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Optimizing Ecommerce Experiences—and Revenue—with Intelligent Payment Routing

By: Ronald De Bos
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In the digital age, ecommerce brands are focused on delivering seamless shopping experiences to their customers. Yet with so much emphasis placed on the importance of dazzling, customer-centric front-end displays, it can be easy to overlook the continued importance of orchestrating frictionless payments behind the scenes.

A payment process that goes off without a hitch is not only vital for customer satisfaction but directly influences the likelihood of repeat business and healthy revenue growth. And as brands go global, the importance of intelligent payment routing to these winning, retention-driving experiences only grows.

Find out why this is the case in our guide to smart routing, where we dig into the challenges of payment failures, as well as the workings and benefits of intelligent payment routing, including its centrality to cross-border ecommerce ventures.

Why payments fail

The journey of an online payment is fraught with potential stumbling blocks. Errors can emerge at any of a number of stages. In general, though, ecommerce payment failures can be categorized into two categories: checkout and processing errors.

Checkout errors occur when a customer experiences issues at the point of sale, such as input errors or connection timeouts. These happen on the front end of the consumer experience and prevent the transaction from being completed.

Processing errors, on the other hand, occur behind the scenes and can arise from various factors. These errors occur after a shopper seems to complete a purchase, yet something along the way prevents the transaction from being fully, successfully processed.

Among the most detrimental processing errors are false declines, where legitimate transactions are incorrectly refused. These dreaded declines are a black hole in the ecommerce universe, driving an estimated $430 billion in lost revenue annually.[1] Behind these declines are outdated fraud detection tools, poor data quality, and an inability to understand local banking practices—all of which intelligent payment routing is designed to address.

What is intelligent payment routing?

Intelligent payment routing, or smart routing, is the technology that ensures transactions are processed through the most optimal path. Like a river finding its most efficient course to the sea, intelligent routing dynamically selects the best route for a transaction to reduce the likelihood of payment failure. This requires flexibility as well as versatility in a payment processing network; and when it concerns cross-border transactions, it requires an understanding of local financial institutions and processes.

How intelligent routing works

At the heart of intelligent payment routing lies a multi-acquirer network. This network functions as an interconnected system where payment transactions can be rerouted in real time to the most suitable acquirer (the financial institution that approves or declines a transaction).

In a traditional payment routing system, a payment platform will connect with only a single acquiring institution; if it fails, then the payment fails. Meanwhile, in an intelligent routing system, there are multiple options available. The payment processor will first attempt to connect with the best option, however, if this route fails or is slowed, the intelligent routing system will promptly divert to another, helping to ensure the transaction’s successful processing.

This adaptability is paramount in global ecommerce, where the difference in local banking protocols can be significant and shoppers utilize an increasingly varied number of preferred local payment methods.

The benefits of intelligent payment routing

For businesses looking to optimize their global payment acceptance and authorization rates, intelligent payment routing is a must-have. Smart routing of transactions brings numerous benefits:

  • Increased approval rates: By routing transactions to the acquirer with the highest likelihood of approval, businesses see more completed sales (i.e., higher authorization rates).
  • Lower transaction costs: Smart routing can identify the most cost-effective processing path, eliminating bank fees that would otherwise be passed on to both the consumer and business.
  • Improved continuity: By having multiple acquirers, the risk of downtime is minimized.
  • Enhanced customer experience: Customers are less likely to encounter errors or surprise bank fees, leading to a smoother purchase experience.
  • Greater insights from payment data: Intelligent routing systems can provide analytics on payment processing, giving businesses valuable insights for strategic decisions.

The importance of intelligent payment routing for cross-border ecommerce

For businesses engaging in cross-border ecommerce, intelligent payment routing is not just beneficial—it’s essential.

This system of payment routing ensures payment settlement is optimized for the locale, reducing failed transactions due to local banking practices.

An expansive acquiring network facilitates easier market entry and localizes routing, which can significantly enhance the customer’s experience by offering preferred local payment methods and currencies. Such localization can be the difference between a sale and an abandoned cart.

Get global intelligent payment routing with Digital River

The advantages of intelligent payment routing are clear, and for a business operating on a global scale, they’re indispensable. Partnering with Digital River, ecommerce brands can access the industry’s largest local acquirer network, streamline payment authorization, offer shoppers’ preferred payment methods, and accelerate global growth.

Contact us today to learn more about how, as your merchant of record, Digital River can take on the risk and complexity of global expansion and simplify your ability to reach new markets.