Fintech is also among the fastest-growing markets globally. It is predicted to reach $492 billion by 2028, with a 16.8% CAGR. Backed by over 50 years of cumulative founders’ experience in the online payments field, Akurateco has built and perfected a number of payment gateways. Based on such rich industry expertise, we can transfer valuable knowledge to implement a payment gateway successfully. With our practice and guidelines to guide you through, we will take you through the process of designing a secure, robust, and scalable payment solution.
Planning the Architecture of a Payment Gateway
The first step in building a payment gateway is deciding on its architecture. There are three main types of architecture for a payment gateway: Monolithic, Microservices-based, and Hybrid. Each offers distinct advantages depending on scalability needs and business goals.
Developing a payment gateway requires a deep understanding of its core components, which are not just crucial, but fundamental for ensuring secure, reliable, and seamless transactions. These components form the backbone of the gateway, and their proper implementation is key to a successful payment system.
Core Components of a Payment Gateway
A payment gateway is central to processing digital payments, offering smooth transactions, and protecting sensitive information. The following are the most critical components that make up a robust and secure payment gateway:
1. Security Protocols
Description: Security is the most essential attribute of any payment gateway. Sensitive data in transit are secured using the SSL (Secure Sockets Layer) and TLS (Transport Layer Security) encryption protocols. These technologies prevent unauthorized users from accessing data transferred between the customer’s browser, the gateway, and the merchant’s system.
Benefit: Protocols safeguard card and payment information, such as bank data, credit card numbers, and addresses, against hackers, curtailing the liability of fraud and data breaches.
2. Payment Processor Integration
Description: A payment processor clears and authorizes an agreement between the shopper’s bank account and merchant account. Payment gateways interface with multiple processors to verify card data, check for fraud, and accept or decline payment. It requires significant resource and time investment to ensure it meets industry standards and delivers a seamless payment experience. Instead of building from scratch, businesses can rely on payment orchestration services to simplify integration, optimize transaction routing, and ensure compliance with the latest security standards.
Benefit: Smooth integration of multiple processors allows the merchant to offer the customer various payment options, from credit and debit cards to other payment methods, thereby increasing customer satisfaction and merchant market coverage.
3. Fraud Prevention
Description: Payment gateways require anti-fraud protection to safeguard merchants and consumers. Anti-fraud techniques such as authentication technologies, such as 3D Secure, with an added verification level, and tokenization, where sensitive card information is replaced by short-lived identifiers (tokens), are widely used to prevent fraudulent transactions.
Benefit: Such anti-fraud facilities help quickly recognize and block suspected transactions, reduce chargebacks and fraudulent claims, and give customers confidence.
4. Transaction Authorization
Description: Authorization of the transaction refers to verifying that the customer can make a purchase using available funds or credit. When a customer initiates a payment, the gateway communicates with the bank to verify the transaction data, find out the available balance in the account, and get approval or decline feedback.
Benefit: This ensures that only authentic transactions are carried out and merchants do not ship merchandise or provide services without proper authorization, reducing the risk of chargebacks and rejected transactions.
5. Bank Communication
Description: One crucial feature of the payment gateway is its ability to communicate directly with the bank or financial institution where the customer’s account is being processed. When the payment request is made, the gateway verifies that the funds are available and that the transaction has passed the needed security checks. Then, the gateway sends a response (approval, decline, or error) back to the merchant.
Benefit: Through constant communication with banks, the payment gateway can rapidly verify the payment status and notify merchants with data to assist in fulfilling orders, furthering transaction efficiency.
Value-Added Services in Payment Gateways
In addition to the fundamental features, payment gateways offer various value-added services that complement the overall functionality of the payment system. These value-added services boost the merchant’s payment management ability and make the payment process more convenient and smooth for the customers. Some of the most prominent value-added services provided by payment gateways are:
1. Routing and Cascading
Description: Cascading and routing allow payment gateways to route transactions automatically to several payment providers by provider availability, transaction volume, and success rates. Upon failure of the primary provider, the system immediately cascades the payment to a secondary provider.
Benefit: This optimization feature improves transaction success rates and reduces costs. By routing payments to the most reliable and lowest-cost provider, merchants can minimize transaction declines, lower fees, and improve customer satisfaction.
2. Merchant Onboarding
Definition: Onboarding merchants are enrolling merchants to begin accepting payments. A good onboarding process provides merchants with the equipment and documents required to get up and running quickly and effectively, including opening payment accounts, integrating with payment processors, and implementing payment methods.
Benefit: Streamlining the onboarding process reduces the time it takes for merchants to start accepting payments, maximizing their time to market. Now that onboarding is simplified, merchants can focus on running their business while the payment gateway does the technical setup.
3. Recurring Payments
Description: Recurring payments allow businesses to charge customers regularly for subscription services or membership. The feature is typically used in industries like SaaS (Software as a Service), digital media subscriptions, and health clubs.
Benefit: By using automated payments, merchants can reduce churn, improve cash flow, and improve customer engagement. Customers appreciate the convenience of not having to pay manually each time, with constant service uninterrupted.
4. Transaction Routing
Description: Transaction routing, the most critical element of payment gateways, is designed to direct payment requests to the most appropriate provider. This process ensures that payments are completed as quickly and inexpensively as possible, enhancing overall customer satisfaction by reducing delays and failed transactions.
Benefit: Routing payments automatically in the best manner lessens delays and causes fewer transactions to fail, improving overall customer satisfaction.
5. Pay by Link
Description: “Pay by Link” is a payment solution that allows merchants to generate a one-time payment link and send it to customers via email, SMS, or social media. The customer clicks on the link to pay on a secure page without manually entering payment information on a website.
