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What Is Payment Gateway Routing

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Last editedOct 20212 min read

For any online merchant one factor that often makes the difference between success and failure – defined as a sale going through smoothly or crashing before a payment can be made – is a frictionless payment process. The more work a potential customer has to put into making the payment, the more likely they are to abandon the process and shop elsewhere. This is particularly true if a payment is declined for technical reasons, rather than issue such as a lack of funds in the account. 

As more and more merchants trade on a global basis, the number of factors that could cause a payment to be declined or fail multiplies along with the number of potential banks involved. The answer to this problem is to work with a provider offering intelligent payment routing.

In simple terms, intelligent payment routing involves routing individual transactions so that they are presented to the acquiring bank that is most likely to approve them. This is made possible through the use of detailed payment analytics and processing software that guides payments in the right direction, as well as “failover transactions”. This means that if a transaction fails at one bank it is automatically presented again to another bank – one that is most likely to approve it. 

This offers two distinct advantages over the traditional payment model, which relied on the single merchant bank of the merchant, and often required a different bank of this kind in every territory. The first big advantage is that it makes it easy for a business of any size to sell to customers from any part of the world, including emerging markets that may not offer as many payment options. In addition, payment gateway routing increases the percentage of transactions that are approved quickly, driving revenue higher and increasing customer satisfaction.   

The details of payment gateway routing

Working with a dedicated provider of intelligent payment routing, means the provider will select the appropriate acquiring banks suited for the details of your business. These include:

  • Where the business is located

  • The product(s) or service(s) the business provides

  • The parts of the world that the business is selling into

Once this has been put in place by payment gateway routing, when a customer opts to “buy now” on the merchant website, their transaction will be processed via an acquiring bank chosen according to factors such as the region where the shopper is located, the currency being used to pay and the type of card. If the payment fails for some reason other than a lack of funds, then the transaction will automatically be re-sent to another acquiring bank. This entire process takes place in a matter of seconds, without the shopper ever being aware that anything other than a straightforward payment is being handled.   

Data gathering via payment gateway routing

Another big advantage of opting for intelligent payment routing is that the process gathers large amounts of data. Efficient data management means this can be used to create detailed analytics, highlighting any areas in which the payment process a merchant is offering their customers could be improved. Using payment gateway routing can also help merchants to cut costs, because one of the other factors that influences the choice of provider a transaction is sent to is the payment fees charged, with lower charging providers being favoured.   

We Can Help

If you’re interested in finding out more about payment gateway routing, or any other aspect of your business finances, then get in touch with our financial experts at GoCardless. Find out how GoCardless can help you with ad hoc payments or recurring payments.

Over 85,000 businesses use GoCardless to get paid on time. Learn more about how you can improve payment processing at your business today.

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Interested in automating the way you get paid? GoCardless can help

Interested in automating the way you get paid? GoCardless can help

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