Our partners at Payoneer took over our blog to explain to you the technology behind Payment Routing
The road to accepting international payments online is a mix of challenges and opportunities. To sustainably scale and cater to a global array of customers, businesses need to ensure their international online payments follow the best route and are processed by the right payment providers. A merchant can achieve successful payment routing and all the rewards that come with it by building proper payment connections, reviewing strategy, and leveraging technical know-how.
What is Payment Routing?
Payment routing begins as soon as a customer makes an online purchase. To process a transaction, every component of the payment system must be in sync. Acquirers, issuers, payment providers, etc, must come together to ensure that payments are processed through the path of least resistance. What looks like a simple and swift process for shoppers, requires complex connections, thought out strategy, and powerful technology on the merchant side. And running an online business in multiple countries around the globe only adds complexity.
Payment routing is a prominent feature of a multi-provider setup, which allows customized payment flows with flexibility in payment load distribution, lowest transaction costs, and having a backup provider facility in case of downtimes. With multiple providers, merchants are much more in control of their payment flow.
The Importance of Proper Payment Routing
Having all the transactions processed by one payment provider puts international merchants at risk for declined transactions and high costs. With a linear, single-provider payment setup, merchants run the risk of losing revenue due to potential provider issues. Especially during peak transaction hours, it is essential to have a backup provider that will take over the transaction load in case the first one experiences unexpected downtime.
The freedom to route payments through different providers also increases merchants’ negotiation power while letting them direct their transactions through multiple providers. All of this results in higher payment acceptance rates and accelerated revenue growth.
The New Age of Smart Routing
Smart routing is an enhancement to the traditional payment routing mechanism. The introduction of Smart routing through specialized payment partners such as Payment Orchestration Providers (POP) has been revolutionary for payment processing.
Smart routing relies on collecting and analyzing streams of payment data to determine the success and failure rates of various combinations of payment flows. In-turn, this enables merchants to choose a routing strategy that works for them.
Smart routing goes beyond the mere shifting to or mixing of multiple payment providers to smoothly direct international transactions. It also works in sync with issuers and acquirers around the globe. An innovative functionality known as BIN Routing, available through payment orchestration providers (POPs) such as Payoneer, is a highly advanced way of routing payments using BIN (Bank Identification Number) information.
The primary goal of BIN Routing is to increase payment acceptance rates while cutting costs per transactions. Typically, costs for a cross-border transaction are higher and associated with more risks if the issuer and acquirer are located in different countries. By contrast, locally processed transactions have minimal to no costs.
BIN Routing helps merchants create specific BIN lists and route the transactions that fall in the range of those BINs through a specific payment provider, which will ensure that the issuing and the acquiring banks involved in the processing either coincide or are located in the same country. This significantly increases transaction speed and success rate with the lowest possible per-transaction cost.
The Route to the Future
Smart routing creates a flexible atmosphere for merchants to process payments. POPs connect merchants to several providers which give them routing options they otherwise would not have. Access to smart routing through POPs can offer merchants tremendous customization possibilities to finetune their payment strategy. Especially with the COVID-19 pandemic resulting in excessive loads on payment providers, and the Payment Services Directive 2 putting further pressure on merchants to adapt, a more sophisticated routing mechanism is important to weather both a demanding present and an uncertain future.
Payoneer’s mission is to empower businesses to go beyond – beyond borders, limits and expectations. In today’s digital world, Payoneer enables businesses of any size or location to access new economic opportunities by making it possible to transact as easily globally as they do locally. Payoneer’s agnostic payment orchestration platform serves as a technical layer that provides the merchant with a single point of access to over 100 local and global payment providers, payment methods and fraud providers. This empowers them to create their perfect global payment setup, take control and gain transparency when accessing payment data. The payment orchestration platform frees merchants from the restrictions of limited payment partner choice. This ensures the fast implementation of newly desired providers anywhere in the world. By customizing their payment setup, merchants meet the specific needs of their consumers, according to local preferences and user experience norms. In addition to market-leading global coverage, Payoneer brings a suite of features such as Smart Routing, Common Tokens, Retry Logic, Consolidated Reconciliation File and PSD2 optimization.
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