High-Risk Payment Processing: Choosing Multiple PSPs

Sophisticated high-risk merchants understand that de-risking their payments operations can truly be a game changer for their business. They see that not only is it important to choose high-quality partners that understand the nature of their business, but also to select partners that can interoperably work together to form their ideal payments stack.

In part four of the five-part series on high-risk payment processing we will cover all the benefits and downsides high-risk merchants can see by working with multiple PSPs to stay compliant, efficient, and operational.

Selecting Multiple PSPs for Optimal Performance

Why Should You Use Multiple PSPs?

To put it simply, leveraging more than one processor in your payments stack can assist in two areas: reducing both risk and fees.

Reduce Risk

Having a single point of failure in any organization is a risky proposition. Using a single payment partner is no different, and by using only a large PSP like Stripe or Worldpay, organizations open the door for many single-point-of-failure issues.

The best way to prevent this risk is to build in a backup payment processor into your payment flow. Should your account close for any number of reasons you’ll have ownership over your payment tokens, meaning you can quickly shift your payment processing to your backup payment processor.

Optimize Fees

Different processors levy different fees, based on the services they deliver. Some will charge more because they are able to handle high-risk merchants, others will charge flat fees in return for a simplified process for payment routing. The reality is that most payment processors are better at some things than others, and that they often have wildly divergent pricing schedules. 

As a result, merchants seeking to optimize their payments and their business operations find that implementing a smart payment routing strategy - in which payments are routed to different payment processors, based on an intelligent decisioning process - is a highly valuable option.

How To Select PSPs

Selecting PSP partners is especially important in the high-risk space. And, because it is likely most higher-risk merchants would have to work with a high-risk payment provider, the options may be quite narrow. 

For those that have avoided being caught up in the MATCH process, the options may be greater, but the process is unlikely to be easier to manage. This is because every merchant is different, with wildly differing needs, and having the right PSPs in your payment stack can truly set a merchant up for success.

When selecting any PSP to add to your payments stack, be sure to consider:

• How this partner operates with your designated merchant category code (MCC) and whether similar merchants transact successfully with them, or not.
• The payment methods they offer and whether they meet your customers’ expectations.
• What makes them unique and a good fit for you, whether they offer fraud prevention, flexibility, performance optimization, global coverage, or reporting you require.
• The level and quality of support - is it what you need in a PSP?
• How well this PSP collaborates with other partners, including PSPs, third-party tokenization providers, fraud management tools, and more.
• What the overlap may be between this PSP and any others you may have, and how this PSP fits into, and enhances, your payment stack.

Optimizing Payments with Partners

PSPs alone are unlikely to offer everything your business will require to continue operating smoothly in the midst of the unpredictable ups and downs of payment processing.

Consider working with third-party providers that specialize in key payments operation areas, such as fraud prevention and payment compliance, that will take difficult work off your plate while keeping your business in the clear.

Payment Orchestration and Smart Payment Routing

When working with multiple PSPs, it is advantageous for merchants to build in sophisticated routing techniques, called smart payment routing, that can ensure the best PSP is selected for each transaction.

Smart routing works by intercepting transactions before the customer’s information is sent for processing, and applying an algorithm to known information about the sale to select an appropriate PSP. 

 For instance, smart routing algorithms may look at:

• Card issuing country - to select a PSP with a local presence and higher likelihood to successfully authorize payment
• Card type - to select the PSP best suited, for example, to process debit card transactions, which are less expensive overall
• Card brand - to select a PSP with the highest likelihood for successful authorization or most agreeable fees, like in the case of American Express cards, which are notoriously expensive to process

Once the routing decision is made, the transaction is packaged up and dispatched to the optimal PSP. If a transaction then fails, a cascading payment strategy may also be implemented to automatically re-present failed transactions to alternative processors in the hopes of arriving at a successful conclusion. 

Note: it is important not to be overly aggressive with cascading payments, as sending too many already-failed transactions to a downstream PSP may give partners the impression that your business is (more) risky and could cause them to shut you down.

Solutions like Basis Theory, Feedzai, and Spreedly can provide the flexible infrastructure for merchants to implement sophisticated routing strategies.

Fraud Prevention and Management

While merchants could monitor fraudulent activity on their own, this task becomes especially cumbersome when processing thousands of transactions daily. Many solutions on the market today are especially good at using AI and sophisticated algorithms to:

• Monitor historical performance for trends that could signal attacks 
• Identify and flag - and, sometimes, even prevent - suspicious activity in real-time
• Manage disputes as they come in and flag any alarming trends

While these solutions do come at a cost, many merchants consider these to be necessary expenses, because fraudulent and errant disputes could mean the difference between a smooth running business and one that ceases to operate.

Companies like FraudLabs Pro, Kount, and Feedzai, to name a few can be seamlessly integrated into a company’s payment stack. 

Payment Security and Compliance

While all-in-one payment processors usually offer a full suite of compliance tools, specialized PSPs may not. Many merchants leveraging a multi-processor approach choose to manage compliance through a trusted third-party solution.

Third-party tokenization providers like Basis Theory can assist merchants that would like to secure their payments, achieve PCI compliance, and maintain ownership over their payments data. These solutions not only take away a significant portion of the burden to maintain compliance, but they also provide freedom in the form of network-agnostic tokens that growing merchants can use with any PSP, partner, or network.

Additional Payment Services

Some merchants may choose to take this even further and work with additional partners that can assist with analytics, subscription management, 3DS, and more. Depending on the nature of your business as a merchant, you may need to work with such partners, or you may opt to take these roles in-house. 

High-Performing High-Risk Merchants

When working in a higher-risk environment, many merchants set their sights on what can keep them operational today. However, by choosing the correct platforms and partners, these merchants can not only survive today, they can also thrive, remain compliant, and grow into massive e-commerce platforms. 

Continue Reading

In this five-part blog series, we cover in-depth details on high-risk merchants, including:

• The Rules of the Game
• How Are Merchants Shut Down?
• How to Stay Operational with 1 Payment Processor 
• Working Effectively with Multiple PSPs (this post)
• High-Performing High-Risk Merchants: Best Practices