Global business expansion goals require reducing payment provider outages, boosting revenue by increasing authorization approval rates and increasing market share by offering local payment methods is key. Flexible access to the world’s payment networks is required to safely achieve that expansion. The payment switch is a technology that allows retailers to create redundancy, expand their networks, and route transactions more efficiently.
Businesses can swiftly respond to an acquirer slowdown or outage by routing transactions to their backup acquirer, thanks to the ability of a payment switch to dynamically route transactions. If one acquirer declined a transaction, the merchant can immediately attempt the transaction with the other acquirer and receive permission.
What is a payment switch?
Payment Switch is a mechanism that allows multiple payment service providers to communicate with one another. The payment switch generally offers a rules-based authorisation and switching solution that is driven by the merchant. Payment transactions are constantly routed between numerous acquirers and Payment Service Providers.
It stands at the heart of payment processing, acquiring, routing, switching, authenticating, and authorizing transactions across numerous payment channels in real-time. The payment switch makes it simple to expand the payment network by adding new payment methods and suppliers without incurring significant integration costs.
How does a payment switch work?
- The payment switch authorizes the merchant and transaction when the payment request is initiated. The transaction is processed further depending on the state of the request which could be either a failure or a success.
- The payment switch then uses the rules to dynamically route allowed payment transactions.
- Routing via the bank identification number, amount, time of day. The payment switch prepares and transmits a message to the provider based on the bank identification number, and receives a response from the provider.
- It formats the received response once more and returns to the caller.
What do you need to look for when choosing a payment switch?
Merchants must clarify their requirements and understand the tradeoffs before deciding whether to build or buy a payment switch.
- Dynamic Routing
Different acquirers’ acceptance rates change based on a variety of factors; payment switch analyzes these factors as rules and uses them to dynamically route transactions, optimizing payment acceptance and minimizing transaction failures.
- Fraud Management
Every payment service provider should strike the ideal mix between a smooth user experience and strong fraud prevention. Since there are thousands of transactions per day, it’s difficult to see suspicious activity, thus a Payment Switch that supports and provides real-time notifications is required to detect fraud.
- Extension of Payment Network
With multiple payment service providers, customers typically pay online using the method that is most familiar to them. There are many payment service providers on the market, and the number will continue to grow. Payment Switch should allow for the integration of different providers and worldwide acquirers, lowering the merchant’s integration costs.
Security is one of the most critical features of online or digital payment platforms. Payment Switch should be compliant, using encryption and tokenization technologies, for the protection of both clients and merchants.
The primary reason for payment switch is that merchants are still subject to acquirer failures, despite all of their technological redundancies. Given the increased number of significant acquirer processing outages, merchants must consider the impact of a single payment failure on sales.
Having numerous acquirers serving their core markets might help merchants avoid losing sales. Whether built or purchased, such a strategy requires a payment switch.