Banking Providers Need to Upgrade Payment Routing Platforms

Finding a better way to address payment processing through multiple service providers is increasingly important as payment options proliferate. A payment gateway manager helps simplify processing, reduce transaction failure, optimize cost and enhance consumers’ checkout experience.

Technology has changed the payment landscape over the last couple of decades, and will continue to do so in the future. The demand for newer, more intuitive payment options is growing every day, and they are being met in the form of e-wallets, virtual cards, one-click online payments and other solutions.

According to Juniper Research, online sales of physical goods will grow from $3.3 trillion in 2020 to $4.4 trillion by 2025. Such huge volume and value of transactions are handled by range of financial institutions from banks and credit unions to fintechs. Businesses, on the other hand, are required to offer a host of payment instruments such as bank accounts, credit cards, debit cards, digital wallet et al.

But integrating with multiple financial instruments is complex and managing them is cumbersome. To overcome these integration complexities, many businesses have integrated with payment service providers (PSPs) that aggregate various financial entities – banking providers, card schemes, digital wallet providers and others.

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Most businesses start operations with one PSP. But with globalization, businesses can reach people from far corners of the world and one single PSP cannot accept payments across channels, geographies and currencies. Moreover, a single PSP cannot always provide 100% uptime while handling high transaction loads.

Payment downtime can result in failures, cart abandonment and lost sales for businesses. A survey says that among e-commerce shoppers, 42 percent abandon their carts if their cards are declined. Also, depending on a single PSP might restrict the business from getting most affordable processing rate in the market.

To address these challenges, businesses are integrating with multiple PSPs to ensure most optimum and holistic online payment experiences. However, this again leads to complexities of managing multiple PSPs.

Therefore, finding a suitable payment gateway management solution to address payment processing through multiple PSPs is important for businesses. An ideal payment gateway manager sits over the multiple PSPs, helping businesses to simplify payment processing, reducing transaction failure, optimizing cost and enhancing consumers’ checkout experience.

The Need for Payment Gateway Manager and Smart Routing

A smart routing service is beating heart of a payment gateway manager. It helps businesses to easily configure transaction routing to multiple PSPs as per business needs by defining routing rules. Routing rules can be defined based on multiple variables like:

  • Transaction value
  • Payment instrument
  • Card network
  • Card issuer
  • Card currency
  • Card issuer country
  • Payment channel
  • Business Unit
  • Health of the PSP etc.

Such a smart routing system relies on advanced algorithms, artificial intelligence (AI) and machine learning (ML) tools to help merchants that use multiple PSPs. The system evaluates the PSP for optimal returns per transaction, and determines the best PSP to be used using data points. The data points considered can be the transaction success rates of different payment methods, location, connectivity, or other factors.

These dynamic routing techniques are being used at startups like PayU India, which recently upgraded to an advanced ML decision-making payment gateway system. The organization revealed that the change improved conversion rates by 12%.

For businesses, the advantages of using a payment gateway manager can stack up benefits as listed below.

Complete control over transaction to merchants. A payment gateway manager allows businesses to define routing rules as per their business need giving them control over payment processing. For example, if PSP A processes only card payments, while PSP B processes both card and digital wallet payments, a payment gateway manager would allow the configuring rule to route all digital wallet payments to PSP B.

Similarly, PSP A provides higher transaction success rate in country Y, while PSP B provides higher transaction success rate in country Z, payment gateway manager would allow configuring rule to route transactions from a particular country via PSP with higher success rate.

Optimizing transaction costs for businesses. Each PSP has a different processing fee based on factors like payment instrument, card scheme, country, transaction type and many more. Usually, businesses use static routing, which can translate to a higher processing fee on an average. Smart routing helps to route transactions to the PSP charging lowest processing fee, bringing cost savings for businesses.

Intelligent alerts. Payment gateway managers dynamically calculate the health of each PSP on run-time basis, and if any PSP or payment instrument falls below a defined threshold, the payment gateway manager generates alerts to notify the administrator, who can then take corrective actions and redefine routing rules.

Fail-over PSP. Businesses can also define a fail-over PSP which kicks in if the primary payment gateway is down to prevent mass failure of transactions, reducing card abandonment and loss of revenues.

