Payment Switches: Speeding & Securing Transactions

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LTP Research Team

The electronic payment market which includes debit, credit, prepaid, Automated Clearing House (ACH) and person-to-person (P2P) payments is growing at an exponential growth. Consumers have already started considering the option of cashless payments and non-cash instruments. The growth in electronic payments globally is due to factors such as technological change, global mobility and initiatives taken by the governments in order to facilitate the adoption of electronic payments.

New entrants and investors are also lured to these markets by their vast potential. Large technology & social media companies such as Amazon, Google and Facebook have already marked their entry into the payments market. Apart from that, virtual currencies such as bitcoin which offers payment options independent of government control is also picking up the pace in the electronic payments market.

With this, the need of financial institutions’ of having functional & flexible systems that can acquire, authenticate, switch and authorize large volumes of financial transactions across multiple channels is also increasing.

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The evolution and the need have led to the evolution of the payments hub which is capable of achieving more than just payments switches. The payment switches routes and processes the payments between the points of customer interaction, which includes ATMs, POS and banks.

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According to a white paper by SQS, provider of software testing and quality management services, “A typical transaction passes through one or more switching platforms from acquirer switch to card scheme network switch & issuer switch. These switches process each of the transaction in milliseconds. The capability, reliability & efficiency of the payment switch are important for shaping and delivering customer expectations. With the advent and convergence of transactions with new channels such as the Internet, mobile and NFC contactless at POS terminals, the need for smarter and more efficient payments system has become a necessity for the volumes being handled.”

The payment switching market is dominated by companies such as ACI Worldwide, FIS, NCR etc. The description of various switching products from these companies is given below:

1. BASE24, BASE24-eps, Postilion by ACI Worldwide:

BASE24 is an electronic retail payment switch used by banks, retailers and processors across the world. Operating on the HP NonStop server, the payment engine provides organizations with a robust, high-performance, fault-tolerant solution for processing consumer payment transactions. BASE24 and BASE24-eps ATM and POS networks are a complex combination of hardware, applications and transactions that require comprehensive, real-time monitoring.
Postilion is the transaction acquiring, switching and authorizing component for the real-time processing of payment transactions. Postilion Card delivers card management functionality including stand-in, validation, authorization and card issuing.

2. Authentic by NCR Alaric

Authentic is an agile, high-performance open development platform for switching and authorizing payment transactions. Authentic can be used by retailers, issuers, acquirers, payment switches and payment processor organizations. Authentic can be deployed as a platform-independent, high-performance switch to route transactions between multiple acquirers, issuers, networks and other switches.

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3. SmartVista by BPC group

SmartVista covers various aspects of electronic payments: high-performance authorization switching and routing, full ATM and POS management, comprehensive card management, advanced fraud prevention, loyalty program management, card personalization and production, billing and merchant management, and integrated Internet and mobile banking. SmartVista’s broad range of capabilities effectively support and manage payments across all channels, including POS, branch, Internet and mobile applications.

4. OCS by Clear2Pay (Acquired by FIS in 2014)

The OCS provides comprehensive card payment services through ATMs, POSs, kiosks and a wide array of self-service devices. The Open Card Switch covers device driving, authorization, routing, real-time monitoring and management for mission critical ATM and POS networks. The OCS supports a wide array of device types, network connections, card types and processing orchestration. Fully fault-tolerant and highly scalable, the OCS offers customer configurable card payment services that enable the amending or inserting of business rules or new device support without any service interruption.

5. Tranzware by CompassPlus

It is amulti-card processing solution enabling efficient electronic funds transfer, inter-network switching and the handling of an unlimited number of devices and delivery channels. The system was specifically designed to deliver great flexibility and options for system expansion unrestricted by hardware, operating system, networks & host systems, financial products, types of transactions, devices and delivery channels.

6. IST/Switch, Cortex by FIS

IST/Switch is an open platform, high-performance credit and debit processing switch for all transaction processing needs. As a front-end processor that handles unlimited devices, networks and host systems, IST/Switch manages ATM and POS networks of any size, electronic funds transfer and inter-network switching. It provides batch and online network interfaces required to process credit/debit transactions through all the major card associations and networks, including Visa, MasterCard, Interac, American Express, Diners, JCB, STAR, NYCE and HONOR. FIS Switches makes nearly 20% of FIS’ total annual revenue.

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Other players in the payments switching market are ITM by Euronet, PowerCard by HPS, Tango by Lusis, Way4Switch by OpenWay, BanWorks by RS2 , Worldline Pay by Worldline and Posh Payment Switch by Fiserv.

Some of the trends in the Payment Switching market are:

1. New payment types like faster payments, direct debit and credits, cross border transfers, micropayments and services like Amazon Payments and M-pesa have been growing at a rapid pace in recent years. With the advent and convergence of these transactions with new channels such as Internet, Mobile and NFC Contactless at Point-of-sale, the need for smarter and efficient payment systems is increased in order to handle the volumes being generated.

2. Companies are implementing high end transaction processing switching infrastructure supporting multiple institutions and delivering a wide range of services. These switches drives all the industry standard front-end devices such as ATMs, POS, cash-in systems, and provides transaction authorization by connecting to hosts, interchanges and co-networks.

3. Acquirers, issuers and merchants loose billions due to fraud every year. The newer payment switches being built are better integrated with fraud prevention application, offering enhanced security features to cardholders.

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