What is Smart Routing? Definition and Meaning - Ikajo Glossary

Glossary

Smart Routing

Smart routing eases the procedure of purchasing for the shopper. Smart routing indicates conducting the transfer to the bank that is in charge of the payment processing. Then the system establishes the success of a certain transaction. Moreover, this type of routing guarantees that the chosen bank is most probable to allow the transaction. It automatically defines the financial institution which is probably able to process a certain payment.

How does smart routing work?

When the client clicks the button “buy now”, it directs the transaction to the most suitable acquiring bank. Smart routing uses the current position of the trader, seller’s position and currency along with the type of credit card to make everything possible to increase the chances of the transaction’s approval. On the occasion that the payment fails, it will automatically direct it to the other fund.  The system also includes a logical analysis that is used to improve the payment success of future transactions.

Of course, smart routing is a good thing for merchants as well. Taking into account that the payment processor connects the merchant to the correct bank(s), it lowers the decline rate. This is possible, thanks to the fact that the bank works and processes certain kinds of businesses. Also, by connecting the merchant to the right local bank, merchants can receive the lower transaction fees.

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