The biggest problem with rules-based routing is that rules work. Temporarily.
You built them carefully. The logic accounts for BIN behavior, decline codes, and known issuer patterns. Traffic lands where it should. Performance is tracked.
Because static payment routing rules are based on patterns that were true at the time they were written, they inevitably become outdated. If an issuer changes its logic or customer behaviors change, the effectiveness of the rules quickly atrophies. Your authorization rate pays the price. It may remain steady, but it’s unlikely to improve without significant manual work.
What’s often called dynamic payment routing — Forter refers to it as predictive payment routing — doesn’t have that problem.
At the moment of the transaction attempt, dynamic payment routing considers past issuer and processor behaviors; live issuer authorization rate probability per processor, rail, and credential combination; recent failed attempts; and more. Forter also considers customer identity, providing even more context. This data paints a much more complete picture of every transaction and maximizes your authorization rate — while reclaiming money left on the table.
Why rules-based routing caps your authorization rate
Static rules give Payments teams control and predictability. But they’re binary decisions, which require you to define exactly what you want to do based on those rules. They can’t account for nuance in issuer behavior.
For example, one processor may suddenly experience a drop in authorization rate from a specific issuing bank. A rule won’t automatically recognize the drop and route the transaction to a higher-performing processor — unless you have another rule set to automatically adjust traffic based on real-time changes to the ecosystem. A complex set of rules would require constant tuning to account for fluctuations. Unless you’re constantly doing manual analyses, you’ll never be able to keep up. You’ll always be playing catch-up, never able to optimize for real-time changes in performance.
Rules are also limited by historical customer behavior. Say you’re a high-end apparel merchant. Traditionally, your lower-cost accessories were mostly purchased by customers from lower-income brackets. Because those customers are more likely to decline for insufficient funds, you configured a rule to account for that behavior. Then the product line gains traction with your higher-income customers.
The original rule optimizes for a customer profile that no longer matches the current audience. Nobody updated it because nobody knew to. Your authorization rate suffers as a result.
Rules-based vs. dynamic payment routing: The authorization rate gap for multi-PSP merchants
Rules-based routing answers the questions the Payments team anticipated. Dynamic payment routing answers a different one: What is the highest-probability path for this specific transaction, given this cardholder and this moment in the ecosystem?
Each transaction is individually evaluated based on live signals, improving first-attempt authorization rates and reducing the cost of failed transactions. Our data shows that dynamic payment routing typically improves authorization rates by 1–4%.
The performance gap is highlighted by the way many merchants use multiple PSPs: routing primarily to hit contractual minimums and for redundancy rather than for optimization. When routing remains static, even with multiple PSPs, merchants lack real-time insights to adjust their strategy to match the current behaviors of both new and existing customers.
That’s not to say dynamic payment routing should completely replace rules. The most effective approaches use both in tandem. For example, you may have a rules-based policy that says a certain percentage of transactions should stay on one processor because of commercial agreements or liability preferences. Dynamic decisioning then optimizes within those boundaries.
What poor payment routing costs you
Poor payment routing damages issuer relationships. If you’re sending traffic that declines at high rates, issuers notice, and they can limit or shut off your volume. That reputation compounds over time.
There’s a more immediate cost: lost customers. If a transaction is routed to a less effective processor for a specific issuer, the issuer may decline it, even when it’s coming from a legitimate customer. New customers may not be routed effectively due to a lack of available information. Poor payment routing logic generalizes based on a customer persona of “new customer” or “tenured customer” rather than the cardholder’s identity.
If the customer is declined, they may not try again. You’ve lost them to a competitor through no fault of their own — even after they hit “buy now.”
Merchants also frequently overlook the cost of unnecessary payment retries. If retries are part of your payments strategy, excessive retries can be expensive. You end up paying additional processor fees on transactions that shouldn’t have failed in the first place.
Dynamic payment routing improves first-attempt success. Merchants maintain more control over processing costs, while reducing many failures that make retries necessary.
Expanding into new markets, one merchant quickly saw significant authorization performance improvement and cost savings by moving to dynamic payment routing. Their rules couldn’t adapt to real-time performance fluctuations, which caused suboptimal conversions and higher payments costs.
The merchant then began routing based on past cardholder behavior, processor availability, 3DS requirements, and authorization rate probability at the moment of the attempted transaction. First-attempt acceptance increased by 5%. Overall conversion rate also improved by 3%.
Assess your dynamic payment routing opportunity
Routing is a live decision, not an infrastructure you configure and maintain. The performance gap between rules-based and dynamic payment routing compounds over every transaction you process. Every transaction that rules can’t optimize but dynamic payment routing can is revenue a competitor with better decisioning will capture.
The Merchant Risk Council (MRC) found that 41% of its member merchants are utilizing dynamic payment routing. For those who are not, it’s often a matter of not knowing where to begin. An assessment of your current payments capabilities is a great place to start.
Our Payments Benchmark Assessment evaluates your payments approach across processor routing and orchestration, vaulting and tokenization, and 3DS readiness. Ten questions produce a benchmarked score and a prioritized list of where to improve.
