Know the Important Role of Switching Companies in the Banking System in Indonesia

In the midst of the rampant trend of banking digitalization, switching companies continue to survive. In an article by Kontan.co.id, Business Director of PT Artajasa Pembayaran Elektronis Heru Perwito revealed that switching companies will support and complement various digital financial services that exist today. However, how familiar are you with switching companies? And what is their role in our banking system?

What is a Switching Company?

A switching company is a provider of infrastructure and technology services that connects various types of payment systems, such as banking, e-Wallet, and other financial service providers. In this case, the switching company acts as an intermediary that facilitates various financial activities, ranging from data transfer, transaction verification, to electronic transaction processing.

Quite often, switching providers are equated with banks. In fact, both are different institutions. Although switching companies and banks both provide financial services, banks have another function, which is to collect and distribute funds to support the economic activities of the community. This function is not performed by switching companies.

How did Switching Companies Establish in Indonesia?

Initially, transactions between banks in Indonesia could only be done through the systems owned by each bank. This was quite difficult, because customers could only use the bank ATM from the account they had. In fact, there are often conditions where we have difficulty finding an ATM for our own account, especially in areas with a limited number and choice of ATMs. From here, the need for services that connect between bank services is increasingly urgent.

In 1990, Lintasarta developed ATM Bersama, the first shared ATM network established in Indonesia. At that time, the main function of this service was the physical integration of ATM networks from various banks. Then, in 2000, Lintasarta established PT Artajasa Pembayaran Elektronis to manage and develop ATM Bersama services. At this stage, Artajasa expanded the role of ATM Bersama from a shared ATM network to a switching company that processes, validates, and forwards transaction data between banks. Artajasa then became a pioneer in developing a real-time-online interbank transfer system through ATMs.

As the largest switching service in Indonesia, ATM Bersama is connected to more than 95 banking institutions. This extensive ATM Bersama network allows customers from various banks to conduct transactions easily anywhere. This advantage makes ATM Bersama a reliable solution in facilitating interbank transactions. In addition, Artajasa also continues to innovate by expanding its services to the digital ecosystem through Bersama ID, providing a more modern and integrated transaction experience.

The Role of Switching Company in Payment and Banking System

To make it easier for you to understand the role of switching companies, imagine a payment system like a highway that connects various cities. In this analogy, banks, e-Wallets, and merchants are likened to cities that exchange goods. Transactions are the process of sending goods from one city to another.

For the delivery to go smoothly, you need a toll road. Switching companies function like those toll roads, ensuring every transaction is done quickly, safely, and efficiently. In detail, here is the role of a switching company.

1. Liaison Between Systems

As a liaison between various entities in the financial system such as banks, e-Wallets, and merchants, switching companies ensure that all entities can communicate and work together despite having different technology systems.

Switching companies like Artajasa play a role in forwarding data from one bank to another, such as in the transfer process from Bank BNI account to Bank Mandiri account. Without switching services, each bank would have to build a direct connection from one bank to another through specialized infrastructure and services.

2. Managing Transaction Data

Customer data such as account information, transfer amount, or payment details, must be processed quickly and accurately. This is where switching services come in to manage such data with the integration of various critical activities such as automation, real-time processing, and data logging.

Every day, switching companies have to handle millions of transactions without human intervention. To process transactions instantly, automation and real-time processing are needed. In addition to speeding up, they are also useful for minimizing the risk of errors from transaction completion.

After the transaction is processed, recording in data logs needs to be done in detail. So, when there is a need for audits, problems, or reporting to regulators such as BI, companies have a basis to track data quickly.

3. Ensuring Transaction Security and Regulatory Compliance

Cyber attacks continue to transform and increase. One of the most memorable cases was the ransomware malware attack on the National Data Center (NDC) in Indonesia on June 20, 2024. This incident successfully paralyzed more than 200 government servers and hacked public data. However, ransomware is not the only thing to worry about. There are various other forms of cyberattacks that often occur in the scope of payments or banking, one of which is fraud.

Fraud is a form of fraud or cheating through payment transactions. This activity can be carried out by the practice of data theft and misuse. In this context, banks are institutions that are vulnerable to fraud activities, because banks own and manage customer data.

