Read a complete guide that will help you develop a payment gateway for your business from scratch.

How To Develop A Payment Gateway: Your Hands-On Guide

If you think about creating a payment gateway software instead of using a ready-made one, mind several challenges you may face. From startups searching for an opportunity to propose payment gateways in an underserved region to merchants looking for ways to decrease payment service fees, various market players can benefit from developing from scratch. Those who have a pure interest in creating payment gateway integration services should find this piece useful.

In today’s article, OpenGeeksLab will reveal all the payment gateway software development secrets to you. This guide will assist our audience with building an effective payment solution hassle-free.

What Is a Payment Gateway? How Does It Function?

Here’s how experts define payment gateways - have a look at their main features and principles of work.

To simplify online payment processes on their ecommerce websites, businesses create payment gateways that are specific services for processing business card transactions. Simply said, it is an online service for payments that acts as a channel to make and get payments. This term serves as an interface between a trader’s site and its purchaser. The main idea is to make sure that money is available to let merchants pay with them. Payment gateways encrypt sensitive financial data to verify that info is delivered safely.

Payment gateway integration services may ease how traders integrate the important software. So, those are middlemen when it comes to online fund transactions. It is guaranteed that the customer’s financial and private information is secure. Such info, in particular, involves credit/debit card numbers, CVV, and expiry date each time a user places an order for a good or service from a payment gateway-activated merchant. From providing financial information such as card details to completing the transaction, integrating a payment gateway into a website requires several stages.

  • Stage 1. Once a user makes an order, they should type in card details to proceed.
  • Stage 2. A system encrypts debit/credit card data safely using SSL encryption. Gateways obviate the merchant’s Payment Card Industry Data Security Standard (PCI DSS) compliance requirements.
  • Stage 3. Then, the merchant passes information to their online payment gateway for the website. This is also SSL-encrypted data.
  • Stage 4. A gateway then converts the message from XML to ISO 8583. After that, it sends data to the payment processor of the acquiring bank.
  • Stage 5. A processor submits the data to a debit/credit card.
  • Stage 6. A bank gets an authorization request, confirms the credit/debit, and submits a response back to the processor with a reply code.
  • Stage 7. A processor passes an authorization response to payment gateways that, in turn, obtain the response to send it onto the corresponding interface. This stage is characterized as Auth. This process may last for up to three seconds.
  • Stage 8. A merchant completes an order. The process described before can repeat to Clear authorization by fulfilling the transaction.
  • Stage 9. A merchant sends all authorizations to their bank recipient for settlement via its processor.
  • Stage 10. A bank makes the batch settlement query of the debit/credit card issuer.
  • Stage 11. Settlement payment is made to the receiving bank.
  • Stage 12. A bank keeps on depositing the sum of the confirmed money into the merchant’s account within 24 hours (as a rule).

As you can see, adding a payment gateway to a website is a challenging process, and you may need some time to master all the steps. Now, how should you know if creating a custom payment gateway is what you need?


Who Can Benefit from Using a Payment Gateway?

Are you the one who may need to create a payment gateway? See why you may require this system for your business.

So, does it make sense to design an app or purchase one? This question may pop up in your mind when it comes to discussing different approaches to integrating payment gateway in a website. If you belong to one of these groups, you will definitely benefit from using a payment gateway:

  • Information technologies (IT) companies that wish to expand business by serving as a payment platform provider.
  • Huge and influential merchants with great turnover who have no desire to be dependent on a third-party provider.
  • Hi-growth payment providers who are looking for a better, improved payment processing system.
  • Incumbent billing firms that wish to remove or upgrade their software;
  • Acquiring banking systems that would like to enhance their front-end solutions.

Even if you’re an individual thinking about launching your own business, adding a payment gateway to a website might be one of the great ideas. Why? Check out some of the main reasons below.

What Are the Benefits of Building a Custom Gateway?

Discover the main reasons why so many companies decide to integrate payment gateways. How can you benefit from having this tech solution?

A custom technical payment gateway usually stands for a greater investment regarding time, funds, and efforts. It is still worth your attempts as a gateway will dramatically assist your company’s growth and prosperity of your business. For example, in 2020, the number of noncash (debit/credit card, ACH, and check payments) procedures achieved more than 167.3 billion euros only in the EU area. When choosing the preferred payment systems for your future customers, mind that 57% of all American shoppers choose Visa as their preferred way to pay.

In general, the payment gateways business will probably expand at a compound annual growth rate (CAGR) of 21.7% from 2021 to 2028. Safe payment gateways make businesses obtain clients’ credibility. They encourage them to make transactions.

