What Is Payment Routing

20 Dec, 2022 . 4 minutes

What is payment routing?

As businesses expand globally both in terms of reach and customers, it is reasonable to have more than a single payment provider. Otherwise, a minuscule error, declined payment, or unnecessary glitch may have a severe impact on the longevity of your business. The solution is to have multiple payment providers and by ensuring a seamless and effective payment process, businesses would usually resort to using payment routing.

Payment routing is essentially a payment feature that helps businesses process transactions despite working with multiple payment providers. The primary goal is to smoothly process transactions and maximise success rates.

What is static payment routing?

Static payment routing is considered the more outdated of the three payment routing systems currently available. Nonetheless, it remains useful for small businesses as it sets very strict rules and procedures for transactions. In some cases, it also offers time efficiencies while performing much better than dynamic payment routing.

The major downside of static payment routing is how it functions. Static payment routing uses manually configured and fixed routes in sending transactions to payment providers. These routes are not responsive to occurrences, making this payment routing system less efficient whenever a configured route becomes unavailable. In other words, a transaction cannot be processed when a route is down and this will affect your business.

Regardless, network administrators can still modify the routes and make the necessary changes to the entire network manually if needed.

What is dynamic payment routing?

Unlike its static counterpart, dynamic payment routing automatically chooses the best route for the flow of the transaction. It creates multiple routes to process transactions, thus limiting the potential risk of disruptions. Dynamic payment routing is suitable for small and medium businesses and even international enterprises as it provides efficiencies in transactions and seamlessly integrates multiple payment providers.

What is smart routing?

Smart routing is similar to dynamic payment routing. This type of routing uses an automated feature by analysing in real time which route is the best to use for a transaction across multiple banks.

Success is determined for each transaction as smart routing sees which bank is the most probable and best used for payment. Hence, it ensures higher transaction approval and success rates since smart routing connects businesses to the appropriate banks for transactions.

As soon as a customer processes a purchase, the transaction data will be routed to the most suitable bank. But before that, this routing determines key information, both of the buyer and the current location of the business, to the type of credit used. The transaction process will be directed to another bank quickly should it fail.

Why payment routing is a successful transaction method

There are several reasons payment routing is a successful transaction method. The idea of payment routing is tied to assisting businesses in processing transactions while working with multiple payment providers. This leads to the transaction method being able to address three key challenges: higher success rates in the transaction process; lower transaction cost; and ensuring service continuity. Payment routing can help to significantly boost transaction success rates and even assist businesses in recovering lost sales with soft declined transactions.

Moreover, up to 30 percent of fees can be saved with each route to multiple and various payment service providers. In terms of leveraging the best experience for consumers, routing your payment is an appropriate payment solution for integrating and making multiple payment options seamlessly for your business.

How payment routing works

Routing your payment highly depends on your route of choice. Static payment routing largely emphasises the use of a predetermined route. This route as cited above is not adaptable to changes and you may lose sales if the route becomes unavailable. Regardless, in setting up static routing, you may begin with its schemes.

Meanwhile, its dynamic counterpart has the best approval rates for your transaction as it uses multiple and various routes which will ensure the longevity of your business. As for smart routing, or a much more "specified" routing version, set multiple routes based on other additional factors, such as geolocation, store location, or date and time.

How to set up payment routing

In a more general business sense, you might want to begin with having a single payment service provider to cater to all of your transaction needs. Although it might be less flexible in terms of location and service, it is the quickest to set up. As your business grows and so does the need to expand its reach to a wider audience. Until your business has arrived at this point, you might want to consider working with multiple providers. Though it is more complex, it also opens much more diverse business opportunities and a more robust payment gateway at the same time. Going from there, you might want to resort to using smart routing, which is significantly more complex but offers much higher acceptance rates.

Common payment routing platforms

Although payment routing is a complex process, most payment-routing providers offer a hassle-free setup for your business regardless of its size. Below are the three most common routing platforms:


Spreedly is a Durham-based global payment-routing platform that offers businesses payment-related services with a single and portable API. The company promises "an enterprise-grade payments stack," via the use of a secure PCI Level 1 vault and tokenisation for businesses keen to provide more flexibility in their payments, and most important higher authorization rates.


Headquartered in London, Corefy is a "universal feature-rich payment orchestration platform" that seamlessly integrates multiple payment service providers under a single umbrella. With over 650 providers, 450 payment and 250 pay-out methods, the platform's service covers an entire payment stack, from connecting to multiple service providers to processing and managing transactions, and many more.


GoCardless is an online processing solution that caters to businesses' transaction needs, primarily in collecting direct bank payments hassle-free, with no card fees and much more efficient administration. Efficiencies remain the core of GoCardless, offering businesses instant one-off payments and automated payment collection through the use of direct debit, perfectly suited for subscription-like services.

The evolution of payment routing

With the growing presence of global businesses and the increasing need to expand their reach to international audiences, an efficient transaction method is needed to deliver transaction processes through the best available route. Compared with traditional routing, payment routing is more efficient in processing transactions and avoids nerve-wracking, unnecessary declines. These luxuries are not available through traditional routing, where businesses are also required to set up and get through the long, winding road of having to establish their own merchant accounts.

With the emergence of smart routing, it makes the entire payment routing landscape so much easier and more efficient, now that transaction processes are carried directly to a certain bank that will most likely accept, process, and finalise the transaction delivered via the best route available. A seemingly hassle-free process with low decline rates is the exact method for businesses globally to assist with their transaction needs.

Common challenges to payment routing

Whether payment routing is suitable for your business depends on your needs and likely the scale of your operations. Now that you have an idea of what payment routing offers, there are some other aspects you must consider, such as common challenges in payment routing and how to deal with them.

Most online businesses have suffered sales losses due to failed transactions, be it a minor system error or something more serious, doing business globally can be very complex. As payments are mostly made online, businesses can be affected by a slow internet connection.

Servers that become non-responsive due to low internet bandwidth can be a turn-off for buyers, especially when their transactions fail due to technical issues, as opposed to insufficient funds in their accounts. To avoid failed transactions caused by low internet bandwidth, you may resort to developing a "slow-internet friendly" platform and payment gateway. Think of it as a lite version of your platform featuring fewer page loads and additional features that will function even during minimal internet bandwidth.

Exposing your business online also means being vulnerable to fraud, including data theft, scams, phishing, and other site exploits, which commonly occur online.

The number of cyber-attacks grew exponentially since the early days of the pandemic. According to a report, 81 percent of organisations globally experienced an increase in cyber-attacks during the pandemic, while 79 percent experienced downtime due to cybersecurity risks during peak seasons. This emphasises the need for businesses to prioritise their online infrastructure and have proper cybersecurity to support business activities, especially with the upcoming holiday season. To ace this problem, you may start by setting up a well-certified payment gateway, such as those complying with Payment Card Industry Data Security Standard.

This will encrypt crucial payment data even before it lands on your server, making it difficult for attackers to access. In addition, having an established and well-supported payment gateway can save you time. It is also best to partner with one that supports international transactions.

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