What is Payment Switch and Payment Gateway? Advantages of Payments switch over Payments Engine

Payment Switch 

Payment Switch is a payments infrastructure for interoperability. It connects the entire payments value chain through a single software platform, hence providing control over all payment operations. 

Payment Switch works as an independent entity that facilitates communication between various providers. The payment gateway talks directly with the switch to process payments. It facilitates processing of real payments between providers and accepts request for a payment, understands which providers it needs to process with, formats the message for that provider and sends it to them, gets response, changes the response to a generic format and send the response back to the caller. 

Being a highly critical component at the heart of transaction processing, it processes almost 75% of the volume of customer transactions. The payment switch routes and processes all payments in real time between the point of customer interaction which includes ATM and POS, and the bank’s processing system.  

• It has a single integrated flow as its API uses the same abstractions for all transactions, regardless of them being synchronous, payins, payouts or marketplaces, redirection-based, one-time or recurring. This in turn enables the merchant to add new payment channels without making any changes to the code. This is a major advantage over Payment Engine.  
• The user can access multiple financial institutions without any add-on technical investments. This minimizes the dependency on the developer, unlike Payment Engine.  
• The switch is compliant with the Payment Card Industry Payment Application Data Security Standard. Switch is compliant with the latest security and data privacy standards, so you don’t have to. You will protect your customers’ data by using our PCI/GDPR compliant payments infrastructure, scale your payments operation using our resilient, Big Data infrastructure and use specialized management support to connect with the right providers and optimize your payments operations. 
• It provides a platform to the user to design complex transaction flows, and manage different types of payment channels through a single data structure. 
• It enables the user to reuse the existing processing channels to access value added services like analytics, reconciliation and anti-fraud. Recon and settlement is an  important functionality for both end-points of switch –Processor & Merchant, which it handles in a better way as compared to Payment Engine 
• Unlike Payment Engine, Switch uses multiple security and fraud vendors scanning the most relevant signals to help detect and block fraud and allow you to create precise rules to reflect your business’s unique considerations. The user can use dynamic 3Ds, define custom blocking rules and also receive automated alerts messages. 
• It uses state-of-the-art big data technologies to process voluminous and complex payment datasets and transforms raw data into consumable information, generating valuable insights that empower payment managers to make better decisions. 
• It helps you improve your strategic analysis, decision making and monitoring through Switch’s comprehensive reporting capabilities. Interactive data visualization and analysis tools help you detect and understand trends, providing additional insight into your payment flows. The user can consume API events to crate real time automated workflows. The dashboard helps the user to see an overview of the business and take proactive actions. 
• It uses a shared, event-based database to log every action related to a transaction. Every lifecycle event can be communicated in real-time through HTTP callbacks to specific URLs, which makes it the ideal platform for transaction orchestration between multiple stakeholders. The same way each lifecycle event can be consumed by multiple participants, they can be published into the Switch platform by multiple sources. 
• It allows the user to use custom rules to route transactions between payment providers in real-time, optimizing payments performance. Switch retries authorizations in real-time across multiple acquirers to maximize acceptance rates, and splits traffic to reduce processing and FX rates.  
• It facilitates dynamic currency conversion to support foreign currency transactions. 
• Unlike legacy payment systems, the single integration flow of payment switch supports payment processing for all your in-store terminal flows: EMV, Apple Pay, Android Pay — and whatever comes next. 

Payment Engine

Payment Engine is a single-payment operations platform that can connect to multiple internal and external payment channels. It is used to verify, sort, and clear payment transactions. Its transparent, flexible, and automated workflow can be controlled by expert users.  

Payment Engine provides functions that support end-to-end processing of cross-border payments, including the upload and management of referential data, handling of payment transaction charges, and fully automated straight-through processing (STP).  

Payment Engines provide high straight-through processing rates, batch processing, and real-time processing, as well as 24×7 reporting. It handles low-value, non-time-critical payments as well as high-value, time-critical payments and also allows financial institutions to offer value-added real-time services. 

Functions of Payment Engine: 

• One-to-one and one-to-many credit transfers and direct debits 
• Same-day or even real-time clearing and settlement 
• Single, queued and collective postings of internal and external transactions 
• Domestic and international transactions 
• Flexible customer correspondence (advices, payment exceptions, and payment recalls) 
• Extensive monitoring and status management 
• Open, multi-channel integration architecture 
• Supports multiple connections with SAP as well as non-SAP applications 
• Increase extensibility: Open integration architecture helps integrate with multiple payment channels, both inbound and outbound, and can connect with multiple account management systems 
• Manage regulatory compliance: Helps your institution comply with regulatory mandates such as single euro payments area (SEPA) 
• Enhance risk and liquidity management: The solution helps you combat fraud and money laundering more effectively by enhancing liquidity management 
• Improve customer retention: Advanced payment services add an edge to your service offerings and help significantly improve customer satisfaction, loyalty, and retention​.” 
• Payment Engine provides semi-automated exception handling. If exceptions prevent further processing of a payment transaction, the system triggers responses based on defined rules. 
• By using the PE, payment processes can be streamlined and processes made more efficient, new payment products can be configured more quickly, and market changes and new regulatory requirements can be responded flexibly and quickly. 
• Payment Engine uses other mechanisms provided by SAP and few systems which can be connected through proxy infrastructure, which can be seen as a drawback.  

Advantages of Payments switch over Payments Engine

• A payment switch allows for a virtual terminal which is a browser based version of a physical credit card terminal. 
• Most of the payment switches allow customization against as in payment engines the customization cycle is slow. 
• A payment switch helps payment information storage: Storing payment information so that the customer doesn’t have to constantly re-renter their information.  
• All payment switches encrypt sensitive payment information prior to them transmitting it to the processing bank. 
• Payment gateways generally integrate with other tools, such as various accounting software. 
• Payment switches even have the functionality to calculate tax amounts to authorize requests transmitted to the processor. 
• Integrated switches allow to connect the ecommerce website through the switch’s provided API. This means customers aren’t redirected to another site so it does not harm the conversions. 
• The payment switch maintains direct connections to some of the major Issuers, like BofA, Wells Fargo etc. 

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