Another reason why plenty of businesses benefit from creating a custom gateway platform is that 23% of consumers abandon their shopping carts because of a complicated, time-consuming checkout and/or the amount of info needed to finish payment operations. Payment gateways can solve most of these issues.

Custom payment gateways have their pros and cons. Many of them are available on the market today, so studying your rivals’ best payment gateway solutions might help with crafting your own gateway. Here go pros of crafting a custom gateway first.

  • Custom functionality. No matter how good prices of off-the-shelf products seem to you, you can discover that fees are unreasonably high. Restricting yourself is another con. A third-party payment gateway does not support multiple currency transactions. It may restrict your opportunity of processing such transactions. When creating a gateway on your own, you can come up with any functions that you want and feel comfortable with without having to pay high fees or limiting your abilities.
  • Reduced fees. If you use third-party technical payment gateways, facing high registration and usage costs is what you should expect. Besides, paying fees for every single transaction. It can result in huge expenses over some period. That is another reason for developing a personal payment gateway. It is your chance to cut costs and fees.
  • Product offer. Users can propose their custom payment gateways as a good to other users, Agents, and ISOs.
  • Extra profits. That is how anyone can become a provider. Being an owner of a website or mobile payment gateway means you can charge sign-up and transaction fees from users. That is an additional source of solid income.

Sure, some pitfalls also exist. One of them is payment gateway software development technical expenses. The problem is that the primary cost of developing a custom gateway is usually higher than those fees required to use an external payment gateway.

Still, custom solutions will guarantee all features that you may need without breaking the bank. It means that, if you are about investing in custom platforms rather than a brand new one, you’re going to invest in a long-term project created specifically for your business needs and objectives.

One more disadvantage is coping with settlement reports. Finally, some share that payment gateway integration and certification cost are not that low. Still, all benefits in total outweigh these drawbacks.

So, custom features, minimized fees, additional earnings, and product offers are advantages that seem to overweight all possible drawbacks. That is why your business will definitely benefit from developing payment platforms from scratch.


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Basic Components of Payment Gateways

Check some basic components of any successful payment gateway platform that you should know before you design this tech.

Balancing between your business goals, needs, technical opportunities, and safety is not an easy thing when crafting a payment gateway. You should try to implement as many functionalities as possible. Below, you can see some of the most essential features of your project.

1. Fraud Protection Systems

Each merchant is looking for a totally safe, protected gateway that will allow gaining the client’s trust. That is why security matters that much. Merchants tend to make sure that a payment gateway possesses mechanisms capable of detecting fraudulent activities and preventing them. Having such mechanisms activated is crucial for any payment gateway.

So, the personal information of every user needs a robust framework and protection measures. Your developers should utilize the best security and data protection practices, as well as coding procedures.

2. Tokenization

It is about displacing an IBAN and sensitive data with random alphanumeric tokens. The processor is then the only one capable of handling the transaction. In case a gateway is attacked by some hackers, no private information will be stolen or somehow damaged. This restricts your obligations a lot.

3. Recurring Payments

Configure this feature through dashboards, virtual terminal commands, or using APIs. Why? That is helpful when proposing a subscription service. Do not activate recurring payments by default.

4. Seamless Payment Gateway Integration

Integration to numerous payment processors allows for different opportunities for your users. One benefit for you is being able to offer an attractive transaction fee because all processors propose unstable interchange fees based on such factors as their business and volume of transactions. Second, payment gateway implementation allows choosing the acquiring bank to develop a settlement account. Merchants love having many options instead of a few.

5. Scalability

A project should be scalable so that its owner can come up with new features at any time. A payment gateway should cope with spikes in money transfers, such as Black Friday. Customizing and updating payment gateways easily is critical, and cryptocurrencies along with contactless payments are two proofs of why scalability matters.

Remember: using legacy systems, outdated software or hardware, is a bad idea, so modernizing and continuously updating your software is critical.

6. Disputes and Arbitration

Users take advantage of payment gateways that have an interface made for handling disputes from banks.

7. Hosted Payment Gateways

Reducing the threats and restricting your liability is possible through implementing a hosted payment gateway. Once a merchant’s application redirects to it, no safe data passes through the user’s cart. That’s what it’s all about.

8. Virtual Terminal

Turning a personal computer into a virtual POS terminal is possible by connecting to a cloud-based service. No need to set up a payment gateway. Why would you do that? Well, some users want to pay over a mobile device instead of an online credit card payment system. You can have a look at more detailed mobile banking stats in this post. You’ll find out that crafting a mobile app payment gateway makes sense.

