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What's the difference between static and dynamic routing?

To process their payments effectively, merchants opt for static routing or dynamic routing of their payments.  Both of them come with a price, which at times can be pretty high, making merchants indecisive which one is the better option. Being the most important element in the payment ecosystem, choosing the right payment routing is of the utmost importance since it has a hefty influence on the bottom line, scalability, and experience of all customers. The right choice of payment routing will immensely affect the growth of any business, especially those aiming to expand globally.

So, what are the differences between the two and how to make the right choice?

There is no straightforward answer to these questions. The choice depends on a merchant’s goals and business needs; defining them prior to making a final decision will consequently lead to the right decision.

If you still haven’t chosen the best routing for your business, or you’re contemplating the idea of switching from one to the other, here is an article that highlights the differences and benefits of each.

Dynamic routing

Dynamic routing can be seen as a router which forwards data via different routes, custom-designed directions or using the existing conditions of communication circuit in the system. Routing protocols such as ISIS, OSPF, EIGRP, and BGP, are used in dynamic routing for regulating the paths traffic needs to take. This type of routing is flexible, which means merchants can customize it and change whenever they need to. Dynamic routing enables choosing the best transaction paths. Merchants are the ones who create the rules of routing for their transactions between local acquirers and Payment Service Providers (PSPs) using the most convenient path. It is possible to design routing rules so they can meet any business’s needs. Routing by acquirer fees, card issuing country, vendor, and currency are just some of the examples of routing rules. In situations when a transaction cannot be processed due to scheduled maintenance breaks, bank server overloads or a downtime, dynamic routing uses alternative routes and another provider in order to ensure the payment’s processing.  Dynamic routing has proven to help reduce the number of failures and lost sales.

Static routing

The configuration of routers is done manually by network administrations and statically in preconfigured directions for particular destinations. When a merchant wants to make some changes in the network or do the reconfiguration, it cannot be achieved as routers in static routing are fixed. We commonly find static routing complementing dynamic routing with the aim of ensuring a backup if dynamic routing is not available. It helps in transferring information between routing protocols and determining a router’s exit point when others are not available. Static routing is also found in networks that request more routes. 

Since the routers are configured manually, there’s a possibility of errors occurring. Its fault tolerance, administrative distance, and administrative overhead make static routing less desirable among merchants.

Most merchants nowadays choose only dynamic routing; it brings more benefits and options for those who plan to expand their market. With dynamic payment routing, payment operations are scalable and more compliant, it is possible to build redundancies into payment flows, and merchants can avoid acquirers’ failures and downtimes. All these lead to a reduced number of lost sales. Dynamic routing has helped merchants improve customer experience, approval rates, and reduce costs of payment processing.

Learn more about static vs dynamic routing in payments by ZOOZ