Ultimate Guide On Development Of a Payment Gateway: Cost, Benefit, Opportunities, and Uses
A report released by Deloitte in March 2022 predicted that the global transaction value of digital transactions will reach $11.3 trillion by 2026. This is expected to grow by 13 percent. With the help of an online payment platform, businesses can take advantage of the opportunity to be part of this massive change. The payment system online that is made up of several important stakeholders, including consumers and merchants is now proving to be the basis of the modern world.
In becoming part of the online payment system businesses and startups can benefit from the growing digitalization of payments. A vital component in this nearly flawless digital payment system is the payment gateway. There are payment point (POS) terminals that perform various essential functions, helping to facilitate the digital payment ecosystem. Before we dive into the construction of an online payment gateway, we must first learn the way payment gateways function.
What is a Payment Gateway, and how do they work?
If we enter an offline store, the process of completing the (non-cash) transaction requires us to swipe cards at the POS terminal, which records the card details while sharing it with the appropriate parties to authorize the transaction.
If we reproduce this in a digital storefront, the payment gateway is the POS terminal that captures the consumer’s credit card details. But, many other important functions are taking place simultaneously.
Let’s take a look at the step-by-step process of how digital transactions occur:
Step 1. When the customer adds the item (or product or service) to their shopping cart and then proceeds to checkout the item, they are directed to the payment gateway, either via the merchant’s servers or third-party servers (the differences are explained further in this article). The customer selects the preferred method of payment (taking credit cards as an instance). After entering the card’s details and clicking on something that reads make payment.’
Step 2. When the user submits their card information The payment gateway then tags the transaction as card, not present (CNP), and then encrypts and secures the data so that it can be sent to various parties. In addition, the payment gateway checks the card’s details as well as authenticates your card.
Step 3. This encrypted information is transmitted through processing. It is the payment processing technologies that connect with banks to process payments.
Step 4. A payment processor connects to both the acquiring bank (merchant’s bank) and the bank that issued the transaction (customer’s bank) to review the transaction.
Step 5. The bank that issued the transaction and the appropriate card network (Visa or Mastercard typically) decides whether or not to approve the transaction. The approval or denial will be sent to the processor, who transmits the transaction’s status to the gateway to which it is.
Step 6. A payment processor sends the transaction’s status information to the merchant’s site and then displays the status on the screen for the user. This is the point at which the transaction is concluded.
How can I set up an online payment gateway?
A quick overview of the processing of a payment gateway will look it in an easy step-by-step guide to go about developing a customized payment gateway.
1. Research and Ideate
Before embarking on developing your payment gateway you must first determine the business goal you intend to achieve with this payment method. Also, you should identify your audience’s needs and complete a thorough due diligence process before designing the gateway. After this is done you can move on to creating the product.
2. Create the infrastructure
This involves building the necessary networks and systems to process, authorize, and secure payments. These are the essential components that make up your gateway. They should be designed by a well-known payment gateway software development firm such as iTechnolabs.
3. Implement measures to detect fraud
As already mentioned the concept of the detection of fraud is something the customers of your gateway are likely to anticipate. Thus, implementing this method is just as important as establishing an account on your payment gateway. Take steps to identify and avoid fraudulent transactions.
4. Get licenses and certificates
Creating a payment gateway is a process that requires compliance, which is discussed earlier. Before you can launch your product on the market, you’ll need to acquire all necessary certifications for compliance, which you can obtain with the help of a development firm.
5. Integration with the payments processing system
Your gateway needs to connect with the payment processing network to approve and settle transactions.
6. Test and open your payment gateway
Be sure to check your payment gateway’s functionality to make sure that it works properly and safely before releasing it for public use.
When you design the payment system, it will be constructed using various programming languages like PHP, Java, Ruby on Rails, Python, and .NET according to the needs of the gateway as well as the experience of the developer responsible for the payment gateway. As a rule, when developing a website or web application, PHP or Ruby on Rails could be a suitable option. Java or Swift may be a better alternative for mobile applications.
Read more about Development Of a Payment Gateway
