Let's explore the economics behind payment routing, why it matters for businesses of all sizes, and how innovative routing strategies can help strike the right balance between cost, risk, and conversion.
What is payment routing?
Payment routing is the process of determining the most effective way to send each transaction. Instead of pushing every payment through one gateway, it looks at different acquirers, processors, and providers, then picks the route most likely to succeed.
Behind the scenes, this process draws on a combination of rules and live data points – factors such as card type, issuing bank, currency, transaction amount, customer location, or past provider performance. The aim is simple: maximise approval rates while keeping costs low, transactions fast, and systems reliable.
Why payment routing matters
Why should anyone care about the "how" behind transactions? Because routing can make or break a business's bottom line.
- Costs add up: every PSP or acquirer charges fees, and not all are created equal. Smart routing ensures you don't overpay.
- Conversions drive growth: each declined transaction isn't just a technical glitch – it could be a lost customer. Intelligent payment routing boosts acceptance rates.
- Risk is always present: outages, fraud, or compliance issues can hit at any time. Routing strategies help spread the risk across providers and regions.
For high-volume businesses, even a small percentage improvement in approvals or costs can translate into millions in saved revenue. If you're considering developing a payment gateway, think about adding payment routing capabilities as a value-added feature – it can make your solution far more competitive.
Payment routing optimisation strategies
Within Corefy's payment orchestration platform, payment routing is highly flexible and can be tailored to your specific business needs. Here are the top routing strategies that can boost merchant profitability.
1. Optimisation by fees
Transaction fees can quietly erode your margins. The smart move is to route payments dynamically to whichever provider offers the lowest fees at the moment. By keeping a close eye on provider costs and currency fluctuations, you can build a routing strategy that automatically prioritises cost efficiency. Corefy's cost analytics, for instance, help you reorganise payment flows on the fly to keep expenses in check.
2. Optimisation by conversions
Every failed payment is a lost customer. By monitoring conversion rates across different routes, you can prioritise the ones with the best track records. Real-time data and automated rules ensure transactions are always directed through the most reliable channels. If your business is high-risk and conversions look unusually low, it may be worth diving into routing performance to uncover the cause.
3. Optimisation by balances
Managing multiple merchant accounts means constantly watching your balances. Running one account empty or letting another balloon can disrupt operations. Automated balance-based routing solves this by evenly distributing transactions while keeping liquidity healthy. With Corefy, you can activate a "By Balances" strategy, set up alerts for critical thresholds, and even export detailed reports in just a few clicks.
4. Optimisation by weightings
If you're processing large volumes, spreading the load is vital. Routing by weightings enables you to set percentage splits across accounts – for example, 40% through one, 30% through another, and 30% elsewhere. This keeps things balanced, reduces operational risks, and gives you more control over traffic distribution.
5. Optimisation by turnover volumes
Turnover thresholds matter, especially as you scale. By setting limits for each account, you can ensure no single account exceeds compliance requirements or becomes overloaded. Routing payments based on turnover helps spread the volume more evenly, improving both cash flow and compliance management.
6. Combined optimisation strategies
You don't need to stick to just one approach. The real power comes from blending strategies – cutting costs with fee-based routing, while also improving conversions and managing balances. This mix-and-match flexibility allows you to adapt to different business models, volumes, or regions, creating a routing setup that genuinely works for your unique needs.
Pro level: payment routing analytics
Setting up routing rules is only the first step. To really maximise performance, you need to constantly measure, analyse, and refine them. With the right insights, you can fine-tune your schemes, adapt to market changes, and spot hidden inefficiencies before they eat into your margins. In other words, crafting routing strategies properly and backing them up with continuous analysis is what separates basic setups from pro-level optimisation.
Final thoughts
Payment routing may happen behind the scenes, but its impact is felt across every transaction. From cutting costs and boosting approval rates to managing risk and keeping customers happy, it's one of the most powerful tools merchants and PSPs can use to strengthen their payment strategy.
Corefy is a payment orchestration platform built to make smart routing simple. With access to 550+ ready-made integrations, it allows businesses to connect multiple providers and craft flexible routing schemes that adapt to real-time conditions. Those who embrace data-driven routing and orchestration put themselves in the best position to grow sustainably and stay resilient.
