Why The Smart Payments Money Is On Gateway Diversification

In business, the mantra goes — diversify.

So it is with payments, where, for merchants, relying on one channel or gateway for transactions can prove costly, even disastrous.

That’s because revenues can only be realized if transactions are successful. Relying on a single point path can stymie transaction flows and discourage consumers from coming back to try to complete their purchases. A hiccup here means consumers may simply opt to take their business elsewhere, moving on to a merchant and site where checkout is smoother.

Gateways, of course, are the platforms that merchants use to process card transactions done online, across debit and credit transactions. Gateway diversity allows mitigation of outages, a method for higher success rates through intelligent routing of transactions, as well as provides the flexibility to experiment to improve success and lower costs.

Meredith Tomblin, head of business analytics at Spreedly, told PYMNTS that a multiple gateway strategy acknowledges “business needs are changing,” and that multiple gateways are “part of an overall payments orchestration strategy.”

That diversification, she added, can help merchants see boosts in top and bottom lines amid a backdrop of ever-increasing card-not-present (CNP) transactions and a range of localized consumer payment preferences.
At a high level, said Tomblin, multiple gateways can help create a resilient payments infrastructure, eliminate pain points and ensure payments will be successful.

“More merchants are doing more business internationally,” she said. “They are maintaining online and brick-and-mortar stores — and sometimes they change their business models.”

New offerings to end consumers, spurred by the pandemic, often include CNP options.

As businesses fine tune their business models and expand into new geographies (with, perhaps, the challenge of accepting payments across multiple currencies), the costs of complexity, and the specter of latency and declined transactions, increase.

“It’s important to tailor your payments experience for the market and for the customers that you would like to attract and retain. Payments orchestration gives you that ability to transact with the best mix of vendors to meet your customer’s needs,” said Tomblin.

Although the benefits of optimizing a payments strategy (particularly through orchestration) may be clear-cut, the complexity of developing and maintaining that strategy wholly in-house can be daunting and costly, especially for smaller companies with somewhat limited resources.

“You might have a development team in-house, but even if you do, they may not have the skills or the time to create and maintain these gateway connections,” noted Tomblin.

In addition, there’s also the risk of increasing the payment card industry (PCI) compliance burden. One solution is to embrace a model in which firms work with third-party, gateway-agnostic providers such as Spreedly, which can connect to almost any gateway across several countries through a single point of integration.

Once multiple gateways are in place, explained Tomblin, smart routing — which determines transactions’ optimal path to completion using data such as transaction type, currency and issuing banks — can select the optimal gateway for a given transaction by transaction type, geography, etc. (Improved data reporting also helps companies fine tune their payment strategy while minimizing any impact to the business.) Should one gateway or provider experience technical issues or interruption, payments traffic can be rerouted with no real degradation of experience on the consumer side of the equation as he or she checks out online.

Spreedly, Tomblin said, has seen customers using gateway diversity and smart routing increase their success rates by double-digit percentages.

“In a nutshell, smart routing is sending the right transaction to the right gateway at the right time,” she told PYMNTS — with the end result of getting merchants paid and keeping customers happy.