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About a Payment Switch

A payment switch is a central system that connects different financial institutions, routes transactions, and ensures that payment messages are delivered securely and efficiently between parties. It acts as the backbone of an interoperable payment network, allowing different systems, banks, and entities to communicate with each other. Traditional switches are often built around batch processing cycles, meaning that payments are grouped and cleared at set intervals throughout the day. These systems prioritize stability and volume handling but introduce delays in the actual movement of money, often taking hours or even days for a transaction to complete.

A real-time or instant payment switch introduces a fundamental shift in both technical architecture and product thinking. Instead of batching, transactions are processed individually and immediately, ensuring that funds are made available to the recipient within seconds. This instant processing demands not only robust infrastructure but also a rethinking of rules, user experience, fraud management, and financial institution readiness. More than simply increasing speed, a real-time system enables new financial behaviors, including 24/7 access, just-in-time liquidity, and business models that rely on the immediate movement of funds. The implementation of such a switch is not only a technical decision, but a strategic one that reshapes how money flows through an economy.

Key advantages of a real-time payment switch include:

• Immediate availability of funds which improves user experience and financial responsiveness.
• Round-the-clock transaction processing, removing the dependency on banking hours or cut-off times.
• Improved liquidity for businesses, enabling faster access to revenue and better cash flow management.
• Operational efficiency, with fewer intermediaries and simplified reconciliation tasks.
• Broader financial inclusion can be achieved by expanding access to digital payments for underserved groups.
• Support for emerging business models, such as on-demand services, instant payouts, and embedded finance.
• Greater transparency and traceability are particularly useful for government programs and compliance needs.

These benefits depend on more than just technology. Achieving them requires coordinated decision-making, strong governance, and alignment among banks, regulators, businesses, and end users.

Actors

A real-time payment (RTP) network depends on coordinating multiple actors, each with a specific role in ensuring the system’s effectiveness, security, and long-term sustainability. Understanding their functions and relationships is key before designing any component of the switch.

Clearinghouse (ACH)

Clearinghouses are often the owners and operators of RTP networks, typically governed by a consortium of the country’s most influential financial institutions. Their responsibilities include maintaining the operational stability of the network, defining cost models, supporting participant institutions, and providing the necessary transactional data for downstream processes like settlement and reconciliation. As orchestrators of interoperability, ACHs are frequently Minka’s direct clients and key strategic stakeholders in any payment network initiative.x