FAT32 on other hand works great on switch, with a big caveat. It cause slow down. Its a well known drawback of FAT32 on larger capacity drives. You may not notice this on Switch that much but very noticeable on systems like PSP with duostick to sd adapter and Nintendo 3DS.
There might be something to this, but I'm not sure it is strictly related to Fat32. Moving from a 64gb microSD to a 512gb microSD, for example, caused some serious slowdown on the
3DS for me. Granted, I filled like 250gb or so with roms for emulation and a crapload of 3DS games, so it might just be the sheer amount of files the system is having troubles with. Every time the 3DS goes "checking contents of SD card" I basically have enough time to make myself a coffee with the 512gb card, it used to be much snappier on the 64gb version.
Trying to access a folder with more than 100+ items in it over FTPD sometimes straight up fails to list the contents of the directory, never had that issue on the 64gb card. And no, the contents are not corrupted, inserting the card into an SD reader everything works, writes, and reads properly. Not sure if this is a homebrew-specific issue, even the 3DS system menu is overwhelmed and just displays "999,999 free blocks" or whatever. Evidently Nintendo never expected people to use cards bigger than 64gb in a 3DS. The switch on the other hand was designed with large capacity cards in mind.
It is perhaps worth noting that a fat32 file system keeps
two file allocation tables handy, for redundancy purposes, and exfat does not. Maybe this is why exfat cards are more liable to corrupt. If a write to the file allocation table screws up somehow, the system can fall back onto the 2nd copy, worst case you'll just be missing a file, and the corruption stays contained. In
theory exfat should be the more resilient file system because it instead relies on a cluster bitmap and additional metadata for error recovery and efficiency. Nintendo must have screwed up something big time in their exfat implementation to make it less reliable than a file system out of the MS-DOS days.
Fat32 was never made with such capacities in mind. The huge amount of clusters seems to be what is causing slowdowns, so picking the largest cluster size in order to keep their count down seems sensible. I can't say I have ever noticed similar slowdowns on the Switch. Maybe it is just far more noticeable on the 3DS due to a general lack of system processing power.