How to Have Your Own Payment Gateway
Introduction
Only certain kinds of companies need their own payment gateway, and they need them for specific reasons, like saving on fees, having a precise set of features, or the ability to offer services to others. Building a gateway is a complicated but doable process that takes a great deal of time and involves significant upfront costs. For some companies, a white label payment gateway in a hosted environment may be the best choice. For those who want to build a gateway from scratch, however, it is important they understand the costs and complexities involved and understand the vital importance of a strong banking relationship. Does your company really need it’s own payment gateway? Could a white label solution from an established provider be the best choice? And how does everything work if you want to set up something of your own? These are among the most commonly asked questions about payment gateways. Just as you must evaluate the complexities in building your own payment gateway, you must also evaluate whether it is necessary in your unique situation, and whether it is the best course of action for your company. In its simplest form, a payment gateway is software that allows you to accept and process customer payments. You can think of it as a virtual credit card machine. Payment gateway software costs a significant amount of money to build or license, yet it is essential to the operation of many kinds of businesses. There are many payment gateway software choices available, but it is also possible to build your own. Each of the existing choices has its own list of benefits and shortcomings, and it can be time-consuming to determine which solution is right for your needs. Building your own payment gateway can be a practical way to get exactly the features you need. Licensing an existing product, however, may make more financial sense. In any case, a payment gateway is more than a complex piece of software. It is a service offering that your business may need for its own purposes or to serve your clients. There are many questions you need to consider when deciding on a payment gateway solution, Build or Buy, Hosting Options, PCI Compliance, Acquiring, Processing and Banking Relationships, as well as your individual companies ROI. The remainder of this article will provide some insight on these questions.
Do I Need My Own Payment Gateway?
Like most things, there are pros and cons to having your own payment gateway. A self-established payment gateway may be a smart investment for the following types of companies.
1
Established billing companies that are looking to replace failing and difficult-to-maintain legacy solutions.
2
Growing payment service providers that need a more full-featured and robust payment processing solution.
3
Software companies that want to expand their business by becoming a payment service provider.
4
Acquiring banks that need better, more up-to-date front end technology.
PROS
Save On Fees
There are signup costs associated with outside gateways and fees for every transaction, taking away a portion of your potential profit. With your own gateway, you may be able to reduce your transaction processing costs.
Precise Feature Set
Every piece of gateway software created by someone else has limitations. Perhaps a gateway you like cannot handle recurring payments or multi-currency transactions. Maybe the features you need are only available in expensive add-on modules. When you build your own payment gateway, you can create the array of features you need.
Offer Services to Others
There are no restrictions on being able to offer payment processing services to other companies when you create your own payment gateway.
CONS
Building Takes Time
If you need a solution up and running in weeks rather than months or years, choosing a white label payment gateway or open source payment gateway software is the fastest way to get up and running.
Substantial Costs
Building involves substantial costs. In addition to up-front costs of building a gateway, there are regular maintenance costs. Initial costs are much higher for setting up your own gateway than for choosing an external payment gateway that meets your needs.
Complications
Integrations and certifications with processors are complicated and time consuming. Choosing an existing payment gateway means many of the complexities and costs are already covered, but you pay a licensing fee or transaction fee for this convenience and speed.
Is a White Label Payment Gateway a Sensible Solution?
It may make sense to consider licensing a white label payment gateway before starting the process of building an in-house payment gateway. It can often take years to build a gateway from scratch, but a white label product can be up and running in a matter of months. The cost is lower, and customization is available to ensure that you get exactly what you want. In many cases, financial institutions prefer this approach as well. Since relationships are already in place between the gateway provider and the banks, your company can benefit from these established relationships rather than having to build your own connections. White label payment gateways can offer you a significant cost savings because the costs involved in developing the solution are spread across many customers. Since those other customers also demand reliability, you can be sure the system has dependability and robustness built into it.
What is a True Self-Hosted Payment Gateway?
