How intelligent transaction routing (BIN routing) saves you money

A cross border transaction takes place when a credit card issued in one country is accepted and settled into a merchant account established in another country. Cross border transactions incur additional fees when compared to a local transaction. These additional fees are imposed by Visa and MasterCard.

As an example, a Hong Kong based merchant using IPGPAY has a customer purchasing with their Singapore issued Visa or MasterCard.  This would be deemed a cross border transaction and as such would attract a higher Merchant Discount Rate (MDR) than if a Hong Kong issued Visa or MasterCard was used for the same purchase.

In our example, the Hong Kong merchant is successfully growing their customer base outside Hong Kong and before they know it customers with Singapore issued Visa and MasterCards have grown from 2% to 40% of the merchants monthly sales.  When looking at their monthly statements, cross border fees for Singapore issued card holders, have become a significant cost.

The solution?  Open an IPGPAY merchant account in Singapore in addition to the Hong Kong account. Without any changes to the merchant's existing IPGPAY integration, the payment gateway will automatically route Singapore issued cards to the merchant's Singapore account, converting cross border fees to marked lower local fees, while continuing to route Hong Kong issued cards to the Hong Kong merchant account. This is intelligent transaction routing, or BIN routing.

To benefit from BIN routing, the merchant must go through the usual IPGPAY application process and is required to have an incorporated company and a bank account in both countries, in this case Hong Kong and Singapore.

Keep in mind the costs for incorporating and administering multiple local companies and bank accounts will mean BIN routing for merchants processing small transaction volumes may not equate to savings, but for merchants processing large volumes across multiple markets stand to make substantial savings.

Why pay cross border fees if you don't have to?

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