Today, approximately 350 billion coin and currency transactions occur between individuals and institutions every year. The extensive use of coin and currency transactions has limited the automation of individual transactions such as purchases, fares, and bank account deposits and withdrawals. Individual cash transactions are burdened by the need of having the correct amount or providing change therefor. Furthermore, the handling, and managing (including guarding) of paper cash and coins is inconvenient, costly and time consuming for both individuals and financial institution alike. It is estimated that in the United States alone, $60 billion dollars a year is spent by money handlers simply to move money. In addition, the security of paper money is seriously threatened by the relative ease of counterfeiting using, for example, widely accessible, high quality color copiers.
Although checks may be written for any specific amount up to the amount available in the account, checks have very limited transferability and must be supplied from a physical inventory. Paper-based checking systems do not offer sufficient relief from the inherent delays associated with processing checks. To this end, economic exchange has striven for greater convenience at a lower cost, while also seeking improved security.
Automation has achieved some of these qualities for large transactions through computerized electronic funds transfer (“EFT”) systems. Electronic funds transfer is essentially a process of value exchange achieved through the banking system's centralized computer transactions. EFT services are a transfer of payments utilizing electronic “checks,” which are used primarily by large commercial organizations.
The Automated Clearing House (ACH) and point of sale (POS) systems are examples of electronic funds transfer systems that have become used by retail and commercial organizations on a substantial basis in recent years. However, the payments made through these types of EFT systems are limited in that they cannot be performed without the banking system. Moreover, ACH transactions usually cannot be performed during off business hours.
Due to increased commerce, the cost and volume of commercial transactions have become a concern for merchants, debit processors, and customers. In performing commercial transactions and debit processing, merchants have several debit processors and methods of processing to choose from. However, merchants are provided with little flexibility in changing their debit processing methods. Current options for debit processing include: (1) the merchant relying on a third party to route all debit processing transactions; or (2) the merchant manually changing the debit processing method. Where merchants rely on a third party to route and handle their debit transactions, a merchant has little to no control over the routing methods or the costs involved. Should a merchant attempt to handle the routing of the debit processing, the merchant must manually change the routing method to suit its needs. However, the merchant stands to lose a great amount of time and money due to the inefficiency of changing its debit processing system.
Where merchants rely on third parties to handle their debit processing transactions, third party providers are not capable of providing multi-level routing or systemic low cost routing. For example, several debit platforms of today route all debit transactions to third party provider and allow routing to be based purely on a match between the transaction and the debit processor with no regard to cost issues.
Furthermore, merchants today are not offered alternative methods to process their debit transactions where a primary network is unavailable. The transaction is merely aborted and the merchant must make an additional attempt to process the transaction. This inefficiency creates customer dissatisfaction and limits the merchant's availability to conduct business.
Consequently, a need has developed for a system and method for routing debit processing transactions which routes transactions based on lowest cost and provides merchants with automatic alternatives when a debit processing network is unavailable.