When Load Balancing Works (And Doesn’t)


Merchants who accept electronic payments from credit and debit cards, are likely aware that there are certain terms and restrictions attached to securing a merchant account and maintaining payment processing capabilities.

Merchant accounts have definitely become a valuable asset for eCommerce retailers, and it is important to be certain that these assets are managed with exceptional care. One part of payment processing which could either help or harm processing abilities is a concept known as load balancing.

New Revenue Opportunities Introduced New Challenges

The internet introduced a variety of components that fundamentally changed the way consumers and businesses interact. One such shift facet was quick payment-processing abilities.

It used to be the case that a retailer would just maintain a connection with a single acquirer. However, modern eCommerce often necessitates merchants to have numerous processing agreements.

For example, merchant accounts may be restricted by earnings regions, currencies, and payment form (recurring vs. non-recurring). Also, most processing arrangements arrive with a maximum sales volume that can not be surpassed. So, to manage these varying and sometimes conflicting restrictions, merchants often choose to run many accounts, each connected to a different Merchant ID (MID).

Nowadays, the ordinary merchant has two processor relationships, leading us away from an “either-or” understanding of eCommerce and payments, and towards a path “both-and” approach. This evolution has helped to forge greater advancements in the payment industry, but at the same time, the process develops increasingly complex.

New Revenue Opportunities Introduced New Challenges

Load balancing, in regards to the payments industry, refers to the shifting of obligations between multiple MIDs and payment processors. There are many reasons why a retailer may take part in load balancing. Some seek to boost sustainable development; others for dishonest efforts to minimize liability.

Good Reasons to Load Balance

There are definite advantages to load balancing, and the procedure can significantly increase profitability when used correctly.

  • Every MID includes a sales volume limitation. If retailers are regularly surpassing the processors restrictions, they’ve got two options. They can either discontinue all sales efforts for the remainder of the month or two shift sales to some other MID.
  • Merchants could have different currency choices on each MID. They could load balance by changing cardholders from foreign issuers to the MID using the applicable currency. This promotes higher acceptance rates and offers better earning potential.
  • One MID might be accepted for recurring transactions and the other one isn’t. If the merchant sells the two product types to a single customer, the retailer may divide the offers, each going to the related MID.
Bad Reasons to Load Balance

Unfortunately, there are a number of bad actors who attempt to use unsustainable tactics in an attempt to disperse transactions across multiple merchant accounts as a means of hiding financial issues within the business.

  • Merchants disperse their transaction base across multiple MIDs in an effort to reduce specific chargeback liabilities. In case chargeback rates spike, networks will assess steep fines, account reserves will restrict access to revenue, and acquirers will probably terminate processing arrangements. In a bid to minimize the appearance of chargeback difficulties, retailers may attempt to allocate trades to other MIDs to distribute risk.
  • Merchants may use unapproved load balancing approaches to shift their refunds to a single MID so as to decrease the transparency of trade or customer service problems.

  • Merchants may try to isolate accountability with certain MIDs by allocating decline salvage for subscription goods in order to recapture lost authorizations.

In these situations, load balancing renders ultimate injury and may be considered a breach of processing regulations. It can potentially cost merchants their payment acquiring skills and incur long-term repercussions with networks.

The Time and Place for Load Balancing

Regardless of the potential for abuse, load balancing still has a definite value for merchants, and retailers cannot afford to stand still while the rest of the world is moving forward.

As the electronic age continues to expand, merchants who offer the maximum flexibility and foster a fluid transaction environment will be the ones who see the greatest success.

The potential for load balancing abuse is real, but when used sensibly, the clinic remains a strategic resource that may help traders develop greater sustainability.