Smart retry for failed transaction. If a transaction fails due to downtime, maintenance, load on bank server or transaction time-out, then the transaction will be routed via the next best PSP. Retry option helps reduce the number of abandoned transactions and boosts success rates.

Unified intelligent reporting. The payment gateway manager provides businesses with actionable insights, which demonstrate the efficacy of different rules across the payment gateway through a single dashboard. With functionalities like checkout analysis, accessing actionable business insights and more, merchants and businesses can easily identify the reason behind the failure of payment gateway and formulate a solution.

Anatomy of a Payment Gateway Manager

While the advantages of smart routing are quite impressive, the technology behind it is no slouch either. There are many smart routing platforms available, but the best ones are characterized by the following:

Smoother checkout experience for consumers

Generally during an online payment, the consumer is redirected to the web pages of different PSPs, which hampers the consumer experience and impacts trust in online payment.

Rather than redirecting consumers to a different web page, a payment gateway management solution should provide a checkout form within the businesses’ website, facilitating a simpler, quicker and trustworthy payment experience with fewer clicks.

It should also provide features such as saving card details for future transactions, auto-filling of one-time password (OTP), option to retry failed transaction manually and personalized payment experience like showing the most frequently used payment instrument at the top.

All this leads to a faster and frictionless payment experience for consumers.

Focus on high-success rate

The smart routing system should be capable of ensuring high success rates at lower MDRs. It should support different payment instruments, and be flexible enough to integrate quickly with the different PSPs.

Quick, automated and error-free reconciliation

When businesses are integrated with multiple PSPs, they would receive multiple settlement files from different PSPs scattered across multiple sources such as emails, APIs, FTPs, portals and manual uploads etc. and would have to perform reconciliation manually which is time consuming and prone to error.

A payment gateway manager automatically fetches data from multiple data sources available in different file formats (xls, xlsx, csv, txt) and shows a single dashboard across multiple PSPs, highlighting red flag transactions, incorrect rates by PSPs, delayed payments by PSPs and incorrect netting by internal systems.

It helps businesses to automatically reconcile internal transaction records with settlement files received from payment service provider at defined frequency and as per defined rules, thus making reconciliation process faster and free of manual errors.

An efficient payment gateway manager can handle massive data volumes and transaction complexity, all of which is processed at high speed and extraordinary accuracy. Beyond these essentials, there are additional features which can add value to merchant business. These include features such as:

  • Marketplace settlements. The marketplace should be empowered to split individual payments between multiple sellers with complete flexibility on how much to transfer, to whom and when to settle. The need is to automate routing of high volume payments to multiple service providers without any hassles. A new age payment platform helps to optimize operational cost involved in calculating the split between different sellers as well as reducing the cost of serving sellers with the transaction and settlement details that they require. It also provides sellers with an easy to use self-service portal providing details of transactions and payout.
  • Invoice payments. The platform should securely generate web addresses which allow people to make payments immediately through any convenient payment mode. It allows merchants to pull payments from a consumer anytime, anywhere without need to be physically present.
  • Merchant management. The solution should be a complete merchant management platform that supports N-level Hierarchy, paperless onboarding, payment instrument management, a seamless payment presentation layer among other features.

The Way Forward

The smarter way of routing can not only save organizations a huge amount in lost sales, but also drastically reduce the uncertainty people feel when they’re waiting for their payment to go through. To meet this need for better payment-related services under the scrutiny of regulations, businesses (including banks and credit unions) must proceed under the guidance of trusted partners specializing in the field.

Starting with the analysis of the space and computational requirements to find the most optimal payment gateway manager, the solution must be able to handle all pressing issues.

Comviva’s payPLUS ticks all such boxes – payment acceptance across multiple instruments and channels, smart routing, automated reconciliation, unified reporting, invoice payments, marketplace payments, value-added services, seamless UI, omni-channel UX and many more.

To know more about payPLUS, contact us at manu.manohar@comviva.com or nidhi.jindal@comviva.com.

About the authors:

Manu K Manohar is a product manager for payPLUS at Comviva technologies, with nearly ten years of experience in the payments and identity domains.

Nidhi Jindal is a product manager at Comviva technologies and manages the payment acceptance platform. She is passionate about building next generation platforms, which serve the financial needs of consumers and businesses.

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