Intelligent payment routing: Driving higher conversions & approval rates

As your business expands globally, managing payments gets trickier. Different regions have their own preferred payment methods, banks apply unique risk rules, and some acquirers perform better than others, depending on the market.

According to Solidgate data, up to 30% of online payments fail due to card declines, fraud checks, and inefficient processing routes—costing online merchants revenue and driving up involuntary churn.

Take Brazil, for example. With low credit card penetration and a strong preference for local payment methods like Boleto Bancário and PIX, using an international acquirer instead of a domestic one can slash approval rates by over 20%. The same goes for Europe and the U.S., where factors like Strong Customer Authentication (SCA) rules in the EU and strict issuer risk models in the U.S. create their own authorization challenges.

That’s where intelligent payment routing comes in. By dynamically selecting the best payment flow for each transaction, businesses can maximize authorization rates and protect their bottom line. But how does it work? And how do you implement it effectively? Let’s break it down.

What is intelligent payment routing?

At its core, intelligent payment routing (smart payment routing) is a system that directs transactions through the most efficient payment processors, acquirers, or gateways based on real-time data. Unlike traditional static payment routing, which relies on fixed pathways, intelligent routing adapts dynamically, considering factors such as:

• Card issuer preferences (some issuers favor specific acquirers)
• Transaction amount and currency
• Geolocation and regional regulatory requirements
• Fraud detection and risk scoring
• Acquirer performance metrics (success rates, processing speed, fees)

Below, you can see what it might look like.

Intelligent payment routing vs. traditional static routing

Payment orchestration plays a key role in this process by providing a unified payment infrastructure, centralizing multiple providers, and optimizing transaction flows. Intelligent payment routing is an essential part of this, dynamically selecting the best path for each transaction based on real-time data. The result: fewer declines and higher conversions.

At Solidgate, we simplify this by providing a unified payment infrastructure to help businesses efficiently route transactions, improve payment performance, and maximize revenue. Keep reading to see how intelligent payment routing can work for you—or reach out to explore how Solidgate’s solution can streamline your payments.

How payment routing impacts acceptance rates

False declines, cross-border frictions, and inconsistent acquirer performance all chip away at approval rates. Intelligent payment routing finds the path of least resistance so transactions get through instead of getting blocked.

Reducing false declines

In online payments, many declined transactions are false positives, where an issuing bank rejects a legitimate transaction due to outdated fraud detection models. Up to 25% of card declines fall into this category, according to a study by J.P. Morgan.

For example, in the U.S., subscription businesses often face high decline rates because fraud detection systems flag recurring payments as suspicious. One fitness subscription app we worked with saw a 20% decline rate from a single issuer, which was resolved by dynamically routing transactions through a different acquirer.

Intelligent routing helps by:

• Identifying issuers more likely to approve transactions.
• Automatically rerouting payments to acquirers with higher success rates.
• Preventing unnecessary declines without increasing fraud risks.

Optimizing transaction paths for cross-border payments

In cross-border scenarios, where the issuing bank, merchant, and acquiring bank are in different countries, payment processing faces more friction due to exchange rate losses, varied regulations, and fraud rules. 

A merchant based in Europe processing a U.S. customer’s payment may face higher decline rates if the transaction is routed through a local EU acquirer instead of a U.S.-based one.

For example:

• U.S. merchants see an 85-90% approval rate on average.
• Latin American markets can have rates as low as 50-60% due to stricter bank policies.
• EU-based businesses might need Strong Customer Authentication (SCA) compliance, impacting approval rates.

With smart payment routing, payments are directed to the most effective processor based on location, currency, and historical approval rates, leading to a 10-15% increase in approval rates on average.

Recovering failed payments

Even with the best routing strategies, some transactions will inevitably fail. However, intelligent transaction routing can immediately attempt to recover failed payments by retrying them through alternative acquirers or adjusting retry timing based on the decline reason.

Here’s how it works:

• Soft declines (e.g., insufficient funds, temporary bank restrictions) can be automatically retried within 24 to 48 hours to improve authorization success.
• General declines (issuer-based rejections) can be instantly rerouted to another acquirer with a higher probability of approval.
• Hard declines (e.g., lost/stolen cards, fraud suspicion) should not be retried, and instead, the card should be flagged or blacklisted to avoid unnecessary costs.

We extensively cover handling soft and hard declines in our article How to manage card declines.

By analyzing the decline reason and applying automated retry logic, businesses can recover up to 30% of initially failed transactions, ensuring better retention and reducing involuntary churn.

Why global businesses need intelligent payment routing

Every failed payment isn’t just a missed transaction—it’s potential lost revenue, increased churn, and higher operational costs. Here’s how intelligent payment routing helps solve it.

Maximizing revenue and reducing churn

Subscription businesses—most businesses we at Solidgate work with—operate on predictable revenue models and rely on high lifetime value (LTV). It makes every failed payment a direct hit to their bottom line. 

A single failed payment could mean losing months or years of future revenue. Research by Stripe indicates that involuntary churn due to payment failures accounts for 20-40% of total churn.

Intelligent payment routing helps mitigate this by ensuring payments are processed through the most efficient channels, keeping customers subscribed and revenue steady.

Lowering processing costs

Not all payment processors charge the same fees, and some acquirers offer better rates based on transaction types or regions. By routing payments intelligently, merchants can avoid unnecessary costs, optimizing for lower fees while maintaining high approval rates.

Ensuring compliance and reducing fraud

Global payment expansion means dealing with complex regulations (like PSD2 in the EU). Intelligent routing helps by optimizing risk-reward decisions for each transaction and making smart use of 3D Secure—automating acquirer selection and reducing fraud in the process.

How to implement intelligent payment routing

While IPR is powerful, implementation requires planning to see results. Firstly, implementing intelligent routing is technically complex. It involves integrating with multiple acquirers and complying with local regulations while optimizing payment flow.

Plus, you face certain acquirer limitations. Not all acquirers are created equal: some may not support dynamic routing, while others may have higher latency. You should continuously evaluate acquirer performance and adjust routing strategies accordingly.

Here is the optimal way to implement IPR:

1. Assess your payment infrastructure

• Review current approval rates.
• Identify regions, banks, or card types with the most failures.

2. Choose the right payment service providers

Not all processors support intelligent routing. Check if payment providers offer:

• Multi-acquirer support for global coverage.
• AI-driven routing that adapts in real time.
• Automated retry mechanisms to recover failed payments.
• Seamless API integration with existing payment stacks.

3. Monitor and continuously optimize

Smart payment routing is not a set-it-and-forget-it system. Businesses should:

• Track authorization rates and retry success rates.
• Regularly analyze processor performance by region and card type.
• Adjust routing rules based on trends and regulation changes.

By implementing payment orchestration, businesses can optimize transaction processing, reduce transaction costs, and ensure optimal routing strategies across different markets.

Smart routing isn’t a luxury—it’s a competitive edge

If you’re scaling globally, intelligent payment routing isn’t optional—it’s essential. By optimizing transaction paths, reducing false declines, and lowering processing costs, merchants can increase approval rates by 10-15% and recover up to 30% of failed payments.

Here’s where to start:

• Leverage real-time routing to dynamically select the best acquirer for each transaction.
• Use local acquiring to maximize approval rates in key markets.
• Implement automated retries to recover failed payments without increasing risk.
• Optimize for compliance with SCA, 3DS, and regional regulations.
• Monitor acquirer performance continuously to refine your routing strategy.