How Smart Payment Routing Can Lower Your International Transaction Fees
When an international customer makes a purchase from your ecommerce website, it takes only a second or two for the transaction to be completed. Nevertheless, there is a great deal of coordination that occurs behind the scenes.
When you incorporate intelligent payment routing into your operations, you can ensure that the journey is as streamlined and affordable as possible.
Smart payment routing
Intelligent or least-cost payment routing is a modern process that enhances the security and efficiency of funds transfers. It does so by directing the procedure along the best route.
When a payment travels through the system, there are several factors that influence its journey. These include the customer’s location, their chosen payment method, and the value of the transaction.
For example, your international transactions will most likely require an alternative route that minimizes the costs of multicurrency payment fees and other charges.
Types of smart payment routing
There are two main types of smart payment routing.
Static
In static routing, you need to manually configure predetermined routes for every type of payment that you process. As you might imagine, this type is limited because it lacks flexibility.
Dynamic
As its name implies, the second type, intelligent payment routing, adapts in real-time, determining the best route for each payment based on current data. Elements that it uses include card type, payment amount, and location.
Additionally, it incorporates factors such as security assessments and cost optimization into the mix, resulting in increased efficiency and resilience and greater affordability.
How smart payment routing works
When your customer clicks the “buy now” button on your website, the information is immediately sent to your payment gateway. This application acts as an intermediary, securely transmitting the information to your international payment processing provider.
That company then checks with both the buyer’s bank and yours to ensure that there are no roadblocks. If everything looks good, the funds are transferred.
In the event that a problem is encountered, intelligent payment routing ensures that there is more than one path to success.
Unlike static routing with only one solution, this advanced method increases the likelihood of a successful outcome by using up-to-the-minute data to view multiple paths, choosing the one most likely to succeed.
How smart payment routing can reduce your international fees
By selecting the most cost-effective payment processor, using local processing, optimizing currency conversion, and minimizing failed transactions, smart routing can help you cut costs for your international business.
Fees can result in significant budgetary constraints for businesses that sell internationally. Although you will never be able to avoid these expenses entirely, putting intelligent payment routing in place can minimize your financial outlay. Here’s how.
With smart payment routing, selecting the most affordable payment processor costs can be lower. Algorithms are used to analyze the details of each transaction, including the amount, the location of the customer, and the currency being used.
Because cross-border payments are processed internationally, they often incur higher fees. With intelligent payment processing enabled, the transaction can be routed to an acquiring bank in that local region.
As a result, interchange and other fees can be significantly reduced.
Another source of fees for your cross-border sales is currency conversion. These can be especially burdensome when payment providers charge high markups. Your intelligent processing system can survey all of its routing options, choosing the one with the lowest international charges.
As is the case with domestic transactions, some of your international ones will fail for any number of reasons. Intelligent routing increases the likelihood that a payment will go through successfully by directing it to the processor most likely to give an approval.
Unlike static transactions, your dynamic or intelligent routing system can automatically reroute the payment to an alternative processor in the event that the first option is declined. By recovering potentially failed payments, you will have fewer lost sales.
Additionally, you will have fewer administrative costs incurred when payments fail.