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 prefer creating payment gateway software rather than using ready-made solutions, be ready to embrace certain challenges. 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.

E-commerce businesses create payment gateways that process business card transactions to simplify the online payment procedure and make it more convenient for users of marketplaces or online stores. An online service for payments can be seen as a channel for making and receiving payments or an interface between traders’ websites and online buyers.

The core idea that lies behind these services is to ensure the money availability and the ability of customers to pay with them. When it comes to payment gateways, sensitive financial information is encrypted to verify that these details are delivered safely and securely.

To gain a better idea of payment gateway functioning, explore the typical workflow below:

  • Step 1. A shopper places an order on the trader’s website and enters credit card info, as in card holder’s name, card number, expiration date, and card verification value also known as CVV code to ensure the payment will go through the payment gateway effortlessly.
  • Step 2. Credit card data is encrypted securely with the help of Security Socket Layer (SSL) encryption and will be further sent between the browser and a web server of a marketplace or online store. Additionally, the payment gateway performs fraud checks before sending the card’s data to the trader.
  • Step 3. The trader sends the transaction details to the online payment gateway for payment authorization.
  • Step 4. The credit card data is transferred to the payment processor which is used by the trader’s acquiring bank.
  • Step 5. Card associations such as Visa or Mastercard receive the transaction data.
  • Step 6. The acquiring bank that issued a credit card gets a request for authorization. As soon as the debit or credit is verified as available, the bank sends the response code to the payment provider (either accepted or denied).
  • Step 7. This authorization response is further transmitted by the payment processor to the payment gateway. The payment gateway sends the response to the interface responsible for payment procession.
  • Step 8. The trader transfers approved authorizations to the back to settle via its processor.
  • Step 9. The acquiring bank makes a settlement query of the credit card issuer.
  • Step 10. The credit card issuer carries out a payment to the bank.
  • Step 11. The bank transfers all approved funds to the trader’s account.

If you want to add a payment gateway to your e-commerce website, you have two options. You can either build it from scratch or partner with a company offering payment gateway integration services.

As the name suggests, payment gateway integration services imply integrating third-party payment providers into a website. The first two popular gateways that come to our mind are PayPal and Stripe.

If you consider integrating a payment gateway, you have three methods to choose from: hosted or off-site method, non-hosted ( API integration), and self-hosted (on-site method). Your ultimate choice depends on two factors: whether compliance with financial regulations is required and degree of user experience regarding payment procedure and checkout.

Now that you know what a payment gateway is and how it functions, let’s find out 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.

So you definitely need a payment gateway in the following cases:

  • You want to increase the customer base of your technology company by delivering payment platform provider services.
  • You are a big trader with a great turnover who wants to be independent from third-party providers.
  • You are a fast-growing payment provider requiring an enhanced payment processing system.
  • Software in your incumbent billing company needs to be upgraded or removed.
  • Your acquiring banking system needs an advanced client-side solution.

Even if you are a solo entrepreneur who has just started a new business, adding a payment gateway to a website can do a lot of good. 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?

Usually, it takes a lot of time, effort, and money to build a custom technical payment gateway.

A custom technical payment gateway usually stands for a greater investment regarding time, funds, and efforts. Still, the process of building a gateway makes sense since it will facilitate your company’s growth – and all thanks to the increase in non-cash payments. Thus, according to the Federal Reserve Payments Study, their number has grown to $204.5 billion in 2021. Here we should mention Visa as the most common payment system among the American shoppers.

When it comes to the Payment Gateways market, their future looks very promising. In 2022, its size was valued at $26.79 billion and will show a stable annual growth rate of 22.2% from 2023 to 2030. At least that’s what the data provided by Grand View Research tell us. The significant growth factors are increasing Internet penetration and the rise of e-commerce sales.

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.

Building custom payment gateways can be a challenging task. Today we can see many available solutions and you may find it hard to stand out from your market rivals.

However, in the long run, custom payment gateway solutions development brings your business multiple benefits. Some of them include:

  • Custom functionality. Off-the-shelf software solutions available on the market have generic features. Eventually, you may notice the lack of certain features you need functionality while other features can be completely useless. Custom software development is a proven way to ensure that you have exactly what you need and nothing more.
  • 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.

An important thing you should consider when crafting a payment gateway is its functionality. Your ultimate set of features relies heavily on your business objectives, specific requirements, and technical opportunities. To make things easier for you, we made a list of the most essential features for a payment gateway. You may check it below:

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

Tokenization implies replacing a personal account number (PAN) with a randomly generated alphanumeric ID called a token that makes sense only to the payment processor. This is done to ensure the protection of sensitive financial information.

