Three myths: moving payment switches to the cloud

<p><b>The migration doesn’t have to be intimidating if you’re working with an experienced partner.</b></p>

<p>Payment switches are the unsung heroes of card-based transactions. These software hubs, which connect various payment methods to financial institutions, are reliable workhorses; most companies’ switch applications have been on the job for 20 years or more.</p> <p>So it’s understandable that modernizing them makes payments players nervous. Why fix something that still works? As a result, myths have emerged around what it takes to upgrade payment switches. As we talk to clients and prospects, we regularly encounter misconceptions about the challenges.</p> <p>Here are the top three myths and how companies can avoid them to find a path forward to upgrade this crucial system <i>and</i> keep it performing as reliably as always. </p> <h4>Myth 1: “No problem, we’ll migrate the payment switch over to the cloud”</h4> <p>Not so fast. For one thing, although cloud’s advantages are winning over payment providers, migration demands careful <a href="https://www.cognizant.com/us/en/insights/insights-blog/6-keys-to-success-for-card-issuers-migrating-to-the-cloud-wf2625901" target="_blank">planning and organizational focus</a>. More important is the challenge of cloud-based hardware security modules (cloud HSMs). These devices play a key role in a payment switch cloud migration by generating, protecting, and managing the keys used to encrypt data. Yet cloud HSMs are a new wrinkle in technology, and few companies fully understand their importance in cryptographic processes.</p> <p>Great precaution must be taken regarding remote access to the cloud HSM, especially the remote loading of keys inside the HSM and its remote administration. As a result, it’s important for financial institutions to choose a cloud HSM provider that provides a secure environment. The downside: If no cloud HSM is available, migrating the switch to the cloud can cause huge latency for transactions. </p> <h4>Myth 2: “Card-based payments are passe”</h4> <p>Not quite. Card-based payments aren’t going anywhere in coming decades. Look for the market size to show a compound annual growth rate of <a href="https://www.thebusinessresearchcompany.com/report/cards-and-payments-global-market-report" target="_blank">9.2%</a> for the next several years due to the rise of mobile payments, the expansion of open banking initiatives, and the continued growth of e-commerce.</p> <p>What’s more, each year brings new alternate payment methods—pay-by-bank, push-to-card, and others—that the switches of the world gear up to support. The upshot is that modern switching applications will power card-based payments with the engine they need to be efficient and drive revenue to capitalize on the profitable years ahead. </p> <h4>Myth 3: “We don’t have the bandwidth for a multi-year, multimillion-dollar modernization”</h4> <p>Put simply, switch migration is more flexible and easier than it used to be. Enterprises can opt to modernize components of a payment switch or the entire switch. Moreover, availability of pre-built, fault-tolerant, multi-platform switches with high-volume processing capability and high availability make modernization faster and more affordable.</p> <p>In addition, a careful strategy and roadmap makes the journey much easier. For example, we’ve partnered with clients to migrate logical chunks of functionality—like the on-us/not-on-us acquiring traffic or the issuing traffic—to the virtualized cloud-native switch using strategies like maintaining a host-ISO bridge between the old and new switches during the coexistence phase.</p> <p>Modernizing switch applications doesn’t have to be the headache many financial institutions foresee. With a clear understanding of the task and careful planning, providers can manage the upgrade and keep it performing as reliably as ever. </p>