To build a custom payment gateway development process you need expertise in security protocols and software development. For starters, it involves seamless integration requirements with banks and payment service providers. Only then will your customer be able and willing to make payment transactions with your business? The development process involves multiple steps, and you need to have a solid understanding of the process. An ideal payment gateway development would have tackled compliance and regulation standards, an intuitive user interface, and implemented secure payment processing. Continue reading to know more about the Payment Gateway Development Process. 

What is a payment gateway? 

A payment gateway is software that enables payment/fund transactions between clients and merchants. To put it simply, it is a “middleman” (for lack of a better term). While banks empower businesses and individuals with payment transactions. A payment gateway is a technology/tool that allows online payment opportunities for the same audiences. Even though the banks offer their own payment gateways, the most popular ones are offered by fintech companies because of their agile and innovative nature when compared to the traditional structure of a bank. 

The client makes an online payment request transaction authorization information of the client is transmitted to the payment processing parties the fund is safely deposited in the merchant account 

Understand: A payment gateway does way more than just transmit data. The following are the BAUs for a payment gateway: 

  • Step 1: It verifies whether the client has requested funds in their account, card or digital wallet to cover the purchase. 
  • Step 2: It uses encryption technology to secure the sensitive information that the client shared for making the payment.  
  • Step 3: It protects merchants from any potential fraud. 

In any optimum payment gateway development, the payment gateways are buttressed by chargeback and fraud prevention systems to ensure the safety of the payment and protect the client from any financial loss.  

Payment gateway vs merchant account 

 Payment Gateway Merchant Account 
Function Think of Payment Gateway as a cashier, it takes the client’s payment information, validates it and sends the information to the bank. A Merchant Account is a special bank account where the money goes first, once the transaction is approved. 
Role in Transaction It is a software technology used to accept or decline online transactions. A Merchant Account is a temporary account, where the money goes before it is transferred to the merchant’s regular bank account once approved by the payment gateway. 
Examples PayPal, Stripe, or Authorize.Net When you are setting up payment processing with a bank or any other financial institution, you are typically setting up a merchant account. 

Payment gateway vs payment service provider 

 Payment Gateway Payment Service Provider 
Function It is a payment transaction software that facilitates online payment. Payment Service Provider or PSP is a fintech company that provides a wide range of financial services to the merchant including Payment Gateway. 
Role in Transaction The payment gateway acts like a digital “middleman” that handles the technical side of payment processing. The technical side includes encrypting data, handling authorization requests, the payment processor, and communicating between the merchant’s websites  The PSP handles everything related to payment processing. This includes providing the payment gateway for managing the merchant account, compliance, fraud detection, and even invoicing and analytics. 
Examples PayPal, Stripe, or Authorize.Net PayPal, Square, and Stripe 
Here is an overview of how a payment gateway works

Client Makes a Purchase:  

The client decides to buy a product or service through the Merchant’s online store. He/she/they then enter their payment information i.e. their credit card/debit card/bank account details or information for any other type of digital payment. 

Payment Gateway: 

The payment information is received by the Payment Gateway in an encrypted form to protect the sensitive data. The encrypted information is then sent to the payment processors by the Payment Gateway. 

Payment Processors: 

The payment processors send the encrypted transaction information received from the payment gateway to the card issuing company or the bank of the Client for transaction authorization.  

Client’s Bank: 

The client’s bank, based on the information received, funds that the account holds, and other criteria (or security checks) accepts or denies the transaction request. The approval or denial is then sent back to the Payment gateway. If approved, the transaction will be completed, and the client will receive the confirmation message. On the contrary, if declined, the client is notified the payment request is failed or halted.  

Merchant Account: 

When the payment transaction is approved by the client’s bank or the card issuing company, the payment is temporarily sent to the Merchant account of the service provider before reaching their traditional bank account. This is to ensure additional security to protect the merchant from fraud. The timing of the deposit can vary based on the merchant’s agreement with the bank and batching requirements.  

Who needs Payment Gateway Development? 

Businesses or companies considering deploying payment functionality e-commerce websites or mobile applications of a similar nature can be in a dilemma of whether to go for a market-available payment gateway or to choose a custom payment gateway development. Integrating a market-available payment gateway for your digital payment needs is easy, and hence popular. But it comes with its limitations. However, an OOTB gateway/market-available payment gateway is not always heavy on the budget. Opting for an easy solution might not be the right one for most of you out there, it may lead to unfavourable financial consequences. And also, with these OOTB gateways, it is not easy to integrate with all of your existing software and apps. With all that said, OOTB gateways are still great for so many businesses. This brings us to the question – then when one should opt for custom payment gateway development. 

