If your business uses multiple payment gateways, you know how challenging it can be to manage them efficiently and optimize costs. That’s where payment routing comes in. Payment routers direct transactions to the best gateway possible in real time, ensuring transactional efficiency and cost-effectiveness. A payment router like Optimizer can simplify the management of multiple payment gateways, allowing you a comprehensive view of all payment activities on a unified dashboard and reducing operational costs by up to 30%. Let’s explore how payment routers work and how to choose the payment router that best suits your business needs:
What is payment routing?
Payment routing is the mechanism of directing online transactions to the most suitable payment gateway. Payment routing platforms/ payment orchestrators allow direct integration with hundreds of PA/PGs and offer multiple payment methods to customers. Not only that, they allow businesses the option to choose payment gateways with the least processing fee, thereby helping streamline transaction costs. Payment routing becomes imperative if you work with multiple Payment Service Providers (PSPs) and wish to avoid payment failures and reduce operational costs.
While payment routing as a concept may seem complex, it really is not. Think of it as a precision engineer for your payments, carefully calibrating the components of multiple payment gateways, banks, payment methods, and acquirers to ensure each transaction reaches the intended destination smoothly and successfully.
What are the types of payment routing?
Static Routing: If you set up a fixed payment service provider to process a transaction, and the transaction goes to it for processing no matter what, then it is static routing. With static payment routing, your transactions will fail or be delayed if a particular payment service provider experiences downtime or high traffic.
For example, merchant A has set up a routing decision where 50% payments made through debit cards are directed to Payment Gateway 1 and the other 50% will be directed to Payment Gateway 2. All transactions that come under the purview of the set rules will be directed according to the rules, regardless of downtimes or payment failures.
Dynamic Routing: Dynamic Routing simplifies payments for businesses by routing them to the most suitable acquiring bank or payment gateway in real-time, resulting in enhanced success rates, reduced failed transactions, and lowered costs. Instead of designating one primary and one backup gateway, businesses can set up rules to route transactions through multiple gateways based on their performance.
For example, if you have integrated with payment providers A, B, and C, businesses can configure a rule to route a certain percentage of card transactions through each gateway, such as 50% through A, 30% through B, and 20% through C.
What are the benefits of using a payment router?
Let’s take a closer look at how payment routing helps businesses:
- Multiple Payment Methods
Payment routers integrate with numerous payment gateways, providing customers with a wide array of payment gateways and methods. This flexibility is crucial as individually partnering with payment gateways and PSPs involves a complex process. Direct integrations in payment routers such as Razorpay Optimizer simplify this complexity to a great extent. Apart from that, the multiple payment methods provided by a payment router allow customers to choose their favorite payment method, which leads to greater customer satisfaction. - Reduced Downtimes
By directing transactions through the most reliable gateways, payment routers minimize downtimes. This ensures that payments are processed smoothly, reducing the risk of transaction failures and enhancing overall operational efficiency. - Higher Transaction Success Rates
Payment routers increase the likelihood of successful transactions by choosing the most optimal paths. Dynamic routing, in particular, adjusts in real-time to route transactions through gateways with the highest success rates, ensuring higher transaction completion rates. - Reduced Transaction Costs
Payment routers help businesses manage costs by selecting gateways with the lowest processing fees. This cost-efficiency is particularly beneficial for large enterprises handling high volumes of transactions, resulting in significant savings.
- Advanced Analytics Reports
Payment routers like Razorpay Optimizer provide detailed analytics and reporting capabilities. Businesses can gain insights into transaction patterns, gateway performance, and cost metrics. This data helps in making informed decisions, optimizing payment strategies, and improving overall financial management. - Geographical Expansion and Scalability
Payment routers like Razorpay Optimizer support geographical expansion by seamlessly integrating with various international payment gateways. This capability allows businesses to cater to customers in different regions, offering localized payment options. Moreover, payment routing systems are scalable, accommodating increased transaction volumes as businesses grow. Moreover, payment routers/orchestrators also take foreign currencies and exchange rates into account to ensure seamless cross-border transactions.
How can Razorpay help?
Razorpay Optimizer– India’s First AI Powered Payments Router is a modern, new-age payment router/orchestration platform. With direct integrations with 100+ payment providers and the ability to handle 1000 TPS (Transactions per Second), Razorpay Optimizer is a testament to Razorpay’s years of payment intelligence. With that being said, investing in a robust payment routing system such as Optimizer is essential for any large business aiming to optimize financial operations and maintain a competitive edge.
FAQs
- What is payment routing and why is it important for my business?
Payment routing is the mechanism of directing online transactions to the most suitable payment gateway. It is crucial for businesses because it ensures transactional efficiency, reduces operational costs, and minimizes payment failures by choosing the best payment gateway for each transaction in real time.
- How can payment routing benefit my business?
Payment routing benefits businesses by providing multiple payment methods, reducing downtimes, increasing transaction success rates, optimizing transaction costs, enhancing customer experience and loyalty, offering advanced analytics, and supporting geographical expansion and scalability.
- What are the types of payment routing?
There are two main types of payment routing:
- Static Routing: Pre-determined by set parameters and rules set by the merchant, without considering real time changes such as downtime.
- Dynamic Routing: Real time AI-based routing that selects the best payment gateway based on current conditions like downtimes and success rates.
- What happens if you don’t have a payment router?
The lack of a payment router can lead to increased transaction failures, higher payment processing costs, greater risk of fraud, operational inefficiency, and poor customer experience. This can negatively impact a business’s revenue, reputation, and customer satisfaction.