3. Recurring Payments

This helpful functionality for both traders and customers involves creating a payment schedule for increasing cash flow and improving customer retention. Customers will benefit from flexibility and convenience provided by this feature.

4. Software Integration

Integration of payment gateway with business software used in your organization is an important part of payment gateway implementation. It will provide you with multiple benefits in terms of time-saving, better accuracy, and simplified transaction reconciliation with a centralized reporting system.

5. Scalability

A solution should have scalable architecture so that it could effortlessly handle an increase in workload. 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

Virtual terminal turns your personal computer into a service for recording and tracking sales transactions. Apart from that, this feature allows processing payments compliantly, getting payments globally, and monitoring and tracking transactions globally. All these possibilities make virtual payment a definite must when you need to set up a payment gateway with powerful functionality.

9. Working Hours (24/7)

If you are planning to launch a global online or mobile payment gateway that will serve customers from different corners of the world, you should consider different time zones.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. Also, it would not hurt to explore other online payment gateway solutions and implement some features you have missed.


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Critical Factors to Remember in Payment Gateway Development

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

To ensure successful payment gateway software development, you should carefully consider all aspects of this process 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 delving deeper into the payment gateway development process, you have to determine the way shoppers, traders, and marketplace administrators will interact within your payment gateway. Explore which offerings each side may find interesting. 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.
  • Integration of a payment service provider (PSP for short) through API. In this case, the internal checkout page is a component of the platform’ client-side.

It is worth noting that some platforms may allow only one approach, while another one may seem impossible. Therefore, you have to decide which checkout page you want to choose: internal or external one. Apart from that, add-ons and side themes should not be ignored as well.

As soon as you set up a payment gateway, you need to implement different supporting processes and functions for sign-in and checkout procedures. 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:

  • Predicted max peak load per minute, an hour, and 24 hours.
  • Estimated quantity of transactions in a year, a few years later, and so on.
  • 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 option becomes possible with Agile methodology. It facilitates faster delivery times, ensures risk minimization, and increases team productivity. 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

As soon as you clarify the questions we discussed above, you can proceed to building system architecture. here you should bear in mind the following critical aspects:


If you plan to deploy in numerous data centers or want your payment gateway application to operate in multiple countries, you must take into account regulatory variables.

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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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.


Security starts with knowing and complying with Know Your Customer and Anti Money Laundering regulations as well as 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.

Apart from that, ensure that your development team follows secure coding procedures to guarantee privacy and security of sensitive personal and financial data provided by the customers. Finally, implement SSL encryption and two-factor authentication to protect this information.

6. A Dispute Resolution Interface

Another component of the payment gateway development process you should not neglect is easy-to-use and secure Dispute Resolution Interface. It allows creating, validating, encoding, and processing disputes quickly and effortlessly.

7. Branching Out: API Design

API design is a crucial part of creating a payment gateway. The key to success there is a well-thought combination of the latest design practices with primary technical functionalities ensuring accessibility and usability. Focus on building an API that is secure, fast, and easy to implement. Make sure its structure is consistent and straightforward and delivers a clear error message when something goes wrong.

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.

Compliance with the following cybersecurity standards and regulations is crucial:

1. PCI DSS Compliance

The main function of Payment card Data Security Standard is enhancing credit card data security and protecting debit card transactions against fraud and data theft. PCI DSS provides the foundation for operational and technical requirements that should be defined to safeguard the account data.

PCI DSS covers the following activities:

  • Storing of credit card data
  • Contacts with protected cardholder info
  • Transfer of cardholder information to other entity
  • Procession of digital transactions or payments made via cards.

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.

While learning PCI DSS, you should keep in mind the four compliance levels, which are based on the annual number of credit or debit card transactions:

Level 1. Traders processing over six million transactions per year should conduct an internal audit once a year.

Level 2. Traders processing from one to six million transactions annually should complete an assessment with the help of a Self-Assessed Questionnaire (SAQ)

Level 3. Traders processing from 200,000 to million transactions annually should complete an annual assessment using a relevant SAQ and conduct quarterly network audits.

Level 4. Traders processing less than 200,000 transactions still have to complete an annual assessment.

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


2. EMV

EMV is a technology standard for fraud prevention technology (embedded chips) developed by EuroPay, Mastercard, and Visa. These embedded chips implemented in credit and debit cards offer an additional protection layer and are more difficult to counterfeit compared to magnetic stripe.

