Payment Routing in Cross-border E-commerce
A frictionless payment experience is vital for the success of any e-commerce business. You must process payments without glitches to prevent a customer from abandoning a purchase. But international payments can be slower and riskier and have high decline rates. Intelligent payment routing enables merchants to accept payments from anywhere in the world. It enhances your payment success rate, lower costs, and reduces risk. At the same time, it reduces the chances of declined payments, which is a big pain point for both merchants and customers.
What is intelligent payment routing?
Payment routing is a vital part of the payment system. It is the process by which a merchant’s payment gateway sends customer payment data to an acquiring bank. In traditional payment routing, a payment gateway connects to a single acquiring bank in a geographic region. But this leads to slower transactions and more declined payments. In the case of intelligent payment routing, a payment gateway connects with multiple acquirer banks in different regions. It routes the transaction to the bank that is most likely to settle it successfully.
Recent data shows that using multiple acquirers increases payment acceptance rates by over 16%. Intelligent payment routing takes a data-driven approach to match a payment with an acquirer with the highest possibility of a successful transaction. It uses analytics, AI, and machine learning to analyze data on various factors such as location, payment method, card network, etc. Intelligent payment routing lowers the risk of failed payments and reduces a platform’s overall operating costs.
How Intelligent Payment Routing Works?
In the case of intelligent payment routing, a merchant’s payment gateway connects with multiple acquirer banks in different regions. When a customer makes a payment, the payment gateway detects the country where the customer is and routes the transaction to the best acquiring bank in that region. If one bank rejects the transaction, it automatically reroutes to another bank. Once an acquiring bank approves the payment, it sends the data to the issuing bank via a payment network (Mastercard, Visa, etc.). The issuer bank verifies the customer and approves the transaction. Once done, the issuer transfers the funds to the merchant’s account via the payment network after collecting an interchange fee. The card network also takes a fee for its services. The final amount then shows up in the merchant’s account.
Benefits of Intelligent Payment Routing for Cross-Border Payments
Intelligent payment routing simplifies cross-border payments in 4 ways:
- It maximizes your payment acceptance rates by choosing the best route to settle payments in real-time. It determines the best route based on various parameters such as location, card type, local currency type, etc.
- It reroutes transactions if a certain card network is down, ensuring your payments are always up. It even retries declined transactions, thus improving your acceptance rates.
- It supports global payments at a minimal cost by connecting you with local service providers and alternative payment systems.
- It analyzes the parameters present in a payment request to eliminate the risk of fraud and increase the payment success rate.
Intelligent payment routing skips geographical barriers and allows localized routing on a global scale. Unlike traditional routing, it frees you from the limitations of transacting with the acquiring bank in your payment network alone. Thus, intelligent payment routing can transform your payments and customer relationships.
Partnering with the right payment service provider
E-commerce merchants need to choose the right payment gateway to optimize their payments. One way of performing intelligent payment routing is to use payment orchestration, wherein a merchant works with multiple payment service providers. But this can be complex and costly, especially for smaller merchants. Working with an international PSP that has multi-acquirer relationships is a better bet. The right PSP can help you make your payments more seamless and secure. They can also manage payment orchestration and payment routing. You enjoy a hassle-free experience in processing payments and greater flexibility in managing your overall operations.
How can Novalnet help?
Novalnet works with multiple acquirers to ensure you get to experience the benefits of intelligent payment routing. We are a global PSP with deep experience in processing payments for the European industry. Many of Europe’s leading brands trust us to handle their payments. We can help you accept payments seamlessly in 125+ currencies in 150+ country-specific payment methods. Our instant plug-ins get you up and running within minutes and with minimal coding. With our AI-based risk management solutions and advanced analytics, you can securely process payments in a PCI DSS-compliant environment.
Give us a call today to know more about how we can help with your payments and enable you to become the best in your game.
Jose Augustine is the Chief Business Development Officer at Novalnet with extensive experience in European payment industry and a knowledge powerhouse.