What is an H2H payment, and how can they streamline payments?

What is a host-to-host (H2H) payment?

Host-to-Host (H2H) is a payment integration method that enables direct communication between two computer systems: the payment system of a company (merchant) and the system of a bank or payment service provider.

In an H2H system, transaction data is automatically and securely transmitted in real time over a secure network without the need for manual intervention. This technology helps businesses save time, reduce errors and provide a better transaction experience for all parties involved.

H2H payment systems work by integrating a company's system with an application programming interface (API) or specific protocols provided by the bank or payment service provider. For each transaction, data is sent directly from the company’s server to the bank’s server for processing. The results of the transaction are then automatically sent back to the company’s system.

In today’s digital age, many industries use H2H payment systems to process various transactions. These include e-commerce, financial services, healthcare and education. The simplicity, speed and automation of H2H processes allows businesses to conduct transactions more effectively.

To better illustrate, here are some examples of the use of H2H payment systems:

• Automatic payment of employee salaries directly to their accounts.
• Automatic processing of supplier payments based on invoices.
• Facilitating the payment of tuition fees via an online system linked directly to a bank.
• Patients can pay hospital bills online without waiting in line at the cash register.
• Processing monthly utility bills such as electricity, water and internet.

Benefits of host-to-host payments

Host-to-host (H2H) payments offer significant benefits for businesses of all sizes, from small businesses to large corporations. Here are some of the key benefits of implementing H2H payment systems:

1. Faster and simpler transaction processes

H2H payments enable automated, real-time transactions between a company’s system and the bank. This eliminates the need for manual input or third-party involvement, resulting in faster and more straightforward processes.

Both businesses and customers benefit from the speed and simplicity of these transactions. Businesses can effectively reduce the time it takes to process payments, while customers enjoy a smoother and more convenient transaction process.

2. Increased transaction security

The H2H systems encrypt all data transferred between systems using robust algorithms. They also implement authentication mechanisms to ensure that only authorized parties have access and can perform transactions.

In addition, H2H systems are equipped with advanced security measures to prevent fraud and protect company funds. Features such as anomaly detection for unusual transactions or repeated failed login attempts provide additional protection.

3. Improved transaction traceability

H2H payment systems automatically record every transaction with comprehensive data, including timestamps, details of the parties involved and transaction status. This data can be easily integrated and accessed at any time, facilitating auditing, reporting and financial monitoring.

This transparency and traceability improves accountability in transaction management and ensures compliance and reliability.

4. Time and cost savings

By automating processes, H2H systems eliminate the need for manual input, which is often prone to error. Payments are processed faster with minimal human involvement, allowing companies to devote their resources to other productive activities. This also helps to reduce operating costs in the long term.

5. Seamless integration with enterprise systems

H2H systems enable integration with an organization’s internal systems tailored to specific business needs. Systems that can be integrated include Enterprise Resource Planning (ERP), Customer Relationship Management (CRM) and accounting systems.

Such integration gives companies full control over creating efficient and relevant payment solutions. With effective integration, financial data remains up-to-date and accurate. Businesses can access transaction information anytime and anywhere, simplifying decision-making processes.

How the host-to-host payment system works

As mentioned above, the Host-to-Host (H2H) payment system works by automatically integrating two connected systems. Here you'll find a detailed explanation of how the H2H payment system works:

1. Integration of financial systems

Both parties, such as a company and a bank, need to define the financial systems they want to connect. Before the integration, the parties define the types of data to be transferred. Communication protocols such as API (Application Programming Interface) or SFTP (Secure File Transfer Protocol) are normally used for the integration.

2. Establishing a secure connection

As the system is used for transactions, the H2H connection must be secure and reliable. Encryption of the data is essential to prevent unauthorized access. The connection should also be protected against cyberattacks and malware.

3. Data exchange

As soon as the connection is established, the company’s financial system exchanges data with the bank’s system. The company’s system usually sends transaction data to the bank’s server, including the recipient's name, the account number, the payment amount and the destination bank.

4. Transaction authentication

The bank system validates the transaction data sent by the company system in several steps. First, the server checks the sender’s account details, the format and the details of the transaction. Secondly, the server authenticates the sender using security methods such as PINs (Personal Identification Numbers) or OTPs (One-Time Passwords). The bank also ensures that the sender is authorized to carry out the transaction.

5. Payment instruction and processing

After validation, the bank processes the payment instruction and executes the transaction as requested. The sender’s account balance is debited and the amount is transferred to the recipient’s account at the destination bank. The bank’s system completes the process of debiting and crediting.

6. Confirmation and reporting

Once the transaction is completed, the bank’s server sends a confirmation back to the company’s system. Both parties receive detailed transaction reports containing the date, time, amount and transaction status. All transactions are stored in the respective system’s database for auditing and reporting purposes.

Simplify H2H payments with Aspire

From the above, it is clear that the H2H payment system simplifies business transactions. The fast and automated processes save time and allow you to focus on other business activities.

For smoother and more efficient transactions, you can use Aspire’s Payout API. This API integrates seamlessly with your system and enables H2H payments supported by various banks such as Bank Mandiri, BNI, BRI, Permata and CIMB.

In addition, Aspire’s Payout API allows you to make online transfers to over 140 banks across Indonesia at any time. Through a single dashboard, you can also withdraw funds through retail stores.

In addition to H2H payments, Aspire offers a range of premium services such as business accounts, payment gateways and corporate payment cards. Want to find out more? Contact our team today!