The online economy is booming, and the need for payment processing platforms is at an all-time high. It makes processing payments simpler and handles all the bureaucracy that comes with online payments from one entity to another. There are plenty of reasons why businesses need a payment platform. It can range anything from reducing payment service fees, startups looking into offering a gateway in an underserved region to companies looking to move on from a white-label service that cannot provide the support they need.
Now, if you are thinking about building an online payment processing platform for yourself but still cannot make up your mind on whether you should or not, then you are at the right place. This article will answer some critical questions that will help you understand why you need to build your very own payment processing platform. We here at the Zed Network specialize in providing comprehensive payment orchestration services to a wide range of industries that include Fintech, Legal Tech, Crypto brokerage firms, FX brokerage firms, MTOs, and other multinational companies. So we know all there is to know about payments, global and international.
Not only that but Zed Founder and entrepreneur Alan Safahi has over 30 years of experience in the information technology, telecommunications, and financial services industries. Along with Safahi, our team consists of highly specialized individuals who are industry veterans and that’s why we acquired a unique perspective on what makes startups successful. When working with Zed, we have constantly come across entrepreneurs who doubt their need for a comprehensive payment processing platform. One of the most common discoveries we made is that many of them didn’t fully understand the size and scope of building a payment gateway from scratch.
The Zed Network team often had to clear misconceptions about the steps involved with creating and running your payment gateway. We realized that these questions are widespread, and many entrepreneurs are looking for answers. In the following passages, you will find the answers to the questions you have and help you understand all the things about building a payment processing platform. So without further delay, let’s begin!
Where To Start?
Now, you may think that the first thing you need to do is talk to developers and tech service providers, but that’s not what you need. To start the process of building a payment platform, you need to develop business relationships with either a payment processor or an acquiring bank.
Why Do You Need A Payment Processing Platform?
If you are thinking about offering a payment gateway as a service, then you need to connect it to a payment processor. It can be a merchant service or an acquiring bank, and these entities will move the transaction through the payment network. The payment processor will provide you with all the technical information you need to integrate your gateway with their system. Now, depending on your needs, you may even need to partner and integrate with several processors.
Why Do You Need An Acquiring Bank?
If you are looking to get a payment gateway of your own, you’ll need a payment processor and an acquiring bank. Merchants usually have a merchant account to accept digital payments, which are provided by acquiring banks. The acquiring bank or the financial institute works on processing credit or debit card payments on behalf of a merchant. Your acquiring bank is assuming all the risks for your business.
That’s why the bank or the financial institute will need specific financial commitments due to chargebacks, refunds, ACH returns, and potential fraud. You have to remember that acquiring banks are different from commercial banks that offer offers checking and savings accounts. However, commercial banks can have an acquiring division, but not all commercial banks can underwrite merchant accounts.
What Are The Technical Specs Requirements?
When you choose a payment processor, they will provide you with all the specifications necessary to integrate your payment gateway with their system and the overall payment network. Depending on your requirements and accepting many different payment types, you may need to get additional specifications from other acquirers or processors. These specs will help you make an informed decision on the technology you will need.
What Do You Need For Cross-Border Payment?
If you have a multi-national operation and need cross-border payment processing, you will need to partner with a specific processor that operates in multiple locations or partnerships with numerous processors. Local regulations on the regions you want to work in will also weigh on the choice of technology for your payment gateway. Local laws and standards can be a nuisance when growing your business in a region. That’s why working with a payment processor that has a comprehensive understanding of cross-border financial rules and regulations is a must.
What’s The Cost Of Building A Payment Gateway?
The average cost from our experience to create a payment gateway minimum viable product (MVP) is between 200 thousand to 250 thousand dollars. However, the pricing is dependent on the functionality you wish to incorporate into your gateway. The minimum viable product for a payment gateway will get you set up to accept credit and debit card payments.
How Long Will It Take To Build A Payment Gateway?
According to Safahi, It takes years to build a payment gateway from scratch, and that’s why companies usually use payment gateway service providers. Most payment gateway services can provide customized solutions according to your needs. Many processors or acquirers may take months or even years to decide to integrate with your payment gateway, and until then, it won’t be viable for market use. On average, you can chalk up the time to create an MVP payment gateway to a minimum of six months. However, it will likely fluctuate depending on the specifics of your request.
Do You Save Money In The Long Term If You Build A Payment Gateway From Scratch?
Well, that depends on the volume of transactions your gateway sees. If it’s large enough then maybe you will save money. Many think that if they host a payment gateway solution of their own, they can eliminate credit card processing fees that they are paying to their processor. Well, that’s completely wrong. Providers like Visa and Mastercard will always charge card network usage and/or processing fees.
