When a business is starting out, it will usually count on a singular banking partner to provide the service of processing payment transactions made to them through bank cards. This banking institution then charges them a price of this service, often called the discount rate, which is generally a percentage taken from the total of the transaction.
While the cost of applying this discount rate to transactions initially represents a very small reduction in the amount charged to your business, it is also important to consider that offering this payment channel makes up for this slight reduction by increasing the number of clients who are willing to buy from your establishment.
With time and growth in sales, the need to optimize the amount of capital dedicated to fulfilling this discount rate becomes more and more evident, and this is where the concept of “on-us” transactions comes into play.
“On-us” transactions are those in which the payment processor and the payment card holder used in the transaction are both provided by the same bank, for example, a card issued by Banco XXX purchases something from a merchant that uses the same bank for processing. This type of transaction tends to be cheaper for the shop itself (lower discount rate), so in theory, if our payments could be processed by multiple banks, sending each their respective card, we would be saving money on transactions.
Being a very simplistic approach, this theory would mean that your store would need multiple payment terminals so that everyone can process their payments with their respective bank. However, thanks to payment platforms, and especially those in the eCommerce environment, this theory can be put to use without such a complex infrastructure, and without having to waste time checking that each card is used at the correct terminal.
With the help of modern payment platforms, the type of card can be determined and the transaction can be sent to the corresponding bank according to the merchant’s instructions, achieving the optimal discount rate by converting the majority of payments into “on-us” transactions. In this way, if a merchant detects that it receives 40% of transactions from Bank A, 35% from Bank B and 25% from a mix of 14 other banks, 75% of their payments could be converted into “on-us” transactions, and an agreement could be made with Bank C to processes the mix of the 14 others at an optimal discount rate.
As well as this, having an optimised transaction routing system presents further benefits which are more closely related to customer experience. We all face unexpected payments from time to time, maybe an early mortgage payment arrives or an unexpected bill comes up, which places the customer in a position of debt to their bank, causing a certain payment to be rejected. In this situation we have two options, to lose the sale that we have worked so hard to achieve, or to offer one (or several) alternative payment solutions.
As we can see, there are many reasons to have payment routing systems in place which are optimised for business logic, the only question is, what are you waiting for? Optimize your transactions during COVID-19 crisis now with Easy Payment Gateway!