For businesses that accept payments from across the globe or manage a variety of payment methods within a single country, payment routing rules have become an essential function within their payment infrastructure. These rules are necessary to fully optimize payment success rates, especially for merchants operating across multiple jurisdictions and regions, such as iGaming providers or multi-regulated retail brokers.

This article explores the basics of payment routing, outlines the key considerations merchants should make when setting them up, and looks into how the latest advancements in payment orchestration technology like Smart Routing and Cascading are supporting online businesses in further enhancing their transactions.

What is Payment Routing?

Payment routing refers to the practice of setting specific rules to direct certain payments through different Payment Service Providers (PSPs) that the merchant uses for their transactions. These decisions are based on various criteria such as geographical location, transaction amount, payment method, or customer risk profile.

Setting these rules allows merchants to better manage the flow of their transactions, giving them greater control over their payment operations, improving payment success rates, and helping manage processing costs effectively.

How Does Payment Routing Work?

At its core, payment routing enables merchants to define how a transaction should proceed based on certain variables. For instance, if a payment card’s BIN (Bank Identification Number) indicates that the card is issued in a particular country, and the payment amount exceeds a specific threshold, the payment can be directed to a particular PSP. Alternatively, if the payment originates from another country or is below a certain amount threshold, it may be routed through a different PSP.

Merchants typically set up these multi-processor payment strategies by considering a variety of factors, such as:

• Geographical Filters: Routing payments to specific PSPs based on the customer’s location to increase the likelihood of approval.
• Deposit Amount Thresholds: Implementing rules that either flag or block transactions exceeding predefined limits or trigger additional user verification for larger deposits.
• Payment Method Routing: Directing specific payment methods through particular PSPs.
• Currency Support: Routing different currencies to PSPs that offer better conversion rates or natively support those currencies.
• Card Scheme and Type: Setting specific routing paths based on whether the payment card is a credit, debit, or prepaid card and depending on what scheme it is, such as Visa, Mastercard, and American Express.

Fighting Fraud with Payment Rules

Some merchants, particularly those in industries prone to chargeback fraud and other types of payment fraud, implement routing rules with fraud prevention and risk management in mind. For example, a merchant may choose to route a payment through a PSP that offers advanced fraud checks or use products like Praxis Safe, which utilizes Visa’s Cybersource machine-learning-powered solution to perform fraud checks across Visa’s vast 141B+ annual transaction network before authorizing the payment.

These additional fraud checks often complement existing verification methods, such as 3D Secure challenges, where users must verify their identity using features like Face ID or fingerprint scans via their banking apps.

Other techniques used for fraud prevention by Praxis Safe via payment rules include:

• Velocity Checks: Setting rules to trigger additional verification if the number of transactions within a specific time frame exceeds what the merchant considers ‘suspicious activity.’
• Customer Behavior Monitoring: Analyzing past transactional patterns to identify unusual behavior and flag potentially fraudulent transactions.
• Block Lists: Creating rules that cross-reference lists of known fraudulent users, allowing merchants to immediately block payment attempts from repeat offenders.

Smart Routing and Cascading Functionalities

One of the most valuable innovations in the payment industry has been Smart Routing and Cascading functions, typically a key selling point for payment orchestration platforms such as Praxis Tech. Smart Routing allows merchants to dynamically choose the most suitable PSP for each transaction based on which one is most likely to approve the payment. If a transaction is rejected by one PSP, Cascading functionalities ensure that the payment is reattempted with a second, third, or even fourth PSP until approval is achieved. This process significantly reduces decline rates and maximizes a merchant’s transaction success rates, boosting sales.

Beyond Smart Routing, advanced Payment Orchestration Platforms like Praxis also offer more than basic Cascading. They provide sophisticated Decline Recovery features that prompt customers to retry failed transactions by suggesting alternative solutions, such as lowering the transaction amount if the payment failed due to insufficient funds, switching to open banking methods to complete the payment, or displaying alternative payment methods for the customer to choose from.

The Benefits of Payment Orchestration Platforms

While the advantages of routing rules and Smart Routing are clear, implementing them can be complex. Many merchants face challenges when integrating multiple PSPs, managing various payment methods, and maintaining up-to-date routing rules. This often diverts resources from core business operations.

To address these issues, Praxis Tech offers a centralized approach to managing payment infrastructure by providing:

• Integration with hundreds of PSPs through a single API.
• Customizable routing rules and Smart Routing capabilities.
• Cascading functionality to maximize transaction success rates.
• Advanced features for decline recovery and multi-currency transactions.
• PCI-DSS compliant tokenization for enhanced security.

If your business is looking to improve approval rates and offer a better payment experience for customers, connect with Praxis Tech to learn more about how our solutions can help scale your payment operations effectively.