What is smart routing and how does it work?

Smart Routing in payments is a system that uses intelligent algorithms to choose the best payment processing route for a transaction, based on factors such as:

• The customer’s location
• Card type
• Current processing conditions

The aim is to increase successful transactions and minimize fees.

What is smart routing and how does it work?

A smart routing system allows entities to access multiple payment gateways, so the payment uses the most suitable option. Smart routing benefits global businesses as well as those that are expanding. Smart routing systems analyze geographical locations, payment methods, and currencies to identify the appropriate gateway.

They also look at card issuers, payment types, and payment amounts to reduce false declines.

The benefits of smart routing

Here are the benefits of smart routing for your business:

• It lowers per-transaction costs using the right method from the beginning
• It lowers currency exchange fees by selecting the best regional gateway for foreign transactions
• It improves employee and customer satisfaction and retention rates by streamlining the payment experience
• It makes the checkout process more reliable for customers and merchants
• Companies can benchmark payment performance against other businesses to improve inefficiencies and cost savings

How smart routing works

Data analysis

The system collects and analyzes previous data transactions, like success rates, declined reasons, and payment methods used.

Rule-based logic

Based on the collected data, the system applies predefined rules to pick the most suitable payment gateway for each transaction.

Real-time decision making

During new transactions, the system selects the optimal payment processor based on the analyzed data and rules.

How long does it take for a routing payment to go through?

The time it takes for a routed payment to go through depends on factors such as the payment method, processor, and routing complexity. Most card payments are instantaneous. Bank transfers, such as ACH or SEPA, can range from a few hours to several business days, depending on the network and countries involved.
Alternative payment methods, like e-wallets or buy-now-pay-later services, process quickly, though this also depends on the provider.