With online merchants increasingly turning to third-party payment providers for pay-ins and payouts, the global payment gateway market has reached its zenith. If you’re interested to know how to create a payment gateway and capitalize on it, we’ll guide you through the process step-by-step in this article.
However, before delving deeper, let’s clarify the main terms applicable to this topic.
What is a payment gateway?
A payment gateway is a “middleman” between clients and merchants. It is a software that makes online transactions possible by transmitting sensitive payment details from the client to the payment processing parties to safely deposit funds in the merchant account. Furthermore, a payment gateway does more than transmit data.
First, it verifies that the customer has funds on their card, digital wallet, or any other payment method to cover the purchase. Then, it uses encryption technology to ensure the protection of sensitive information processed inside the system. Finally, a payment gateway protects the merchant from any possible fraud. Such systems typically have fraud and chargeback prevention systems to help clients avoid financial losses.
Payment gateway VS merchant account
A payment gateway is software that handles communication between the customer, the merchant, and the bank. In contrast, a merchant account is a specialized bank account that allows merchants to accept and process payments.
Merchants can open an account directly via financial institutions. They can also do it with the help of payment service providers or third-party payment gateway providers offering merchant account services. When the merchant registers a merchant account, they acquire a Merchant Identification Number (MID) for processing electronic transactions.
Payment gateway VS payment service provider
A Payment Service Provider (PSP) refers to companies that provide various financial technology products. They typically include a payment gateway and additional tools to streamline the payment flow for merchants.
PSPs act as payment gateway vendors that provide and maintain transaction processing software. In essence, while an online payment gateway is an integral part of the payment process, PSP is a provider of a complex solution that may include various services beyond the gateway itself.
Payment gateway VS payment processor
Payment gateway and payment processor are two different payment players with complementary roles. Due to this, they often get confused.
The payment gateway is responsible for receiving payment information from the client, encrypting the data, and then transmitting it to the payment processor. The payment gateway also accepts information from the payment processor about the transaction confirmation or rejection.
The payment processor ensures that information about a financial transaction is transmitted directly to banks. It sends the data to the issuing and acquiring bank.
Custom payment gateway development: Pros
As the digital payments industry is currently at its peak, there are multiple advantages to developing a payment gateway. They include:
Cost-efficiency in the long run
The upfront expenses for software development may indeed hit your pocket. Yet, they can shield you from ongoing fees associated with using a third-party system over time. But you will still need to maintain and update the system yourself.
Features tailored to your needs
As there’s no “one size fits all” third-party payment processing solution, you may have to compromise in terms of features and integration. With your own payment gateway system, you can develop specific features and integrations of your choice if you have enough expertise.
Complete control over user experience
The owners of payment processing software fully control transaction data and the user interface. Its analysis empowers you to identify shortcomings that hinder your users from a smooth and user-friendly purchasing experience, enabling you to address them.
Edge in the market
By developing a payment gateway infrastructure, you have the flexibility to fine-tune it according to your specific requirements. Plus, you can craft a unique offering in the competitive FinTech market.
Custom payment system development: Cons
Developing your own payment gateway comes with certain disadvantages that you should consider. Here are some potential drawbacks:
Development cost
Payment gateway architecture development can cost you an arm and a leg. It involves significant expenses such as salaries for the development team and specialists, infrastructure costs, security certification fees, and more. Ultimately, they amount to 500,000$ and more, depending on your requirements. Therefore, independent development is not feasible for businesses operating on tight budgets.
Maintenance cost
Since payment gateway maintenance is not a one-time thing but a continuous undertaking, staying abreast of security regulations, integrating new payment methods, and conducting routine software maintenance will become one of your top priorities in the highly competitive e-payments market. Therefore, when estimating the expenses of internally developed software, it’s essential to consider maintenance costs, which are usually approximately 20 percent of the initial development cost yearly.
Time-consuming development
Opting to develop software from the ground up requires a long-term commitment. Beyond investing time in the development process, you must also dedicate efforts to finding seasoned specialists with extensive expertise in software development, security protocols, and compliance with financial regulations. Therefore, building a payment gateway is a time-consuming process, potentially delaying your revenue-generating capabilities.
PCI DSS certification
Payment gateways must acquire essential security certifications to guarantee the protection of customers’ credit card data. The Payment Card Industry Data Security Standards (PCI DSS) is a mandatory certification. As the owner of a payment gateway, it is mandatory to certify your software in alignment with PCI DSS standards and undergo the renewal process annually, which is quite costly and complicated.
How to build a payment gateway?
If, after evaluating all the pros and cons, you want to give payment gateway software development a go, here is a general step-by-step guide to help you understand the steps involved in it:
1. Understand the business model of a payment gateway
Before you jump into action, gain a thorough understanding of how payment gateways generate revenue. This knowledge will help you set clear short- and long-term goals. For more information, check out our in-depth article covering a payment gateway business model.
2. Establish objectives and requirements
Software development requires establishing goals and prerequisites for your system. Define its capacity, technologies, integrated banks, payment providers, and other critical details shaping the development process.
3. Recruit a skilled development team
The key to software success is your team. Assemble a team of professionals with software development, security, and compliance expertise, including developers, security specialists, and compliance experts.
