Payment optimisation has become a critical factor for merchants. The potential for cost efficiency, savings and revenue uplift can be a game-changer for businesses, but only with the strategic implementation of new payment initiatives.

In my last article, I covered the importance of centralised agnostic tokenisation to increase flexibility and employ a true multi-processor strategy. Once you’ve embraced these tactics, the next step is to adopt intelligent payment routing.

Intelligent payment routing

Today, many merchants are overwhelmed by the number and complexity of payment decisions. ‘Which processor should I leverage?’ ‘Should I retry this transaction?’ ‘Is using a PSD2 exemption fruitful?’ ‘When do I use network tokens?’ and on and on.

The challenge for merchants is that it can be difficult to make the best decision for each transaction when there are so many different factors that influence the cost of acceptance and conversion rates.

Intelligent payment routing takes into account all of these factors to enable transactions to be directed along optimal paths that balance cost and conversion rates. It unlocks the ability for merchants to retry declines across different PSPs, optimise for availability, and more – all while reducing friction, increasing authorisations, and lowering costs.

How? By optimising across a number of factors such as cost, debit/credit rails, conversion, customer experience, availability, retry strategy and more. By taking into account all of these factors, merchants can optimise their payment processes to drive revenue and business growth.

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Optimising for performance by leveraging AI

Currently, most merchants rely on a set of rules to determine their decisions (i.e., if payment method = x, process the transaction with y processor). When you take into account the number of factors and the need to respond to changes in the ecosystem, however, it’s clear that it is impossible to manually manage these dynamics effectively with rules.

Instead, merchants should leverage AI and machine learning to fully optimise their payment stacks. By leveraging AI, merchants can maximise revenue on each transaction, even as circumstances change.

For example, under PSD2, if a PSP experiences increased fraud pressure, its exemption threshold might drop from €250 to €100 without them warning their merchants, leading to more declined transactions or unexpected routing to 3DS. If a merchant is manually managing their routing with rules, they may miss this change or respond too reactively – impacting the merchant’s bottom line. With intelligent payment routing, the technology automatically detects the change in PSP behaviour and may adjust its routing as a result, minimising any negative impact.

Enhanced control

It’s important to note that with intelligent payment routing, merchants retain control over their transactions by setting parameters for how certain transactions are routed. For example, transactions deemed higher risk can be routed differently than those considered lower risk. This control is particularly relevant in Europe, where the extensive and diverse payment landscape offers numerous routing options and complex multi-PSP relationships to manage.

The power of intelligent payment routing

By utilising intelligent payment routing, coupled with agnostic tokenisation and a multiprocessor strategy, merchants gain enhanced control over costs, conversion, and customer experience to drive more revenue. These strategies position merchants to ensure that payment services positively affect profitability, which is crucial in today’s competitive, low-margin environment.

Galit Shani-Michel is VP of Payments at Forter