Least Cost Routing (LCR)

Least Cost Routing (LCR) is a routing strategy that automatically directs payment transactions to the lowest-cost processing option available for a given transaction, without sacrificing reliability or authorization performance. The goal is to minimize the processing fees paid on each transaction by intelligently selecting among available networks, gateways, or processing paths based on their cost profiles.

LCR is best known in the context of debit card routing in markets like Australia, where regulators have required merchants to be able to route eligible transactions away from the more expensive international card rails (Visa and Mastercard debit) to lower-cost domestic networks (eftpos). The principle, however, applies more broadly: in any environment where a transaction can be processed over multiple rails or through multiple providers with different fee structures, LCR logic can identify and select the lowest-cost option.

In the context of a Multi-Gateway Strategy, LCR might route American Express transactions to the gateway with the lowest Amex processing rate, route ACH-eligible transactions away from card rails to save on interchange, or shift volume between processors based on tiered pricing thresholds. The logic must balance cost against other factors: a marginally cheaper gateway that produces lower authorization rates may cost more in recovered revenue than it saves in fees.

Payments Orchestration Platforms provide the infrastructure for LCR by normalizing fee data across connected providers and enabling routing rules that incorporate cost as a variable alongside authorization rate performance and business priority logic.