A Guide to Payment Routing

Money can’t buy happiness, but it can keep your business running. Every business owner needs to get their money delivered safely and on time. Efficient payment routing is the best way to minimize transaction costs, increase acceptance rates, and distribute transactions evenly.

Routing is a key part of payment processing, especially for businesses that use multiple payment service providers. Keep reading to learn more about payment routing and how to find the best solution for your business.

What Is Payment Gateway Routing?

Payment routing is the path a transaction follows after someone makes a purchase. All non-cash purchases go through routing, but in the context of business, payment routing typically refers to companies accepting payment from customers.

An example of payment routing could be a customer using a credit card to make a purchase from your business. This purchase flows through an entire payment ecosystem made of multiple parties and processes. If the payment method is a credit card, the route may look something like this:
The merchant (you) sends a requests to the payment service provider (PSP) => The PSP sends a request to the acquirer => The acquirer sends a request to the card network (for example, Visa) => The card network sends a request to the issuing bank.

Most transactions go through a process of:

  • Authorization
  • Authentication
  • Clearing and Settlement

This example is simple compared to the routing process that businesses with large networks have to follow. Large businesses have complex payment solutions, which is why you should partner with a company that tailors solutions for you. Routing needs differ greatly depending on your processes. Industries with the greatest need for payment routing solutions include:

  • Travel + Travel Insurance
  • Hospitality
  • Car Rentals

Not only do these types of businesses deal with huge amounts of sensitive customer data, but their payment networks are extremely complex with lots of area for failure.

Static Routing

There are two types of payment routing: static and dynamic. We’ll begin by discussing static routing. Static routing is based around preconfigured routes. These flow smoothly but aren’t optimized to cut costs, increase efficiency, or improve authorization rates.

Static routes are contingent on each part of a transaction route being in good condition. If one part of a static payment route is inoperable, the whole route breaks down. Static routes are like Christmas tree string lights—if one light goes out, they all go out. This is especially common for large networks with complex, multi-step route transactions. Static routes have an appealing simplicity, but they aren’t versatile when it comes down to it.

Static routes can be the least-cost routing option for small businesses because they require less computing power than dynamic routing does. However, this advantage goes away as companies (and their payment networks) scale. The manual processes that static routing requires get cumbersome fast when networks grow. The issue of static routes falling apart when any piece of their process fails also makes them less appealing for businesses with larger payment networks.


Dynamic Routing

Dynamic routing is an increasingly popular payment routing option ideal for large companies with intricate networks. Dynamic routing protocols use algorithms to find the most efficient path for payments to follow. Dynamic payment routing is intelligent payment routing. Dynamic routing constantly searches for the open shortest path first (OSPF). This means they’re able to find the path of least resistance to make sure every transaction goes as smoothly as possible.

Dynamic routing can even change course when it runs into issues with the initial payment path. This gives your payment processes an enormous amount of flexibility and guarantees your payments are processed even if there are multiple breakdowns in your network.

Imagine dynamic routes as a taxi driver. A taxi driver doesn’t take the same path every time; they adjust depending on factors like street closures, traffic, and weather conditions. Whatever the case may be, a taxi driver will get you where you need to be as fast as possible, just like a dynamic routing system does with your payments.

Selective focus credit card payment with close up shot_

The Benefits of Dynamic Payment Routing

Dynamic routing, also known as smart routing, has no shortage of benefits. We highly recommend dynamic payment routing for every larger business because it:

Creates Successful Transactions

Technical issues constantly cause transaction failures. A simple bug with a payment service provider could cause your business to lose out on thousands of dollars in potential revenue. Where a static route would force you to sit on your hands and wait for the issue to sort itself out, a dynamic routing system prevents this issue from ever happening.  


The best way to make sure your business has successful transactions is by partnering with multiple payment service providers with a large network of dynamic payment gateways.


Increases Transaction Speed and Approval

Dynamic routes always find the most efficient path to transmit payment data. This means that the payment routing process goes through fewer steps, gets approved faster, and keeps your business humming.

Stabilizes International Payment Networks

International payment networks can be complicated, especially if they’re routed through static payment routes. Dynamic routing simplifies international payment processes because it lets you sell internationally without incorporating international payment methods. This makes international sales better on the consumer end by finding the best transaction provider in any region.

Boosts Authorization Rates

Every transaction needs to be authorized before it’s allowed to move on. Dynamic routing analyzes payment paths in real time and discovers which one has the highest authorization rates. This means that payments will be processed faster—and everyone likes fast money.

Is the Least-Cost Routing Solution

Business comes down to the bottom line. The right partner will set up dynamic payment routes that avoid fees and currency conversion rates. This is crucial for businesses that deal with lots of international customers or clients. Dynamic routing could save companies that deal with international clients massive amounts of money. Industries that greatly benefit from dynamic routing include:

  • Lodging and Resorts
  • Travel Agencies and
  • Services
  • Commercial Real Estate
  • Airlines or Hotel
  • Corporations

PCI Booking Gets You What You Need, When You Need It

Whatever your payment routing needs, PCI Booking is here to help. Our expert software development team tailors solutions for your needs. Make transactions easy and schedule a consultation today!