A true self-hosted payment gateway involves hosting your payment gateway solution on servers that are maintained entirely under your company’s control and on your property. Implementing your own self-hosted payment gateway means:
- Maintaining your own data center
- Having maintenance personnel available at all times
- Dealing with an annual PCI compliance audit
Is it Possible to Save Money With My Own Payment Gateway?
That depends. In most cases, savings are only available on large transaction volumes when traditional gateway processing fees total more than the maintenance cost of a gateway. However, cost savings may not be the only reason to build your own payment gateway, as explained above. Additionally, it may be possible in some situations to save on maintenance if you’re replacing a cumbersome and failing legacy system that has high costs involved in integrating with modern technology. Keeping staff to support obsolete or out-of-favor programming languages can be expensive. Finally, some companies can actually make money by switching to a modern payment gateway setup if the switch allows for the ability to serve more customers since you have better technology. For example, quicker and more automated on-boarding can be one way of saving money on each customer and allowing you to take on customers you once believed undesirable because of high administrative costs and low profit potential.
How Much Might it Cost to Own a Payment Gateway?
While a wide range of variable are involved in estimating the cost of owning a payment gateway service, some rough estimates are possible to allow you to begin framing your plan and arranging your funding. Here are the costs commonly associated with the most expensive aspects of owning a payment gateway:
Gateway Software License:
Tokenization Appliance:
Annual PCI Audit:
Monthly PCI Hosting Fee:
Bank & Processor Integration:
$50,000 - $250,000
$50,000 - $100,000
$25,000 per year
$3,000 - $5,000
$5,000 - $15,000 each
Why Are Banking Relationships Necessary?
Perhaps one of the hardest things to understand about setting up a payment gateway service is the need for banking relationships. Many people mistakenly think that all you need is payment gateway software to establish a gateway. But software is only one piece of the puzzle. The software must be connected to something to process the transactions. Even if that means connecting to Visa, MasterCard and other associations directly, you still need a relationship with an acquiring bank to settle the funds. Banking relationships can be difficult to establish because large banks move slowly and sometimes fail to act with the same urgency you desire.
UniPay Payment Management Platform
UniPay Gateway is a white label open source payment processing platform which can be utilized by merchants with single and multiple merchant accounts, ISOs, PSPs, billing companies, software providers, etc. UniPay is made up of four modules, UniCharge, UniBill, UniBroker and UniRead. Each module provides functionality required by most businesses to successfully process transactions.
Choosing UniPay as your payment gateway ensures a reliable and flexible payment processing solution which combines sophisticated functionality with the simplicity of usage. UniPay will help you develop an effective payment processing strategy, save on processing costs, and, consequently, it will make your business more successful and profitable.
Established Banking Relationships
Has integrations with banks, processors and other payment gateways all around the globe (USA, Canada, Europe, Australia, etc.).
Card Present & Card Not Present
Supports 3D Secure (for card not-present transactions), EMV, P2PE (for card present transactions) and many other fraud protection mechanisms.
Processing
Allows processing card payments (credit cards, debit cards, gift cards) and ACH transactions.
Multi-Industry Support
Retail, MOTO, eCommerce, Restaurants, Healthcare, Petroleum, Lodging, Car Rental, etc.
Advanced Support
Provides high quality support throughout the entire working relationship.
Conclusion
Knowledge is power, of course, and those armed with complete knowledge about payment gateways are in a better position to determine whether their company can benefit from having their own or not. For some companies, existing solutions may continue to serve their purposes. For others, a new and robust payment gateway may solve problems, reduce costs in the long term, and open new opportunities. While this article does not provide a complete explanation of how to build a payment gateway, it may open minds to the questions that must be considered and put readers in the right frame of mind to make the complex decisions that are necessary along the pathway toward choosing or building a payment gateway. Additional information on how to build your own payment gateway and explanations of many other payment processing industry concepts can be found on Paylosophy and UnitedThinkers.