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Dynamic Routing VS Static Routing in Payments

Quick Guide

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As a hyper-growth merchant, you'll be all too familiar with the fact that different transactions get processed at varying levels of efficiency and cost-effectiveness. But why is this the case? It comes down to your routing capabilities which lie at the heart of your payment processing operations.

Routing can be thought of as the nervous system in the payments ecosystem, sending transactions to acquirers and Payment Service Providers (PSPs) for processing and approval so payments can be completed. It's one of those critical ‘behind the scenes’ processes that has a significant impact on scalability, customer experience, and a merchant's bottom line. Examining the differences between dynamic routing vs. static routing is critical to building a more efficient payments infrastructure that supports hyper growth on a global scale.

The best way to think about the two routing types is to imagine a GPS navigation app like Waze or Google Maps vs. a printed map. When using a  map, you define your route before driving, and the route is static. With Waze or Google Maps, the route changes dynamically according to traffic, and other road conditions so that you can get to your destination in the most efficient way possible. Let’s take a look at each in a little more detail.

What is static routing?

Static routing is a type of routing that sends transaction data to payment networks for processing along a fixed path that cannot be changed. These routes are manually configured and managed by a network administrator which makes merchants unable to respond to changes. The non-flexible nature of static routing means that if a primary route is unavailable, no secondary path can be utilized resulting in an inability to process the payment.

Static transaction routing has been the core routing technique used by merchants to process payments since the birth of e-commerce. But times are changing. Online payments are getting more complex and global, and payment volumes are increasing. Static routing is becoming ill-equipped to deal with these new realities.

What is dynamic routing?

Dynamic routing differs from static routing by its ability to flexibly route payments according to changing circumstances, rather than being limited to just one path. With dynamic routing capabilities, a merchant can determine the best path for their transactions by devising rules to route transactions between local acquirers and Payment Service Providers (PSPs) via the most optimal way. This is what makes the difference between losing money on processing fees and saving on lost transactions. It’s what makes the difference between providing an average customer payment experience and an excellent one.

Dynamic Routing

Rules can be devised to achieve specific business needs and include routing by card issuing country, vendor, currency, acquirer fees, and much more.  If there's an inability to process transactions at the time of payment, dynamic routing can help avoid frustrating customers by setting alternative routes to another provider to ensure payments continues to be processed. That means exposure to costly acquirer failures can be reduced, and business can continue as usual.

What’s the best routing type for hyper-growth merchants?

As a hyper-growth merchant, you understand the complexities, risks, and costs associated with payments. You’ve got dozens of providers located around the world and increasing transaction volumes. Acquirer failures and downtimes are on the rise, and you're dealing with fees which vary significantly between providers.
To continue growing at hyper-speed in today's complex payments ecosystem, you need to find a way to drive ongoing improvements to your core payment processes. This requires moving beyond static routing capabilities which provide only fixed connections between acquirers and Payment Service Providers (PSPs). Efficiently facilitating transactions demands more flexibility, control and the ability to optimize payments using an intelligent processing software that enables dynamic routing.

With dynamic routing, your payment operations will become more scalable and adaptable allowing you to grow more quickly. You’ll have the opportunity to build redundancies into your payment flows to avoid downtimes and acquirer failures so that you can minimize lost sales. You’ll also be able to improve your overall approval rates helping to create a better customer experience and reduce payment processing costs to preserve healthy profit margins by setting rules that dictate routing via the lowest cost provider.

Optimizing your payment flows is key to achieving sustainable hyper-growth. With ZOOZ's smart payment switch, you can optimize your payments with dynamic transaction routing capabilities to save money, improve customer experiences, and take advantage of future growth opportunities.



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