We've all been there. You’ve just clicked the pay now button to complete a purchase online, and just as you’re expecting to see that “Payment Successful” message, you get the dreaded “Payment Declined,” even though you know the payment method you used should work.
It’s frustrating, and in fact many customers never return after a failed payment, making transaction approval rates literally a make-or-break factor for online merchants, especially those expanding globally.
This edition of The Praxis Times shares how large online businesses utilize the latest Smart Routing and Cascading functionalities to boost their transaction approval rates, conversion ratios, and to shield them from fraud and other suspicious actors.
What went wrong with the payment?
Sometimes, it's not the destination but the journey that's at fault when payments fail to complete. While 44% of declined payments fail due to insufficient funds or exceeded credit limits, understanding why the other 56% fail is much easier to fix than most realize. And even if the cause of the decline was indeed insufficient funds, this doesn’t mean the transaction should be lost altogether either.
Smart Routing 101: It’s really that simple
Just as you wouldn’t embark on a road trip nowadays without a reliable GPS navigation system, merchants shouldn’t route transactions without dynamic, real-time traffic awareness and diversion alerts.
Smart Routing, or Dynamic Routing, takes into account various factors such as transaction amount, geo-location, payment methods, and many other data points to determine the best path for each payment, based on considerations such as processing speed, cost, and fraud screening. It differs from Static Routing, which directs payments through a route that's manually configured.
By routing the payment in the best way possible, online merchants can significantly boost their transaction approval rates and avoid customer frustration.
Smart routing logic also supports merchants in applying fraud-screening methods for relevant transactions. For example, a global online business connected to multiple processors might route a small €100 payment from a customer in Spain to their local Spanish processor for quicker and cheaper processing.
However, if the same customer attempts a €10,000 payment, which might be considered high-risk, Smart Routing would intelligently send the payment through the company's worldwide processor to utilize advanced fraud and AI-powered risk screening solutions that the smaller processor may not offer.
But what happens if the chosen processor experiences downtime or technical issues?
In such cases, the payment is seamlessly cascaded to the next most suitable Payment Service Provider (PSP) capable of completing the transaction. Cascading, which serves as an additional logical component within Smart Routing, automatically retries declined transactions through alternative pathways with the customer being none-the-wiser.
When Cascading is activated, payments routed to a PSP facing technical problems, downtime, or congestion due to high-volume processing will be intelligently redirected to another processor. This ensures that the customer receives a "Payment Successful" message instead of a frustrating "Please try again later" notice.
At Praxis Tech, we've recently updated our Cascading functionality to include 3DS data collection. This means that customers don't have to repeatedly verify their identity when a payment is rerouted, making the checkout process smoother and reducing the risk of cart abandonment. Click here to learn more.
Why Isn't Everyone Doing It?
Good question. Both Smart Routing and its Cascading component require integration with multiple PSPs, each serving a different purpose - such as providing the best processing cost for each payment method, offering redundancy, fraud-screening, or supporting geo-specific local alternative payment methods to the businesses' global consumer base.
And integrating with multiple PSPs can be technically challenging, expensive, and time-consuming. Additionally, developing an in-house PCI-DSS-compliant system to securely store card payment details is easier said than done.
If merchants allow their PSP or Gateway solution to store this information, it can't be easily shared with alternative third-party PSPs when routing needs arise, limiting the effectiveness of Smart Routing and Cascading.
Payment Orchestration Platform
This is where a platform like ours comes in. Already PCI-DSS Level 1 certified and pre-integrated with over 600 PSPs worldwide, we offer online businesses that cater to a global customer base a Smart Routing and Cascading solution that can be easily connected through a single API.
Merchants using our platform can manage their various PSP connections and incorporate support for Decline Recovery features that act as a fallback solution in cases where currency compatibility issues arise or other barriers are the cause of the failed payment.
Get in touch to navigate online payments with ease, ensuring that your customers enjoy a seamless and secure payment experience every time they hit that “Pay Now” or "Deposit" button.
