Payment routing is the process of determining a viable path along which value moves from a payer to a payee across one or more intermediaries, payment channels or networks. In layered payment systems such as the Lightning Network it involves finding a sequence of hops with sufficient liquidity and acceptable fees, whereas in conventional rails it selects acquirers, schemes or correspondent banks. Routing decisions balance cost, success probability, latency and privacy.
Overview
- Routing turns a payment intent into a concrete sequence of transfers. Each candidate path is evaluated for available liquidity, cumulative fees, expected success probability and latency.
- In the Lightning Network, source-based routing computes an onion-encrypted path so each hop learns only its predecessor and successor, preserving privacy.
- In card and bank networks, routing chooses among schemes, acquirers and correspondent banks to optimise cost and authorisation rates.
Mechanisms
- Path-finding over a graph of channels or institutions, weighting edges by fee, capacity and reliability.
- Atomic settlement through hash time-locked contracts (HTLC) so that either every hop completes or the whole payment reverts.
- Fee estimation and budgeting, retrying alternative paths when a hop fails or lacks liquidity.
- Maintenance of a Routing Table or gossip-propagated channel graph describing reachable peers.
Applications
- Off-chain micropayments and streaming payments over the Lightning Network.
- Least-cost routing across card schemes and acquirers in conventional Payment Processing.
- Cross-border value transfer and rail selection within Open Banking flows.
- Liquidity-aware routing for payment service providers and Payment Gateway integrations.