Why Dynamic Routing Has Become Essential for Online Retailing

Payment processing is vital to online retailers’ operations. A quick and easy checkout experience can be the difference between a completed sale and an abandoned shopping cart.

That’s why, with its ability to optimize transaction paths in real time and provide a multitude of benefits, dynamic payment orchestration is critical in today’s e-commerce landscape. Given this, the global payment-orchestration market size is expected to reach $6.52 billion by 2030.

Using a variety of criteria, dynamic payment routing determines the most economic and effective payment-processing alternatives. The technology uses real-time data and sophisticated algorithms to dynamically route transactions, accounting for various factors like currency, location, payment method, and performance metrics.

In contrast to conventional, static payment-routing techniques—which depend on preset rules and fixed pathways—payment routing orchestration adjusts to the unique conditions of every transaction, guaranteeing optimal performance and increasing the likelihood of a successful outcome.

Determining the optimal payment routes for a particular transaction, based on specific criteria in real time, limits the chance of declines, chargebacks, and other common payment-related issues. By continuously monitoring and adapting to changing conditions, dynamic routing delivers a level of nimbleness and responsiveness that traditional methods can’t match.

So how can this impact businesses’ e-commerce efforts?

Shoppers are more likely to complete their purchases when there are fewer unsuccessful transactions and easier checkout processes. Sixty-two percent of customers who receive a failed-payment notice abandon their purchase, according to BR-DGE. Additionally, a Baymard Institute study found 22% of online shoppers in the United States have abandoned an order due to a long or complicated checkout process.

The positive effect dynamic payment orchestration can have on e-commerce transaction rates is significant. By providing smooth and efficient payment processing, merchants can offer shoppers a hassle-free checkout experience. As a result, organizations have experienced a 20% rise in global sales, according to McKinsey research.

Also, dynamic routing can intelligently choose acquirers, based on performance criteria like uptime and response times. In this way, retailers can lower the possibility of delays, timeouts, and other problems that can negatively affect the customer experience.

All of this results in increased conversion rates and longer-term customer loyalty.

As online businesses grow and enter new markets, the need for payment processing gets more complicated. These shifting requirements can be readily met by dynamic routing, which affords the flexibility and scalability to easily handle higher transaction volumes and adjust to new currencies and geographic areas.

Online retailers can also tailor and fine-tune the routing algorithms to match their own business objectives and priorities, thanks to the flexibility of dynamic routing. Payment orchestration can be customized to match the specific requirements of each retailer, regardless of whether cost-effectiveness, speed, risk appetite, or a mix of criteria is prioritized.

In addition, with the constantly evolving payments landscape, dynamic routing provides the agility to address new regulations and incorporate new payment methods and technological advances, automatically ensuring transactions follow suitable pathways to completion.

Retailers leveraging payment orchestration can also realize a decrease in fraudulent transactions. This is made possible by algorithms that combine payment flows while applying sophisticated fraud-detection rules. Real-time data analysis makes it possible to obtain a consolidated picture of all transactions across multiple channels and payment methods, which enables the detection and prevention of fraudulent activity. This also means businesses are complying with global laws, including the Payment Card Industry data-security standard.

Dynamic payment orchestration has proven valuable in e-commerce as customer demand for friction-free experiences increases. With its ability to streamline transaction paths, increase conversion rates, and bolster customer satisfaction, it is now key for success in online retail.

—Jed Danbury is vice president at Computop.