Andy McHale, senior director of product and market strategy at Spreedly, told PYMNTS in an interview that in the age of digital commerce, dynamic routing can be key to customers’ loyalty to merchants.
And to get there, it helps to differentiate payments orchestration from payments optimization.
Payments orchestration is tied to what McHale termed the “basic building blocks of connecting things together,” spanning payment vaults and making sure that payment methods are securely tokenized, so that connections and payment options can be extended to different payment service providers (PSPs).
“And then you start to layer on this notion of optimization,” said McHale, where transactions can be routed depending on parameters such as which options cost the least or have the highest authorization rates, or when payments must skirt an outage so that a transaction can be completed without interruption.
He noted that merchants may have multiple gateways and PSPs set up, and it’s possible that, on occasion, gateways go dark, resulting in downtime. Transactions can be lost, but as McHale said, dynamic routing can detect those outages, sending the transactions to a backup gateway to ensure continuity.
“There are no impacts to the users, and the transactions can keep flowing — and it’s a seamless transition,” he said.
Dynamic routing helps serve the ultimate ambitions of any merchants operating online, McHale said.
“[They want to] get as many transactions through with the lowest amount of fraud possible,” he said.
The positive ripple effect is that the end customer winds up having a better, more streamlined experience as declines, well, decline.
Dynamic routing also helps ensure that merchants coming into new markets or even geographies can offer a broader, optimal range of locally-referred payment options, he said. Those options may include cards but can also extend to alternative payment methods.
He offered an example in which routing can be customized. A merchant may, hypothetically, be able to get better interchange rates on Mastercard through one gateway than might be seen elsewhere and through yet another gateway when it comes to Visa transactions. Setting those criteria through dynamic routing mandates the transactions flow to the most cost-effective gateways. In the United States, debit card payments can be processed in ways that promote savings for the merchant by ensuring the payments wind their way across debit networks.
And with a nod to the complexities that might be seen in a particular vertical, he told PYMNTS that the travel vertical illustrates the benefits of dynamic routing. Booking and paying for a trip, even through an online travel agent, involves several transactions — and effective routing ensures that these payments are routed to the most effective gateways for authorization no matter how many “categories” of spend are in place.
Dynamic routing also offers another key benefit: decline salvage.
We’ve all been there, he said. A card is declined at checkout, and we might not know the reason why the “false” decline has transpired. “Soft declines,” he said, may occur at a given gateway, but with an optimized approach, that transaction/card might be tried at another gateway or through a different processor with positive results.
As payments skew ever faster as FedNow gains ground, McHale contended that the “entire dynamic” around routing is changing. In the age of instant payments, they become push, rather than pull, payments. The choice to initiate payments may be consumer driven, and the merchant has to offer ways for those funds to be received. As of yet, faster payments schemes across the globe are not always interoperable with one another. Payments orchestration and dynamic routing can help link those systems together more easily and fully.
McHale also contended that the robust data flow that is tied to dynamic routing also gives merchants greater visibility into the payment methods, preferences and market conditions that might spur them to adjust their payments offerings on a market-by-market basis.
“Things change over time,” he told PYMNTS, “and there’s no ‘set it and forget it’ strategy,” when it comes to payments.