Here are instances where a custom payment gateway development is right for you 

  • Online businesses that have a high volume of transactions so much so that you want to incorporate AI-powered fraud detection, or on-demand scalability to handle the growing amount of payment transactions during peak times. 
  • Businesses that want to be independent of third-party payment service providers. 
  • Payment providers looking to expand your business. 
  • Companies that want to become payment service providers (PSPs) and monetize your payment gateway by allowing other companies to use it for a fee. For example, if you own an e-commerce marketplace, you can encourage the merchants to accept transactions via your custom-made payment gateway and charge them for this service. 
  • Businesses that want to support a wide range of payment methods like crypto payments, sophisticated recurring payments, etc.  
  • Businesses that need a solution that can be easily evolved with new functionality as the business grows or transforms.  
  • Businesses that want to integrate a payment gateway system with the existing software i.e. e-commerce website, a mobile banking app, an accounting system, and a customer portal.  

Benefits of Payment Gateway Development 

Long-Term Cost Savings: 

The third-party payment gateway can take a toll on your budget. The registration and usage cost can stack up making the few benefits you gain from such a service inconsequential. Your business must pay a fee for every transaction made for and against it. With custom payment gateway development, you can cut down the operational cost to a degree and gain flexibility. Even though it demands an initial investment and still incurs access and interchange fees in expenses, it cuts down the expenses comparatively to a significant margin. 

Custom Features: 

A rule of thumb when deciding on software is that no one software is one fit for all, and this is true for payment gateway as well. Off-the-shelf payment gateways often come with very generic features which most likely won’t address any of your business’s nuanced needs. On the other hand, a custom payment gateway development can offer a comprehensive range of desired features and functions. And you also don’t have to pay additional for any features that you do not need. 

Control over data: 

Having your own custom payment gateway development will gain you access to your valuable customer data. Through those data, you can understand and navigate your business according to your customer usage and behavior. This means that you can develop and set features and functions in your platforms according to your customers’ preferences and cut down on features that they do not need. It also empowers you to access smart routing to choose the best payment service provider for your business. 

Additional profit: 

Alongside fine-tuning the user experience, you can also make additional profit with your custom payment gateway development. This is through charging a registration fee and transaction fee from your customers, which is a solid additional income. 

Steps involved in Payment Gateway implementation 

Step 1: Understand the Basics 

Start with the basics regarding the payment Gateway Implementation. Understand the essentials and fundamentals i.e. how the payment gateway works? What are its different options? Attain also a working knowledge of the different types of payment gateway software (hosted, self-hosted, integrated). You may also need to familiarize yourself with the industry standards for security and compliance. 

Step 2: Conduct Market Research 

Once you understand the basics, you must figure out what works for your customers. To serve this purpose you have got to do market research. Conduct market research on your target audience’s payment preferences and market behaviors to design a well-suited payment gateway implementation that matches their needs. 

Step 3: Plan! Plan! Plan! 

Now that you have all the data and understanding, plan your payment gateway implementation process. Start planning an all-encompassing outline that details the features, functionalities, and security measures required. This outline will help in creating a roadmap for the development process. 

Step 4: Choosing the Right Technology Stack 

Choosing the right technology stack can make or break a payment gateway development 

Here are some appropriate technology stacks: 

  
Database MySQL, PostgreSQL, MongoDB, OracleDB, Microsoft SQL Server 
Server-Side Language Java with Spring Boot, Python with Django, Node.js with Express.js, Ruby on Rails, C# with ASP.NET, PHP with Laravel 
Payment Processing Stripe API, PayPal API, Braintree API, Square API, Authorize.Net API 
Frontend Framework React, Angular, Vue.js 
Monitoring and Logging ELK Stack, Prometheus and  Grafana 
Security SSL/TLS for secure communication, Encryption algorithms (AES, RSA), Tokenization for sensitive data protection 
Containerization Docker, Kubernetes 
Testing JUnit, TestNG, Pytest, Jest, PHPUnit 

Step 5: Ensuring Security and Compliance 

Ensure security for your payment gateway development with cutting-edge encryption protocols, and compliance standards like PCI DSS, and SSL. 

Step 6: User Interface and Experience Design 

Design and implement UI/UX designs that are captivating and just effortless to use for your customers. The deploying User Design should be intuitive and engaging, and the user interface should simplify the payment process. You need great designers for this, only the best. 

Step 7: Integration and Testing 

 Firstly, enforce a seamless integration of your payment gateway with other popular platforms. The trial-and-error integration strategy and other testing efforts will identify and fix potential issues. 

Step 8: Launching 

After the rigorous testing roll out your custom payment gateway. However, remember to follow three key guidelines when it comes to launching a payment platform to make the most out of it: 

  • Monitor performance closely after launch and make changes wherever required. 
  • Consider a phased deployment of the payment gateway, this gives you room to fix issues and adapt to unforeseen requirements easily. 
  • Regularly update your payment gateway with new features and functions so that your customers are always delighted with your services. 

Need help with Payment Gateway Solution? 

Our skilled design and development is ready to mobilize to work on a custom payment gateway development that serves best your business. Talk to us today! 

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