely will no longer serve its needs. In addition to having backup options in case of transaction failures, the business will want to establish ties with new PSPs to accept local payment methods around the world and to meet diverse markets’ regulatory requirements.

Dynamic routing optimizes global business expansion.

We have described how payments orchestration allows merchants to expand easily into new geographies by offering a wide range of locally preferred payment options — often consisting of unique or alternative payment methods — for any given market. This enables the swift addition of new PSPs to merchants’ payments stacks to send transactions to a region’s primary or preferred gateway.

The addition of PSPs, however, can lead to a need for more complex routing logic. Payments orchestration can help here as well — through an intelligent, dynamic routing solution. The value proposition of such a solution is that it provides the ideal payment route in a seamless experience for any customer in the world — all through a merchant’s single checkout.

Dynamic routing helps make payments a revenue generator — rather than a back-office cost.

As businesses grow and add new payment gateways, the challenge of routing each transaction to its preferred gateway grows as well. A payments orchestrator can allow merchants to customize routing based on a wide range of variables even beyond the preferred payment method and geographic region. For example, if a transaction is above a certain value, it could be routed through a fraud prevention tool. Such plug-and-play dynamic routing solutions can permit the business to grow unimpeded, increasing transaction success, lowering costs and offering a smoother customer experience. That improved experience generally translates to increased revenue — and customer loyalty.

According to a recent PYMNTS Intelligence article, dynamic routing can be instrumental in cementing customers’ loyalty to merchants. Andy McHale, senior director of product and market strategy at Spreedly, told PYMNTS Intelligence that in addition to detecting gateway outages, dynamic routing can be customized to route transactions to different gateways on parameters such as the lowest cost or the highest authorization rates. Leveraging this strategy can help merchants achieve the ultimate goal of maximizing transaction success and revenue anywhere, anytime.

McHale also noted that dynamic routing allows merchants to collect rich data on customers’ payment preferences and other conditions to inform their choices of payment offerings wherever they look to sell.

An Intelligent Dynamic Routing Strategy Is Essential for eCommerce Payments

Routing rules are the foundation of an intelligent routing strategy. Partnering with a payments orchestration provider can allow merchants to set rules simply and intuitively without a resource-intensive effort to build and maintain them.

A merchant looking to implement a payment routing solution should approach it stepwise as follows:

Step 1: Adopt a routing rules solution. This involves choosing a program or partner for setting up rules about the use of different payment gateways depending on factors such as card brand, issuing country or the event of an outage or decline.

Step 2: Establish ideal payment routes. This step involves the selection of preferred payment routes and incorporating them into the rules solution. Generally, merchants will have any number of relationships with payment gateways, each serving a unique business need, market and customer segment.

Step 3: Integrate payments retry capabilities. The last step involves establishing retry capabilities and secondary gateways for when transactions fail or are declined.

Even if a merchant is a novice when it comes to deciding which gateways to use, an orchestrator can make these recommendations and easily incorporate them into the routing payments stack. A good payments orchestrator can help merchants select the best gateways and build them into retry rules to optimize payments in each market they serve and back them up with alternatives if primary gateways fail. Once these rules are set, the process happens automatically, freeing merchants’ hands to do the work they do best.