Benefit: It is helpful, especially for freelancers and small companies that do not have traditional web shops. It provides an easy, quick, and secure way to enable customer payments, making it ideal for single payments, invoicing, or donations.
6. Multiple Payment Integrations
Description: Payment gateways usually handle more than one mode of payment, such as credit cards, debit cards, e-wallets (PayPal, Apple Pay, Google Pay, etc.), bank transfers, and others. This expands the range of available payment options, allowing customers to choose their preferred payment method.
Advantage: Enabling different payments allows businesses to reach more consumers. It increases conversion because it provides customers with flexibility, reduces checkout friction, and enables them to pay in the most convenient way.
How Does a Payment Gateway Work?
So, a payment gateway is a secure intermediary between the customer, merchant, and bank during a transaction. When a customer makes a payment, the gateway encrypts the payment details and sends them to the payment processor. It then communicates with the bank to confirm the availability of funds and authorization. Once approved, the gateway returns a confirmation to the merчchant, completing the transaction. This process happens in seconds, ensuring both parties a seamless and secure payment experience.
How can Akurateco help?
Let’s start from the beginning—Akurateco is a white-label payment software vendor that provides a flexible, ready-made solution that allows businesses to quickly and easily launch a payment gateway under their brand. The PCI DSS-compliant platform comes equipped with over 400 integrations to banks and payment providers worldwide, offering businesses seamless global connectivity. Additionally, it supports multi-currency functionality and can be fully customized to suit specific business needs.
Using an API-first approach can provide seamless integration, process automation, and decent scalability. In other words, it is a straightforward and adaptable tool for those who want many features without complicating their lives. The platform gives you access to multiple payment methods, advanced fraud prevention tools, and seamless integration, helping businesses scale effectively. Akurateco also has excellent customer support and is always available to help. Moreover, Akurateco offers smart routing payments, enabling merchants to direct transactions through the most efficient payment provider based on parameters like location, payment method, or transaction value. This ensures higher approval rates and lower transaction costs, providing a more optimized payment processing experience.
Conclusion
A structured payment gateway is the backbone of any successful online payment system. It provides a core function while providing security for merchants and their customers. Companies can ensure that their payment systems are reliable and effective by adopting a structured way of building and integrating essential payment components such as transaction routing, security technologies, payment processor alignments, and fraud protection systems.
Additionally, adding value services such as merchant boarding, recurring transactions, pay-by-link functionality, and multiple-payment support can significantly improve customer and merchant satisfaction. These flexible services contribute to a higher payment success rate, which translates to customer satisfaction and retention.
For businesses considering building their payment gateway, it’s crucial to understand the complexities of building a secure, compliant, and scalable solution. With the rapid evolution of the fintech industry and ongoing innovation in payment technologies, ensuring your gateway is future-proof and able to evolve with new payment channels and security measures is essential for competitiveness.
If planning everything from the ground up is overwhelming or capital-requiring, worry not. Existing solutions like Akurateco are highly tuned and customizable payment gateways that are easily deployable in your existing infrastructure. Companies save time by choosing a pre-built solution, shaving development budgets and focusing on growing operations rather than working around complex infrastructure. With built-in features continuously updated to meet security and compliance requirements, Akurateco provides a direct path to safe and efficient payment processing.
Ultimately, whether you’re developing your own payment gateway or installing a solid pre-built solution, it’s beneficial to be familiar with the core components and value-added services so that you can make smart, strategic decisions that will drive long-term success.
FAQ
Is it a payment gateway software?
Yes, a payment gateway is specialized software that securely facilitates payment transactions between buyers and sellers. It encrypts customer data, routes transactions to payment processors, and ensures compliance with regulations like PCI DSS.
How to build a payment gateway software?
Building a payment gateway involves:
- Research and Compliance: You must understand the market needs and compliance with legal requirements (e.g., PCI DSS).
- Core Features: Payment routing, multi-currency, security, and API.
- Development: From a secure backend and user-friendly interface to API integration.
- Testing and Licensing: Comprehensive testing and obtaining financial licenses is mandatory.
Alternatively, White Label solutions offer a cost-effective way to launch a gateway without building one from scratch.
Who is the best fit for payment gateway development?
E-commerce businesses with a known high transaction volume require custom settings. The second group is fintech and payment service providers wanting complete independence and payment control.
How long does it take to develop a payment gateway?
On average, payment gateway development takes from 6 to 12 months. The time may increase when customizing the solution and adding complex multi-level functionality and integrations.
How much does it cost to develop a payment gateway?
The cost varies from $150,000 to $700,000 and more, depending on the complexity, requirements, cooperation format, and the payment gateway software development company team involved.
Are there any alternatives to developing your own payment gateway?
Yes, instead of developing your own payment gateway, you can opt for a ready-made solution or partner with an existing provider. This approach saves time and money while eliminating the expenses of creating payment solution software.
What technologies are used in the development of payment gateways?
When it comes to the development of payment gateways, we prioritize your security. We employ robust technologies such as data encryption (SSL / TLS), tokenization for safeguarding payment information, and APIs for seamless integration with other systems. Our use of database management systems (SQL / NoSQL) ensures efficient data handling. Furthermore, we utilize cloud solutions for easy scalability and various data analysis tools for comprehensive transaction monitoring.
What are the advantages of SaaS solutions for payment gateways?
SaaS solutions offer a ready-made infrastructure, automatic updates, and 24/7 technical support. They are optimal for small and medium businesses since they do not require significant initial investments and allow you to start accepting payments quickly.