9. Working Hours (24/7)

If you plan to operate worldwide and have customers from many different countries, you should mind the timezones. Make sure that users can contact your website and support reps at any time of day or night. They should get immediate help on any question.

Except for live support from real people, initiate some chatbots that would serve as FAQs. Troubleshooting issues is essential for any type of user. Without making your gateway available 24/7, you risk losing some share of clients.

Think about at least some of these features to include in your project. You may also look for other ideas that would make your software stand out from similar online payment gateway solutions.


Critical Factors to Remember in Payment Gateway Development

Discover different aspects and principles to keep in mind when building a custom gateway system.

Before jumping into payment gateway software development, you should memorize some core aspects so that you don’t fall behind. Have a plan in mind after learning more about them.

1. Interaction Between Merchants, Buyers, and Marketplace Operators

Before the coding processes, you should define how purchasers, sellers, and marketplace operators would interact within your payment gateway. Decide on which products and services the sides might sell to each other. Think about who will be a buyer and a seller correspondingly.

The one who is liable by financial authorities is a merchant of record (MoR) – it is up to them to trigger a user’s payment. The selling party should move their fund partially to the marketplace as a fee. A marketplace can, in its turn, gather all funds from sales and distribute parts of these funds among sellers (when serving as an MoR).

Your service’s client is the third party when creating a transaction flow. Decide how much info your service will gather from your purchasers, as well as whether you will have businesses as customers or individual buyers. You may allow exchanging goods among your users directly. In other words, select a B2B, B2C, or C2C type of marketplace. Do not ignore such factors as legal aspects for AML, KYC, onboarding procedures, and so on.

The way you choose and use data protection measures depends on what sort of information you gather and save. Make sure that all data proceeds safely. Study data protection guidelines and financial aspects carefully. For instance, General Data Protection Regulation (GDPR) has the following technical requirements:

  • Info anonymization
  • Data retention times
  • User rights to know which type of data you store and why
  • Limited access to info for your staff and third parties
  • “The right to be forgotten”

That is what you should keep in mind before you move to other stages associated with payment gateways development.

2. Integration

If your service requires online transaction processing, make sure you integrate payment providers into your payment gateway. There are two available options that might be handy:

  • Redirecting, which means moving the user to the Payment Provider’s designated, external checkout page.
  • PSP integration via API, but with an internal checkout page this time. Designing one is the responsibility of your front-end team.

Keep in mind that various platforms may dictate one method, refusing another one. Remember that users don’t wish to deal with credit card credentials while in waiting lines. PSPs only support one of the two options described above. So, think carefully about whether you prefer an internal or external checkout page. Also, remember that add-ons and side themes require your attention too.

Once you set up a payment gateway, sign-in and checkout processes should contain plenty of supporting processes and features. For instance, those could be risk management solutions and anti-fraud solutions. Once again, integrating a third-party provider or rolling with the risk tests of the PSPs, or crafting your own solution is your choice. In addition, think about integrating SMS and email services to convey info to your clients.

3. Scalability

For developing a payment gateway from zero you should have a great idea about the respective numbers though, as well as decide how quickly your system will operate. One more vital thing is deciding on the number of transactions it will have to proceed in a certain period. The rest of these factors include:

  • Forecasted max peak load per minute, an hour, and 24 hours.
  • Predicted quantity of transactions in 12 months, a few years later, and more.
  • Specific dates and time when you wish to cope with a particular transaction load. Think about increasing capacities gradually or having everything set from the first day.

Making accurate estimations is especially critical here. Can you feel the difference between 50,000 transactions per 24 hours and in ten minutes? That’s what we mean.

4. Time to Market

The implementation may take more or less time, depending on various factors, such as scalability and features. Remember one “golden rule:” The more complicated the system and the more sleekly it scales, the more time it will “eat” during the building process. Here is a couple of possible scenarios:

  • Their good is already completed. It might have necessary functions and arrive with scalability features that matter. In case users hurry up to your service, flooding it with sign-up procedures and transactions, that is the way to go. It’s possible, however, that you’ll have invested resources in infrastructure that loafs until your marketplace obtains traction.
  • The product should be launched as fast as possible. Without an experienced team of software engineers on board, achieving this goal is impossible. This variation is pretty risky as there is no guarantee that the final product will come with all necessary scalability options. Avoiding high risks is possible by providing access to a limited group of users first.

The second variant is about Agile Development; software development procedures are based on this programming language. Guessing the number of users and transactions is essential. Then, you can design a minimum viable product (MVP) that can cope with this number. Adding functions for more scalability is a good idea at any time. In general, updating your product is always important.