3. EMV 3-D Secure

EMV 3DS was created to help global traders and payment card issuers to reduce the risks of card-not-present fraud and enhance e-commerce payment security.

It implies adding an extra verification step with the card issuer to provide an extra layer of fraud protection. Traditionally, it involves entering a password associated with the card or code sent on the customer’s smartphone.


PA-DSS stands for Payment Application Data Security Standard applied to the payment application software development. It provides software vendors building apps with clear and straightforward data standards. The main purpose of the standard was to ensure that software companies do not store forbidden data, namely CVV2, magnetic strip, or security PIN.

5. P2PE

Point-to-point encryption standard makes it mandatory to encrypt cardholder information right after it has been read by a payment terminal and is left encrypted until this data is processed by the payment processor. Thus, the standard ensures data safety while this information is transferred from point to point and guarantees it cannot be used if stolen.

6. HSM

HSM, also known as a hardware security module, is a generally accepted standard developed to protect private keys and associated cryptographic activities. Additionally, it delivers encryption, decryption, and digital signing services for multiple applications.

In the process of payment gateway development, security and compliance go hand in hand. Follow the standards and guidelines we discussed above and you will be able to ensure the safety of your e-commerce transactions.

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.

The following guide covers all stages of creating an online payment gateway, from building your development team to after-launch maintenance and support. Follow these steps to ensure successful payment gateway implementation.

1. Choosing Staff for Your Project

Implementation of some features of your custom payment gateway may require certain skills and qualifications. Hence your task is to find and hire a payment gateway development team that possesses this knowledge. Besides, you have to ensure that your technology partner has enough experience in building solutions similar to the product that you want to build.

Additionally, pay attention to the project management methodology adopted in the company you have chosen for payment gateway development. It would be great if these specialists adhere to the philosophy of Agile. This approach minimizes risks associated with the integration of payment gateway and increases productivity of payment gateway developers.

2. Coding the Payment Solution

The next step involves actually building predefined functionality for your payment gateway. At this stage, you should already have a solution roadmap where key elements of your product such as deliverables, milestones, and objectives.

With the roadmap, you will be able to prioritize tasks for the development team and focus on those aspects of the payment gateway process that deserve your special attention.

It would be a sound idea to use automation tools for development to improve the efficiency and productivity of your payment gateway developers and other involved specialists. Additionally, they make it easy to uncover and fix bugs.


You Name the Idea, We Bring It to Life!

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

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3. Product Release Stage

As soon as the payment gateway functionality is developed and security testing, load examinations, and penetration tests are performed, it is time to release your project, or, in other words, make it accessible for customers.

Product launch is always the most exciting part of the payment gateway development cycle. A reliable technology partner will not leave you alone and go through this together and help you hit the market.

4. Operations, Product Support, and Maintenance

Be aware that the collaboration with the company offering building payment gateway services does not end with the launch of your solution. The team should provide after launch maintenance and support services to ensure that your payment gateway works as it should without any downtimes. In addition, they should fix any bugs if they occur and implement new functionality per your request.

Now that you know how the payment gateway development process is organized, you may wonder how long it may take to build a payment gateway. In the following section we will try to answer this question.

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 varies a lot, we will try to calculate the time it will take to create a payment gateway. Be warned that it is impossible to define the exact time frames since they depend on several factors, such as the project’s complexity, functionality, and software development team to name a few.

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 project for a small business or a large company:

  • Recruiting freelance employees.
  • Assembling and managing your native, in-house staff.
  • Hiring an outsource software development company to get your solution created from scratch.

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 the development process.
  • Project management instruments.
  • The type/complexity of software.
  • The number of options to include in your application.

It is worth mentioning that support and maintenance of payment gateway development solutions come with additional costs. These expenses may cost you more than registration fees required for applying for a third-party gateway.

Still, the custom payment gateway development is worth the effort. it will provide you with multiple benefits in terms of unique functionality, full control over data, and seamless user experience.

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.

Besides, it may take months to integrate the expected payment processors 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

This guide created by our technical exports provides you with a full picture of the payment gateway development process. Now you know what a payment gateway is and how it works, understand its importance and legal and security aspects. All you have to do now is to find a reliable software development company that will build a payment gateway for you.

If you need a seasoned development company for creating a payment gateway, OpenGeeksLab will be happy to help. Drop a line about your project and our payment gateway development experts will provide you with further assistance.

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