How Technology is Helping Payments Systems
Do you also keep many payment cards (Credit card/Debit card) in your wallet and perform multiple transactions in a day, be it online, POS terminal or ATM. It takes us not more than a minute to perform a transaction through your payment cards and we walk away happily. Ever wonder what technology runs behind to make this process so fast and secure? Read on to understand this mechanism.
According to a World Payment Report volume of transactions can rise up to 185 billion by 2019. Also with the rise of the new technologies, it is bound to increase more and more in coming years. Two major components (or two major pillars) that makes this technology usable for us are Internet and Encryption (i.e security).
1. Internet
Irrespective of the origin of the transaction first it gets routed to the intermediary (i.e Visa/Mastercard etc.). Here they run a very accurate and fast program which authenticate a payment card issued by them and then it routes to the respective bank house for next level of authentication. Upon receipt, bank house validates this transaction on certain pre-programmed parameters and send back the acknowledgment to the intermediary, which in-turn routes this to the transaction originator where approval/rejection of the transaction takes place. This entire transaction flow is programmed so intelligently that it finishes this cycle within some seconds and it all of this is backed by a powerful medium which is "internet". There has been many companies/start-ups which are focusing on this Fintech industry and trying to bring new innovations. However, the main device which routes this transaction is known as Switch, a programmable yet high-frequency device which works as an agent to transfer information from one place to another. Each and every bank house/intermediary has its own Switch which is configured/programmed according to their business requirements and also keeping in mind the policy guidelines outlined by respective authorities.
2. Security(Encryption)
Irrespective of the origin of the transaction first it gets routed to the intermediary (i.e Visa/Mastercard etc.). Here they run a very accurate and fast program which authenticate a payment card issued by them and then it routes to the respective bank house for next level of authentication. Upon receipt, bank house validates this transaction on certain pre-programmed parameters and send back the acknowledgment to the intermediary, which in-turn routes this to the transaction originator where approval/rejection of the transaction takes place. This entire transaction flow is programmed so intelligently that it finishes this cycle within some seconds and it all of this is backed by a powerful medium which is "internet". There has been many companies/start-ups which are focusing on this Fintech industry and trying to bring new innovations. However, the main device which routes this transaction is known as Switch, a programmable yet high-frequency device which works as an agent to transfer information from one place to another. Each and every bank house/intermediary has its own Switch which is configured/programmed according to their business requirements and also keeping in mind the policy guidelines outlined by respective authorities.
The second most powerful component of this technology is security (encryption). Nearly a million transaction request flowing on the internet a high encryption is required to protect all your sensitive information (card number, CVV, PIN etc). Hackers around the globe are always on the look for a way to breach these transaction flow. And the technology which makes this encryption possible is SSL/TLS protocol which is implemented by an SSL certificate. For the better security of this transaction flow payment gateways/intermediaries requires all communication to be secured by SSL certificate, which encrypts all the communications with high standard algorithms. Basically, the nature of SSL certificate is to protect/encrypt all the communications which are flowing from one point to another. The data is encrypted with a 248-bit algorithm which is widely accepted by all the bank house/intermediary and also accepted by regulatory authorities across world. For the scope of this article, I would not like to get deep into the working of SSL certificate, but I can guide you to the relevant post what is SSL certificate read this to know more about the workings of it.
Together these components make this technology a backbone for almost entire globe which is providing us with the facility to transfer money from one country to another country. This also comprises of a major contribution to any developing economy.
The way how we transfer money from one point to another is shaping better day-by-day but the underlying mechanism has always been the same. Ultimately what we all want is a secure delivery of the payments that we make, and this is how technology is helping to make payment system better for us.
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