As the pendulum continues to swing from in-person transactions to virtual, contactless payments, companies are looking to expand ways to tap into this new trend.
A study by the Federal Reserve shows that cash and check transactions have been gradually waning in popularity since 2019, and coinciding with the start of the pandemic in 2020. With the proliferation of contactless transactions, experts project the CAGR of digital payments to reach $8 billion by the end of 2022.
If you are a business owner or software development expert looking to create a gateway solution, continue reading to learn how to build a payment system that can compete with top providers in 2022.
Before addressing the working principles of a payment system, let’s define it.
An online payment system is a service that allows users (companies and individuals) to conduct transactions with one another.
For this process to work smoothly, you need the following:
Here is how the system works:
The customer initiates the transaction at a POS or terminal. The merchant bank obtains information from the card or digital wallet and forwards it to the payment gateway, which encrypts these sensitive details before transferring it to the card issuer for processing.
Once the payment processor (often under the control of the card issuer) receives the request, it goes through a series of authorizations to confirm if the transaction details from the source match the destination account (merchant account) details. The payment processor also verifies the bank account balance before authorizing or declining the transaction.
If the processor approves the transaction, the acquiring bank will receive the approval to release or accept funds for the transaction.
And, most importantly, when you make a payment system from scratch, you’ll have more control over how it works and the features you can integrate.
Every company in retail and eCommerce will need fintech app development services at some point. But when it comes to custom payment systems, numerous businesses can benefit from this technology, regardless of niche and industry.
Here are companies that should consider building a payment system with custom features:
If you fall within this category, continue reading to discover the pros and cons of developing your own custom solution.
Hire the services of our fintech developers right away.
Custom development is always a mixed bag when it comes to fintech services. Before deciding to create an online payment gateway, consider the following factors:
Now that you’ve seen both sides of custom payment gateway development, let’s get down to the core components of the system’s infrastructure.
Check out the key considerations and features before you build your own payment gateway.
Your payment gateway should make it easy for customers to conduct payments, to do so without feeling any frustration whatsoever. You also need to label all essential features to make them usable for users of all demographics. Work with UX researchers to ensure that the interface is intuitive and easy to use.
In the age of increased cyber threats, any gateway you build must deliver secure authorization in order to protect user data. Don’t forget to include two-factor identification and other forms of authorization in the framework.
When you build a fintech app, you also need to create a payment gateway that supports multiple currencies. To save costs, focus solely on common currencies like USD, EUR, and GBP. You can get accurate data by analyzing your user demo and choosing currency options based on locale. If possible, explore cryptocurrencies as well.
Although most PSPs use anti-money laundering (AML) and know your customer (KYC) practices to detect fraud, you still need to factor in these regulations when you create an online payment system. Use advanced verification systems to authenticate users’ identities before they can use your gateway to make transactions.
Apart from the regulations mentioned earlier, your system must meet GDPR and PCI DSS compliance standards before release. Otherwise, you will not get the official license in your local country or abroad
Similar to any other software development process, building a payment gateway requires careful planning and execution. Here are the integral steps to follow when you want to create your own payment gateway.
Coming up with an idea for a payment system is only the first step; you’ll still need to hash out the plan with experts to determine if it is feasible or requires changes.
If you want to build a competitive financial payment system, you must conduct extensive market research to highlight existing opportunities and where your competitors are most vulnerable.
With your ideas becoming more coherent, it is time to hand it over to the designers. A team of experienced UI/UX and graphics designers can help you design your product's interface and brand identity. They can also help you build a working prototype that you can use as a proof of concept. After several iterations, you will end up with a feasible product design that developers can start building.
The core infrastructure of your payment system will start taking shape during this period. The development team will collect the material design elements from the prototypes and use them to code the product. Depending on the technical requirements, developers can also integrate third-party APIs in compliance with industry standards.
Most companies handle front-end and back-end development processes simultaneously, while others start with front-end development before moving to the back-end stage. Regardless of your preferred method, always choose the right tools to create a robust system infrastructure for your gateway service.
Uncrushed bugs and poor error handling can condemn your payment system before it even gets off the ground and/or cost you a lot of money later. To avoid these extra fees, give your QA specialists the leeway to test the software rigorously in order to ensure that everything is in perfect shape. After testing, they should generate a detailed report for further changes.
If the flaws are critical, re-address some of the earlier development stages to plug all loopholes. The DevOps teams can address minor flaws to make the payment gateway flawless. And while optimizing the final version, don’t forget about compliance standards.
Depending on your timeline, you may have time to release the beta version for user feedback. After implementing the changes, prepare to launch it as a standalone software program — or sell it to other financial institutions as a white-label software solution.
After the product’s release, you still need to provide support to the users of the payment system. Set up a team of live support agents to answer users’ questions and resolve conflicts. Bots can also respond to frequently asked questions. Your developers should also continue working on updates to keep the platform running with as few downtimes as possible.
Reach out to us and we will help you start the development process.
Payment systems are flooding the market today, but most of them have been unable to replace top players like PayPal, Stripe, and Square. If you want your custom payment gateway to stand out, here are some vital tips to bear in mind.
Doing the bare minimum when building a payment system will keep you stuck at the bottom of the barrel. Instead of only adding core features, use advanced tools to attract a new audience to your gateway solution.
For example, you can create a crypto payment gateway that supports transactions on verified DeFi platforms. This feature alone will give you access to a blossoming market in the financial sector.
Build your platform for the future. Instead of relying on legacy software that runs on a monolithic architecture, build a new system that relies on several microservices to function. By doing so, you can scale your system architecture as your user pool expands.
Standard security protocols like EMV 3-Dimension Secure (3DS) protocol and P2P encryptions can protect transactions, but you can always add another layer of security. Use diverse forms of multi-factor verification to protect users from fraud and cyber threats. You can connect the new payment system with authenticator apps from both Google and Microsoft.
When you create a payment system, you have to factor in all multiple factors at every stage of development. These factors will determine the overall cost of making the payment gateway.
To sum up, you will spend between $300K and $400K to start a payment gateway. If you want to outsource fintech software development services, reach out to experts at EPAM Anywhere Business to get a detailed quote.
Fees will creep up on you from all angles when you develop a payment gateway for commercial use: licensing fees, monthly subscriptions, authorization fees, early termination fees, and address verification fees. Fortunately, most of them come from payment processors.
Since you are working on a custom payment service, you don’t need to fret about the fees above. You only have to worry about paying for APIs and cloud servers if you use them in building the infrastructure.
Other hidden costs connected to the development process can come from omissions and mistakes in planning. Some sources of these extra costs include:
At EPAM Anywhere Business, we have a talent pool of fintech development experts with industry-relevant knowledge about creating payment gateways. We also work in a diverse array of niches, providing top-notch full-cycle development services to our clients.
In 2018, we partnered with ImageNPay to create a personalized platform that allowed users to acquire virtual credit card customization on any smartphone. We handled the front-end and back-end development stages before building an SDK that achieved PCI DSS certification.
Similarly, we helped the CitiGroup build an innovative, customized, and transformative banking experience called CitiConcierge. This software program provides inter-connected experiences for customers and branch personnel.
Let us help you assemble a team from our talent pool.
Developing a custom feature-packed payment system is a sure way to make your company a reputable name in fintech. Combine brainstorming with solid research to figure out the type of gateway you want to build, and follow the guidelines in this article to fine-tune your product roadmap. When creating your own gateway, don’t forget about testing and compliance standards. And — as important as any other aspect, if not more so — make the system scalable and secure enough to handle massive transaction volumes safely.