What variables change in the reconciliation and settlements process when it comes to cross-border transactions?
To efficiently accept cross-border payments, the merchant will most likely have a multi-acquirer setup and be connected to multiple payment service providers (PSPs). This enables them to offer the relevant payment methods for the jurisdiction in which they operate, as well as to benefit from lower processing fees due to geographical location and other determining factors. While this has its benefits, it is not without logistical issues.
When discussing with clients what they want from a payment orchestration platform, we noticed that a large percentage focus on the problem of not having accurate reconciliation and settlement data across their PSPs and being unable to effectively monitor the lifecycle. This is a common complaint and can happen when connections are built individually and do not speak to each other. By using just one API to connect to payment gateways, merchants can monitor the entire activity from one dashboard, no matter if there are multiple PSPs involved or even multiple currencies, such as fiat or crypto.
What is the role of a multi-acquirer infrastructure in this whole process?
A payment infrastructure that allows for a consolidated multi-acquirer setup, like a payment orchestration platform, gathers all the data and displays it uniformly. This is possible, since the payment orchestration platform acts as a technical layer between the merchant and the PSPs/ acquirers – meaning that transactions are sorted through the platform and then, depending on rules created by the user of the platform, routed to the most relevant processor. It also means that the payment data is stored on the platform, enabling the payment orchestration platform to extract the relevant information from the payment processors.
All the data stored on the platform can be exported into a company’s BI (business intelligence) software, allowing for easy analysis and sharing of data.
Do you think that smart routing based on the card-issuing country would be a solution for global merchants to maximise their authorisation rates?
Using the issuing country of the card – and other geo-specific tags – as a rule to forward transactions to specific acquirers would undoubtedly increase authorisation rates. However, there are many factors involved as to why a transaction is authorised or declined. By creating a set of rules based on risk factors, location, and platform-specific data, merchants will be able to route all transactions to the best PSP. That might mean that 90% of transactions with a card issued in Spain will go to a payment service provider with an acquiring bank in Spain.
However, the remaining 10% might be handled better elsewhere based on the result of the set rules. One clear fact in payments is that making assumptions and generalisations is risky.
Smart routing has the wonderful power of taking macro and micro-level into account. The flexibility of the routing rules, on a platform such as IXOPAY, is almost limited only by imagination. Merchants can set up routing rules that are based on a variety of factors and can implement features such as cascading, which is when a failed transaction is pushed to another PSP until it finds one that accepts it.
Another method that helps, especially during busy times, is load balancing, as it can stop providers from becoming overwhelmed, reducing the risk of declined transactions. As IXOPAY consolidates all the payment data, the routing of transactions has no detrimental effect on the reconciliation process.
When a PSP or acquirer encounters technical difficulties or performs poorly in the transaction flow, how is smart routing able to ensure a backup?
When a payment provider unexpectedly experiences downtime, it can be a big problem for merchants. To protect their payments, they should have a multi-acquirer setup giving them the safety of a backup. However, having a multi-acquirer setup is not enough.
Using a payment orchestration platform with a smart transaction routing engine means that merchants will be able to easily implement fallback routing, and if the problem lasts for longer than anticipated, they can rearrange their routing rules to not lose any potential payments. A payment orchestration platform also means that merchants can integrate quickly with new providers.
A payment infrastructure that allows for a consolidated multi-acquirer setup, like a payment orchestration platform, gathers all the data and displays it uniformly. This is possible, since the payment orchestration platform acts as a technical layer between the merchant and the PSPs/ acquirers – meaning that transactions are sorted through the platform and then, depending on rules created by the user of the platform, routed to the most relevant processor. It also means that the payment data is stored on the platform, enabling the payment orchestration platform to extract the relevant information from the payment processors. All the data stored on the platform can be exported into a company’s BI (business intelligence) software, allowing for easy analysis and sharing of data.
Using the issuing country of the card – and other geo-specific tags – as a rule to forward transactions to specific acquirers would undoubtedly increase authorisation rates. However, there are many factors involved as to why a transaction is authorised or declined. By creating a set of rules based on risk factors, location, and platform-specific data, merchants will be able to route all transactions to the best PSP. That might mean that 90% of transactions with a card issued in Spain will go to a payment service provider with an acquiring bank in Spain. However, the remaining 10% might be handled better elsewhere based on the result of the set rules. One clear fact in payments is that making assumptions and generalisations is risky.
This interview was first published in our Cross-Border Payments and Ecommerce Report 2021–2022, which taps into the fast-growing cross-border market and provides a comprehensive overview of trends and developments that are pivotal in this space, being the ultimate source of information for ecommerce businesses interested in expanding globally.
About Rene Siegl
Rene is the Founder and Executive Chairman of the IXOLIT Group, which was founded in 2001. Since 2014 Rene has been leading the development of the IXOPAY Payment Orchestration Platform, which addresses the global payment scaling needs of online merchants and licensed payment institutions.
About Ixopay
IXOPAY is a scalable and PCI-certified payment orchestration platform for white label clients and enterprise merchants. The modern, easily extendable architecture enables the orchestration of payments, provides intelligent routing and cascading functions, as well as state-of-the-art risk management, automated reconciliation, and settlements along with plugin-based integration of acquirers and PSPs.
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