4. Choose technology stack
Select the appropriate technology stack for your payment gateway. Consider programming languages, frameworks, infrastructure, and tools that align with your development goals and your team’s expertise.
5. Design architecture
Create a robust and scalable architecture for your gateway based on the expected payment transaction load. Define how different components will interact, ensuring efficient and secure data flow.
6. Implement core features
Develop the core features of your payment gateway, including payment processing, transaction authorization, error handling, and support for various payment methods such as credit cards, digital wallets, and bank transfers.
7. Ensure system security
Implement robust fraud prevention technologies to protect your customers’ sensitive transaction details. Keep payment information secure by encrypting communication channels and securing databases.
8. Integrate with payment processors
Integrate your payment gateway with the Application Programming Interfaces (APIs) of payment processors and acquirers to facilitate transaction authorization and settlement.
9. Perform a system test
Test your system to identify and fix any bugs, security vulnerabilities, or performance issues by running unit, integration, and security testing.
10. Obtain the necessary certifications and licenses
Get the necessary licenses and certifications, such as PCI DSS compliance, to handle payment data legally and securely, minimizing fraud and data breach risks.
11. Go into the live mode
When the system is complete, deploy your payment gateway in a production environment and monitor its performance. Implement real-time monitoring, logging, and error tracking tools to identify and resolve issues promptly.
12. Conduct ongoing maintenance
Establish a plan for ongoing maintenance, updates, and support. Regularly update your payment gateway to eliminate security risks, comply with updated regulations, and improve functionality.
Other factors to consider
Nevertheless, to build a payment system that will be competitive in the market in today’s day and age, combining issuer and acquirer data is not enough. To succeed, you need to have a whole service that will be useful for end users.
Value-added services
This means one payment page should have a certain number of value-added services that will make your customers’ payment experience much more comfortable. These include mobile wallets, Google Pay, and Apple Pay, as well as the connection to all card schemes such as MasterCard, Visa, and American Express. Also, it should offer a Direct Debit option for users from certain geographical countries.
Streamlined checkout process
Streamlining the checkout process is another crucial strategy to keep in mind. Minimize the number of interactions required to complete a purchase with the help of streamlined security measures like 3D Secure 2.0 and network tokens, as well as by offering alternative payment methods – crypto payments, Buy Now, Pay Later (BNPL), and more.
Microservices
In order to have a seamless experience and keep services up even when some of them might experience downtime, your system needs to be divided into microservices. These include the dashboard, merchant onboarding functionality, merchant management system, reporting, reconsolidation, routing, cascading, etc. Akurateco takes this approach into account, offering you a reliable microservices architecture.
Comparing payment gateway development services with white-label payment gateway
Since new payment methods are constantly being added and payment trends are changing, businesses are exploring out-of-the-box solutions. Imagine you are integrating one connector while another one already appears. This is where white-label payment gateways can help.
How a white-label payment gateway works
A white-label payment gateway is a brandable software developed by industry experts. It is a pre-built payment gateway equipped with advanced technologies and support for various payment integrations. When a customer partners with a white-label payment gateway provider, the system is rebranded with their brand identity and can be marketed and resold as their own.
White-label payment gateway VS custom payment gateway
A major difference between a self-developed payment gateway and a white-label one is that the vendor handles a white-label payment system entirely. When we talk about developing your payment stack, generally it takes up to 2 months to integrate one payment connector. This process also requires a certain amount of resources – proofreading, documentation, partnership, technical integration, testing, etc.
In contrast, you can connect to one system with all the connectors onboard and make one integration instead of 30. The vendor will handle all aspects, resulting in significant cost and resource savings that can be directed toward essential business processes, such as marketing and business expansion.
This visual representation demonstrates how our white-label payment gateway connects and coordinates different payment components, including other gateways and value-added services, to create a unified and efficient payment solution.
Plus, the white-label payment gateway offers quick time-to-market, allowing the customer to start generating revenue from the first month of operation.
Akurateco white-label payment gateway solution
The pivotal factor in the success of your business utilizing a white-label payment gateway lies in the choice of a software vendor. Akurateco stands out as a well-established Fintech company that leases white-label payment infrastructure featuring integration with 370+ integrations from global to local payment methods. It incorporates various innovative features, such as intelligent payment routing, cascading, recurring payments, automated merchant onboarding, and more.
With a global presence spanning Europe, the USA, the Middle East, North Africa, Latin America, and other regions worldwide, Akurateco facilitates the seamless expansion of services for its clients.
By offering a wide variety of popular payment methods, Akurateco enables clients to extend their reach worldwide, accepting global transactions effortlessly. With a quick time to market up to a couple of weeks, clients can easily leverage Akurateco’s cutting-edge white-label payment gateway.
In outline
Taking on the journey of building a payment gateway demands careful consideration of the associated challenges and advantages. While independent customization offers unique benefits tailored to your business needs, the intricate development process, ongoing maintenance, and compliance requirements entail a great deal of finance and effort.
However, those who would like to leverage an advanced, ready-made payment solution can opt for a white-label payment gateway. Akurateco saves your resources and time letting you focus on the business part instead!
