Existing switching and authorization systems are on legacy infrastructures. To accommodate new payment methods, switching has expanded to support diverse formats (ISO 8583, ISO 20022, JSON, XML, etc.) while preserving the existing rails. Conventional switching processes are being disrupted by regulators demanding data sovereignty. Data localization is driving a re-architecture of switching to support distributed switching and authorization. Further, M&A activities have resulted in large enterprises managing multiple switching solutions. Duplication is driving operational inefficiency and unnecessary IT and operational expense. IT simplification strategies are driving the need for switching systems to be replaced, consolidated, or re-engineered.

Acceptance imperatives are driving the stateless switching systems to support dynamic flows for encryption/cryptography, tokenization, real-time fraud and risk management, risk-based-authentication (RBA), least-cost-routing, and much more. Digital transformation across enterprises is driving the modernization of core capabilities. Leveraging micros-services and API technology can address the demand for commoditized switching processes to enable value-added services.

The future of switching goes beyond host to host messaging; the next-generation of switching entails the freedom for a merchant to accept any payment method, enrich transaction with information, process with their provider of choice, and enable higher economic value for consumers, issuers and themselves.