The only way to eliminate interchange and settlement costs you will need direct integrations with card network providers. This is only viable if your company has revenues in billions. While you can bring down the surcharges with your payment gateway, that too depends on whether or not your revenue can offset the investment in building the payment gateway. There is also a wide range of charges that comes with owning and operating a payment gateway.
The additional cost of paying for servers and gateway product maintenance is just some you cannot avoid amongst many others. Now, suppose it’s eliminating third-party gateway-related fees and offsets the annual price of gateway maintenance, PCI DSS audit, certifications, and other myriad costs. In that case, we recommend you take up building a payment gateway. Otherwise, it won’t be worth the trouble.
What About Security?
Security is vital to boost customer confidence, and a secure payment gateway with a fraud detection system will help you avoid chargebacks and other problems resulting from fraudulent purchases. So, what security measures do you have to ensure? Well, let’s check them out! Simply partnering with a processor and getting technical specifications for integration is just the beginning.
PCI DSS. Any business that holds cardholder information must comply with the Payment Card Industry Data Security Standard or PCI DSS. It’s a list of practices that companies use to improve the security of card transactions and protect cardholder information from theft. Remember, the fallout from a security breach isn’t limited to losing computer data.
It can lead to many problems like loss of customer confidence, loss of future sales, or the threat of legal action. It can even lead to fines per PCI DSS non-compliance and losing their merchant account if they have one. So, what level of PCI DSS do you need to comply with? Well, that depends on which level you fall under. There are four levels of PCI DSS compliance, and deciding what you need to comply with is a bit tricky. So let’s break it down a little bit more:
- Collection: Where will the cardholder information be collected. Will it be on the customer’s browser, the merchant’s server, or the payment gateway server?
- Storage: Whether the card data will be stored on the merchant’s servers or the payment gateway’s servers.
- Transmission: How is the data transmitted to the gateway?
- Processing: How is the data processed? Is it processed by the merchant or by the payment gateway?
Now, several technologies you can use to ensure the security of customer information and protect the data against cyberattacks. However, taking up one or a combination of these services won’t constitute PCI DSS compliance. It’s a multi-faceted set of standards that cover a range of topics and disciplines. You can find more about PCI DSS on the PCI Security Standards Council’s website. But to help you out, let me tell you about the technologies that can help you build a payment gateway.
The EuroPay, Mastercard, and Visa or EMV is the global standard for credit and debit payments based on chip card technology. All chip card transactions contain dozens of information exchanged between the card, POS terminal, and the acquiring bank or processor’s host. Now, EMV doesn’t replace PCI, but it was created to defend against the fraudulent use of cards in a store. However, if you want to accept any credit card transactions, then you have to prove you can handle EMV transactions.
EMV 3-D Secure
The EMV three-domain secure or EMV 3DS is a messaging protocol that allows consumers to authenticate themselves when making card-not-present (CNP) e-commerce and m-commerce purchases. It works as an additional security layer that helps prevent unauthorized CNP transactions, protecting merchants from fraud. The 3DS has three domains. They are the merchant/acquirer domain, issuer domain, and interoperability domain. It’s the perfect technology that streamlines the user experience by improving communication ‘in the background’ between the issuing bank, the acquirer, and the merchant.
It’s a process that protects sensitive data by replacing it with a token and is a measure that’s used to prevent credit card fraud. With tokenization, the cardholder’s primary account number is replaced with the token then it’s passed through the various networks needed to process the payment. The best part is that the actual bank details are never exposed as stored in a secure token vault. While it doesn’t ensure merchant PCI compliance, it is considered the best practice and helps reduce PCI DSS scope.
Peer-to-peer encryption, or P2PE, is a system that organizations use to create a secure communication between devices. It protects transmitted sensitive information from exposure to intermediate devices on the same network. The best part is that it’s usually used as a compliance solution for PCI DSS.
So that’s about it for the security aspect of a payment gateway. As you can see, there is a wide range of compliance and regulations you need to ensure consumer security. These are considered vital parts of building a payment gateway.
Work With A Payment Processing Platform
So that’s about it. These are the usual questions I have faced when working with many Fintech, legal tech companies, and FX brokerage firms. Hopefully, now you know what you need to build a payment gateway. If you are looking for steps on building it, then you can check out the steps on building an ideal payment gateway where I explain in detail what you need to build a payment gateway.
However, if you are a company that doesn’t have revenues in the billions, we suggest you work with an online payment orchestration and processing service like Zed Network. We here at Zed specialize in providing highly efficient payment orchestration layers for all sorts of companies, even companies with multi-national payment processing needs.
So if you are looking for the perfect payment orchestration solution, then contact us. If you have any questions regarding payment gateway or payment processing, drop them in the comments below or send them in on our socials, and we will answer them all. And that’s about all I have for you now. Make sure you check out the steps of building a payment gateway or some of my other articles. I will come back with something new for you soon. Until then, see ya!