5. System Architecture

Payment systems require high credibility as the outcomes of not making requested payments are rather high. Achieving credibility is possible when the system puts requests onto a queue that is processed asynchronously.

Have you done everything recommended above? Outlining your payment gateway is the next stage. Bear in mind some critical aspects.

6. Deployment

Do you plan to deploy in numerous data centers? Do you want your payment gateway application to serve in several countries? While you’re doing so, regulatory variables are added to the equation.

Then, think about whether you wish national instances to be bonded to other nations’ instances under the roof of a single comprehensive system or not. You can make it a fully local model. Choose between a universal account versus multiple accounts for different regions, in other words. You’d better consult some attorneys before deciding on this question.


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7. Monitoring

This stage stands for controlling infrastructure’s health and condition and ensuring that all system elements are active at any period. Business control is what comes next. It involves keeping an eye on how many transactions there are, new sign-ups, and other activities. Making sure that the system can cope with the load when the number of actions is higher than expected is critical.

8. Safety

Security is something that requires your full time and attention. Start with getting acquainted with AML and KYC requirements and local laws. Make sure you follow global guidelines like a famous standard PCI DSS. Check whether each payment gateway developer obeys safe coding procedures while working on a custom payment gateway.

Last but not least, come up with an approach to guaranteeing privacy and security of personal and financial information. Think about methods of dealing with various safety breaches. SSL encryption and two-factor authentication are just a couple of examples.

9. A Dispute Resolution Interface

It makes sense that users might be having some disputes as to financial activities often cause many questions and complaints. Thus, do them a favor – offer a convenient, simple interface that would allow contacting an issuing bank fast.

10. Branching Out: API Design

Once you use extra limitations when creating a payment gateway, they offer an extra source of income for you and your business. Crafting an API means updating strategies all the time and clear versioning, so keep it in mind. When others use your API, it means that you are no longer fully free to select when to modify it.

Thus, make APIs as stable as possible. A single API should process many different payment options and info – that would be a perfect situation.

Another requirement is flexibility. Just imagine how often you may want to add new payment methods as new ones show up every year. Before adding another payment option, reading an article with some statistics on the most popular methods would make sense.

Legal and Security Requirements That You Should Consider

Study legal and security aspects that you should remember before you ever develop a payment gateway.

Taking into account the cybersecurity standards and regulations is rather vital. Memorize at least the basic points.

1. PCI DSS Compliance

Refusing Payment Card Industry Data Security Standard (PCI DSS) means providing unsafe financial operations, higher processing fees, and a threat of facing scammer’s activities. The worst thing that may happen is the closure of the user’s account. It means losing a client.

Checking all requirements for your country of residence is not enough in case your payment gateway operates in more than one country. Study legal aspects of all regions that your project will cover.

Mind that four compliance levels are known. While learning PCI DSS, you will face these levels:

  • Gathering. There are several methods you may use: gather user’s info in a browser, server of your project, or on the merchant’s application server.
  • Storage. Saving data is possible on the marketplace payment gateway server or user’s native server.
  • Transmission. Decide on how you will transmit the info to the processor.
  • Processing. Finally, who will process the data? Choose between a gateway itself or the merchant.

That’s not all! Some cybersecurity standards should be considered as well. Let’s look at each of them.


2. EMV

EuroPay, MasterCard, and VISA are three payment systems that stand for this abbreviation. The idea is to avoid card-related fraud by exchanging various data between the card and the POS terminal thanks to the special inserted chip tech.

3. EMV 3-D Secure

Three domains are used to secure every single financial activity. Those are the payment acquirer’s domain, card issuer’s domain, and interoperability domain. Once a fraudulent chargeback takes place, obligations switch from the merchant to the card issuer. EMV 3-D secure is defined by SSL (TLS) communication and XML messaging.

4. Tokenization

What is the most effective way to keep possible threat scope at a minimum and defend user’s financial info? Right, interchanging credit/debit card data with tokens.

Setting up tokenization involves getting ready the hardware that will encrypt the card data and the software that will fully comply with PA-DSS guidelines. In case you wish to host in another place, these problems rest on the server provider’s shoulders.

5. P2PE

Point-to-point encryption is also called end-to-end, E2E, and encryption. Building communication channels between different devices is possible thanks to this technology. It makes it possible to prevent transferring safe information over an open network. This practice is useful for reducing the possible threats.

6. HSM

A hardware security module offers key generation, crypto processing with these keys, and defense in a safe, protected environment. Without applying HSM, guaranteeing full data security and leaving an electronic signature is impossible without any risks.

Security and compliance are equally important when working on your project. Now, looking at how payment gateways are usually developed makes sense.

