What is Payment Switch and Why is it Important
3 mins read

What is Payment Switch and Why is it Important

Payment switch refers to a strong system with high performance, massively accessible because of its unique flexibility. Payment switches can be software or independent entities which help communicate between different providers and perform payment settlement. Its major functions encompass accepting payment requests and sending a message to providers.

Payment switches can also be transaction-based software programs, which you buy off-the-shelf or build internally. By using a merchant-driven rule, you can dynamically switch route payment transactions between PSPs (Payment Service Providers) end-points and acquirers. These rules include routing by amount, lower cost, BIN, and time of the day. This capability to route transactions makes payment switches  far much different from a traditional gateway.

Anatomy of Payment Switch

A switch serves as the back and front end processor, which handles an unlimited host system, devices, and networks. The payment switch should be compliant with the networks it unites.

It also has to scale every type of payment and meet high standards of fraud and security management. Consequently, the payment switch needs to use cases of its stakeholders and support innovations.

Factors to Look at

These days, merchants sell on an international level with many acquirers, and in order to offer uninterrupted service to customers, payment switch must fulfill the below requirements:

  1. Security

For merchants’ and clients’ security, the payment switch needs to be compliant with PCI DSS providing tokenization tools and encryption.

  1. Payment Network

Generally, clients pay online with options they find comfortable with. There are a lot of PSPs in the marketplace, and the number can keep on increasing. The payment switch needs to support the integration of global acquirers and multiple PSPs, reducing merchants’ costs.

  1. Dynamic Routing

Acceptance rates of various acquirers vary depending on many variables. Basically, switch regards these variables as dynamic rules and you can use them to route transactions so as to reduce transaction failures and increase payment acceptance performance.

Reasons Payment Switch is Important

From authorization support to device driving, the switch offers a reliable operation of complex transaction processing with the help of an end-to-end and integrated solution, which covers a full range of services required to complete the life cycle of transactions. Merchants usually use various payment processors and solutions across transaction channels, including catalog, retail, eCommerce, and petroleum. With this, organizations may enjoy a lot of discounts by consolidating these channels and sending every transaction to the same processors.

Merchants using store-based batch settlements may also reduce costs related to processing by consolidating records into a single file. Some merchants use middlemen processors for cost-saving. You can as well eliminate intermediary arrangements and related costs of processing through a payment switch that directly routes transactions to processing end-points.

In a Nutshell!

Before signing up with a payment switch, ensure you research and determine if there are hidden costs or fees. If you have a physical processor for in-person payments, you may want every system to feed into POS so as to simplify bookkeeping.

If you integrate payment solutions with your landscape, you will maintain PCI compliance and be on the hook for different types of fraud.