Smart routing guide

Learn how smart routing can enhance payment performance and efficiency, with increased success rates, reduced fraud, and processing cost optimisation. 

In 2023, Africa added more new e-commerce shoppers to the world than any other region. In South Africa alone, the value of e-commerce transactions is expected to surge to $12 billion (R225 billion) in 2025, catalysed by changing consumer behaviour, widespread internet penetration, and market entry of global brands such as Amazon.

As online payments continue to grow exponentially, value can be captured and compounded. But today, merchants are locked into outdated payment systems that lack the agility, scalability, and intelligence to process high volumes of transactions. This results in businesses losing value through payment downtime, cart abandonment, hidden fees, and lost customer loyalty. 

Instead of focusing on what they do best, businesses are forced to build and maintain increasingly complex payment operations, hindering growth, increasing costs, and impacting customer experience.

To maintain pace with the rapidly changing online commerce landscape, merchants must invest in payment performance. This starts with offering customers the most relevant payment methods, with the capability to intelligently route transactions to optimise success rates, conversion, and payment efficiency. 

What is smart routing?

Smart routing is the capability of a payment platform to selectively expose payment methods or providers, and to direct transactions to different payment processors or acquirers during the payment process. It allows merchants to create a set of routing rules that are applied to each transaction based on parameters such as currency, basket size, card brand, BIN number and issuer. 

At Precium, we distinguish between two categories of routing:

1. Static routing: Predefined rules that selectively expose payment options and / or route transactions based on factors such as processing fees, basket size, currency, and BIN number. For example, a merchant that aims to optimise transaction costs may route transactions with a basket size greater than $75 to payment processors with a flat fee structure, while transactions with a basket size less than $75 are routed to processors and methods with a percentage-based fee. 
2. Dynamic routing: Responsive rules that block selected payment options and / or reroute transactions based on real-time performance data, such as acquirer downtime or failure thresholds. For example, a merchant may automatically reroute a failed transaction to an alternative payment processor without disrupting the customer experience. 

Merchants adopt routing to optimise payment performance, including increasing their authorisation and acceptance rates, mitigating the impact of payment downtime on customers, and optimising transaction costs or settlement times. 

Why use smart routing with Precium? 

Increase success rates 

Smart routing enables merchants to increase authorisation and acceptance rates through sending transactions to the processor and acquirer with the highest probability of success. With Precium, merchants can also cascade transactions in real-time to prevent gateway or acquirer downtime from impacting their customer experience. Our routing engine also allows merchants to implement retry strategies for soft declined transactions, boosting conversion rates and recovering otherwise lost revenue by up to 20%. 

Optimise processing costs

Through selecting the most cost-effective route, merchants can reduce their processing fees by up to 40%. Merchants adopting smart routing can also save on hidden fees such as declined transaction costs and retry attempts charged by single-gateway payment service providers. 

Increase conversion and repeat purchases

Merchants leveraging smart routing can capture additional revenue through increasing customer conversion and repeat purchases. Cart abandonment is reduced by offering customers the most relevant payment methods to suit their context and preferences. With 62% of customers opting not to return to a website after experiencing a failed payment, increased success rates ensure merchants can capture otherwise lost revenue and future purchases. 

Minimise fraud while managing false positives

Smart routing can mitigate chargebacks and fraud by enabling merchants to decide when to require additional authentication measures, such as 3D Secure, based on transaction attributes and customer behaviour. This can be complemented with merchant’s customer data, such as purchase history and basket contents. This intelligent approach to fraud helps to protect honest customers, while reducing false declines that hamper conversion and repeat purchases.

Diversification out-of-the-box

Smart routing ensures business continuity when one gateway or acquirer is down, by enabling merchants to route to an alternative. But integrating and managing multiple payment providers requires substantial investment and ongoing effort. Precium abstracts this complexity with built-in integrations with best-in-class payment processors, acquirers, and alternative payment methods. Merchants can leverage our pre-negotiated pricing or bring their existing commercial relationships. This means that merchants can get set up with smart routing quickly, with limited ongoing technical and operational effort required to maintain payment performance. 

How does smart routing work? 

Precium’s payment page is connected to our rules engine, which allows merchants to use relevant attributes to decide which payment methods to display. Popular attributes include currency or BIN number for location-based routing; transaction amount for processing cost optimisation; and card brand for authorisation and success optimisation. Merchants who prefer greater control can selectively expose specific payment methods using white-listing options when creating a purchase instruction. 

When a customer initiates a payment, Precium’s routing engine analyses the transaction details based on the configured static and dynamic routing rules to determine the optimal route. If the transaction fails, our routing engine can cascade the transaction to an alternative processor or acquirer without disrupting the customer experience. 

Precium’s  team partners with our clients during the onboarding and integration process to recommend static and dynamic routing rules based on the merchant’s business model, customer base, and priorities. Examples of smart routing applications include:

• Exposing locally relevant payment options based on currency or BIN number to increase customer conversion.
• Splitting transaction traffic between multiple processors and acquirers during peak periods such as Black Friday. 
• Rerouting failed transactions to an alternative processor to reduce cart abandonment and involuntary churn. 

Who benefits from smart routing? 

Any business looking to optimise customer conversion and repeat purchases can benefit from smart routing solutions. For businesses with high volumes and complex payment needs, smart routing is increasingly non-negotiable. These merchants include:

1. Large retailers and e-commerce sites: Given their high processing volumes and peak periods such as pay-day sales, large retailers and e-commerce sites can significantly increase conversion rates and cart abandonment with smart routing. 
2. Multi-market companies: Merchants operating in multiple markets can increase speed to market and streamline complex financial flows across multiple channels and geographies. Through exposing the most locally-relevant payment options, merchants can optimise customer experience and increase conversion and success rates. 
3. On-demand delivery and mobility platforms: For on-demand platforms, payment success rate is a critical factor for customer experience and capturing value. Smart routing ensures a seamless customer experience and business continuity, mitigating the impact of downtime on revenue realisation. 

Ready to get started? Book a sales consultation to learn how smart routing can optimise your payment performance.