How Does Payment Gateway Development Look Like?

How you create a payment gateway from scratch: have a look at the detailed step-by-step tricks.

It is time to discuss a payment gateway implementation and development lifecycle. From choosing people for your team to providing support and maintenance – see the guide on creating online payment gateway services below.

1. Choosing Staff for Your Project

If you plan to include many different features in a custom payment gateway, think about hiring professionals who specialize in developing those specific functions. Assign priorities at each stage of payment gateway development. Specify when the product will turn into an MVP.

An example of organizing your payment gateway development procedure is an automated examination and a sample integration of a payment gateway and related payment flows. That is how a payment gateway developer can obtain a complete picture of its functionality.

Implement such functionality as brief notifications about any errors so that team members can fix failures as soon as possible. Finally, you should have code reviews on any modifications to your product.

2. Coding the Payment Solution

Discuss with your team members. Cover the roadmap and split the stories into separate assignments. Which stories would you like to include? Perhaps, you’ll realize that your team will need some external teams and extra consulting from experts.

Focus on automation. You’ll see how much it can increase the overall productivity of the payment gateway developer and other people who participate. Ensuring the code’s quality is possible through implementing integration, security examinations, and end-to-end (2E).

Automation also allows for detecting and getting rid of bugs, as well as extending the code at any time without any obstacles. Enterprise Resource Planning (ERP) will also help with organizing all business processes.


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Contact us right away to know how our pros can transform your business with custom software development services.

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3. Product Release Stage

Once you have a feature-ready MVP, this stage of the payment gateway process shows up. Make sure that all features work without any delays or other issues through involving, security testing, auto-E2E, load examinations, and penetration tests. Thus, taking care of the infrastructure is of top priority.

Later, come up with a risk-based analysis of how serious various issues discovered during the testing are. Is handling them simple? How much time may it require?

4. Operations, Product Support, and Maintenance

Congratulations! Now, you are an owner of a payment gateway. However, do not hurry to relax – along with building payment gateway services, the team should provide ongoing support. No matter how hard they try when testing a final product, different errors, small and big, may still take place further.

You may either ask an internal team to provide maintenance and bug fixes or hire some external specialists. In case you hired external experts before developing software, the contract may say that they are the ones to provide support for your product even after its release.

Creating software of this type is not trivial at all. Another question that might pop up in your mind is how much it may take you to build a payment gateway. Check out our next section.

How Much Time Does It Take to Build a Payment Gateway of High Quality?

What is the time needed for an average payment gateway development process? We propose rough estimates.

While a payment gateway development cost may vary a lot, we will try to calculate the time required to create a payment gateway technology. From a financial aspect, determining the exact amount is impossible as it only depends on your gateway’s complexity, features, workforce, and other things.

We have made some conclusions based on particular factors. Here are the scenarios that determine how much time you may have to spend on your payment gateway for a small business or a large company:

  • Recruiting freelance employees for payment gateway development.
  • Creating a digital payment gateway with your native, in-house staff.
  • Recruiting teams from some pro-development companies for the project.

Even though we cannot provide specific numbers, we still have some factors for you that might impact how much you may spend on your project:

  • Staff that takes part in building an instant payment gateway.
  • Project management instruments.
  • The type/complexity of software.
  • The number of options to include in your application.

Remember that you’ll face multiple payment gateway development, support, and maintenance costs related to payment gateway development. The initial expense required for creating your app is slightly higher than the registration fees necessary to apply for an external gateway.

Despite this fact, you can still benefit much from building up custom software for payments. This customer-centric solution that allows depositing and withdrawing funds is worth your money and efforts in most cases. Of course, unless you refuse to cover critical factors discussed in this article, paying special attention to the legal aspects.

If you start working on your project from a blank page, be ready that years may pass until it is ready. Remember that you should consider too many factors and legal aspects. The fastest known way out is licensing a white label product. In this case, you may spend only several months. Customizing white-label goods is not a problem.

In addition, you may spend months or more on having the expected payment processors integrated with your gateway. Our experts have estimated that it might take around six months to design an MVP payment gateway, depending on your project’s peculiarities mentioned above.

Use Payment Gateway Development Best Practices

We have discussed the ins and outs of the payment gateway development process: how it works, factors that impact the SDLC, features to mind, legal and security aspects, how much time it might take you to design your project.

Are you ready to build a payment gateway or improve your existing project? OpenGeeksLab is a solution that you might have been looking for. Now that you have a well-rounded perspective of what goes into creating a payment gateway, get in touch with one of our payment gateway development experts today to deliver custom solutions tailored to your business requirements and objectives.

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