To avoid fraud, the Financial Services Authority (OJK) requires the implementation of anti-fraud strategies for Financial Services Institutions (FSIs). Through this policy, FSIs such as banks and switching companies are expected to prevent, detect, and investigate fraud activities.

As a payment infrastructure provider (PIP), Artajasa plays a significant role in ensuring the security of transactions involving various parties. For example, Artajasa supports the implementation of an effective anti-fraud strategy across financial partner networks by performing end-to-end data encryption, real-time data monitoring, and integrating internal threat prevention systems such as fraud and external threats such as malware attacks.

Not only that, switching companies are also required to follow the standards set by BI and OJK, namely Payment Card Industry Data Security Standard (PCI DSS) and ISO: 27001. Through PCI DSS, switching service providers such as Artajasa must ensure that payment data transferred through its network is protected from theft and misuse. Not much different from PCI DSS, ISO:27001 also provides a framework for companies in the banking and financial sector to manage and improve their data protection from leaks and cyber threats. In addition, ISO: 27001 is also a standard that ensures a company complies with applicable regulations.

4. Operational Efficiency

To support the operations of various payment and banking institutions to run more efficiently, switching companies provide centralized infrastructure. By utilizing the services of switching companies, banks can reduce operational costs because they do not need to build and maintain ATM networks independently.

Switching companies also have a direct impact on bank customers, by expanding access to ATM usage that can increase convenience and service satisfaction. In this case, digitalization plays an important role in driving the operational efficiency of switching companies. The application of technology allows transaction processes to be automated, reduces the need for physical infrastructure, and supports data exchange between financial systems.

Development of Switching Companies in the Era of Banking Digitalization

In the midst of the rapid digitalization of banking, switching companies have a strategic role in supporting an increasingly integrated payment system infrastructure. With the increasing need for real-time transactions and the use of digital wallets, switching companies are the main bridge that ensures transactions run smoothly, safely, and efficiently.

Along with technological developments, switching companies continue to improve their capabilities in managing transaction data to support more effective services. Analysis of this data can provide insights into transaction patterns and market needs, which can help switching companies design strategies and solutions that are relevant to financial institutions and service users.

Switching companies also play an important role in ensuring financial services are interconnected. The integration of e-wallets, payment applications, and banking networks in switching services makes it easy for users to transact across different platforms seamlessly. The ability of different systems to interconnect greatly contributes to expanding access to financial services, especially for people in areas that are not fully covered by conventional banking.

In addition to supporting large banking institutions, switching companies also have an important role in reaching financial institutions that are not yet fully digitized, such as rural banks (BPR). Many BPRs still face challenges in developing IT systems independently due to financial limitations. By providing reliable and easy-to-integrate payment infrastructure, switching companies help BPRs connect with a larger network of payment systems. This not only improves accessibility, but also supports the implementation of security and compliance standards in line with the modern financial ecosystem.

The strategic role of switching companies in integrating various financial services, both digital and conventional, makes them an important foundation in supporting the transformation of payment systems in Indonesia towards the era of banking digitalization.

Artajasa as a Switching Service Provider in Indonesia

Artajasa is one of the largest switching service providers in Indonesia that plays an important role in the development of payment and banking systems in the country. Since its establishment, Artajasa has enabled interbank transactions in Indonesia through various services, ranging from ATM networks to digital services that support modern transaction needs. Artajasa's existence as a pioneer in the industry has become an important foundation for a more integrated and inclusive payment ecosystem.

As part of Artajasa, Bersama ID is present as a solution for financial institutions to facilitate customers in making transactions, be it interbank transfers, bill payments, and other digital services. Utilizing advanced technology and an extensive integrated network, Bersama ID helps financial institutions to provide a faster, safer, and more efficient transaction experience. This step not only increases convenience for customers, but also supports financial institutions in responding to the challenges of digitalization with adaptive and innovative solutions.

Going forward, Artajasa will not only serve as a liaison between financial institutions but also as a digital transformation partner. By continuing to innovate, Artajasa plays a key role in supporting the growth of Indonesia's digital economy. Through an inclusive, efficient, and globally competitive payment ecosystem, Artajasa is ready to help all levels of society to get the best payment solutions. Find various innovative services from Artajasa and Bersama ID here.