How the Switch by Interswitch Works


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Transactions are basically defined as business processes with starting points and end-points. They have specific activities and timelines, through which these transactions take place to achieve the desired effects. Take for example an ATM transaction has many underlying operations, controls and processes aimed at making it a successful transaction between the start and finish point.

Interswitch offers financial institutions a central, comprehensive and outsourced platform through which they can implement and manage their user transactions. The switch thus allows a consumer from any bank on this shared platform to perform their transaction. The beauty of the switch is that it allows for different devices to plug-in from ATMs to POSs. It also provides users with transaction authorization by connecting to hosts, interchanges and co-networks. Other additions allow for plugging in of internet payment gateways as well as mobile payments.

What is the role of Interswitch?

With an increasing number of organization issuing cards as well as institutions accepting card payments as well as merchants accepting payments made by these parties, a third party offers a service as an intermediary between merchants and institutions offering the cards. The intermediary serves as a clearing house for the various transactions.

To clear these transactions, the third party relies on a transaction switch to route transactions received from merchants. A typical transaction sees the merchant initiate a transaction (say payment for groceries at the Supermarket via card), which is routed to the holders financial institution for approval. The response from the financial institution is then conveyed to the merchant via the switch. The first step is the transaction moving from the POS API to the acquiring bank’s switch, it then conducts credit authorization, back to the POS API the merchant is thus able to complete the transaction.

It is imperative to remember there are other underlying processes which include loyalty programs for using their cards, fraud detection to authenticate if in deed, it is the bearer performing the transaction. If either of these processes fails to meet the set controls and guidelines, the transaction is declined. With a central switch, these transactions are faster, cheaper and platform independent.