How to create a payment gateway and get paid

Thanks to quarantine, online sales have skyrocketed in the past year and you might be wondering, how to create a payment gateway? Well fear not, you have come to the right place. Here we’re going to talk about payment gateways and how to create a payment gateway.

What is a payment gateway?

Before we go any further we need to discuss what a payment gateway is.

A payment gateway is essentially the link between your website/service and the bank. Without a payment gateway processing transactions would be almost impossible.

So you might ask how payment gateways work? Well, here’s a summary of how most of the payment gateways work. After the customer decides to purchase an item they are prompted to enter their banking details, these details are then forwarded to the payment gateway which then starts talking with the bank servers and helps process the payment and makes sure that the money reaches the merchant.

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Why use a payment gateway?

To process money without using a payment gateway would require you to be present when the customer makes the transaction to be there to verify whether the transaction was successful.

This approach is resemblant to how payments are made in physical shops and reminds you of having the additional baggage of hiring a cashier.

The better approach to online transactions is to use a payment gateway. This way you don’t have to worry about hiring a cashier while making payments faster and more secure.

What is a white label payment gateway?

A white label payment gateway is sold to merchants for a small fee. These gateways are built and maintained by other bigger companies. They usually take a small percentage of your transactions to maintain the gateway and provide you with their service.

Some examples of white-label payment gateways are PayPal, PayTM, SBI payment gateway, etc.

Why make a payment gateway?

White-collar gateways are great since you don’t have to worry about maintaining the gateway and its security but when it comes to flexibility these gateways offer little to no flexibility. On top of this, you have to lose a small chunk of your payments to them.

But again, creating a payment gateway is no easy task either, you would have to hire experienced developers or spend months learning how to make one which only makes sense in case your business has a huge turnover.

Otherwise, you can always pursue this as a passion project or as a product that you might want to bring to market.

Another good reason to create a payment gateway is to enhance security. Even though white label gateways are known to be secure they’re not perfect and hence can always be improved.

All in all, making a payment gateway is a cumbersome process and can take up a lot of resources. It only makes sense to make one in case your turnover is big enough or in case you intend on providing it as a service to other companies.

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What factors to look out for in a payment gateway?

As discussed earlier one of the biggest concerns when looking for a payment gateway is security and reliability. Customers might not buy the product if the payment methods are insecure. You might not receive the payments in case the gateway is insecure. Hence security is one of the biggest factors when deciding which service to choose.

Another key feature is the payment methods available. You want your payment gateway to be able to cater to everyone hence you want your gateway which has all the different payment options such as e-wallets, internet banking, debit/credit card payments, etc.

You need to also check its support for various currencies. You wouldn’t want your gateway to be accepting payments in US dollars when your customer base is in India. On the other hand, you wouldn’t want to restrict your customer base to a single country due to a lack of support for other currencies.

A smaller thing worth noting is speed. What I mean by speed is how frequently you get paid. Most payment gateways accumulate your payments in your merchant account until a certain threshold is hit. You want to be able to withdraw money from your merchant account as frequently as possible.

Without support for recurring payments, your customer will have to reenter all their bank details every time they decide to purchase a product from your store. Being able to securely store relevant banking details of the customer will improve the user experience.

White label payment gateways

With the above 4 points in mind, I want to quickly talk about some white-label payment gateways before diving deeper into the process of creating a gateway yourself.

Please do note that in-app purchases on iOS and Android platforms are subjected to the terms and conditions laid down by them. You might want to consider Apple ID and Gmail as payment gateways in case you’re working on their respective platforms.

1. Paypal

Paypal is the undisputed king of online payments, it has a 51% market cap globally according to datanyze. Present in over 200 countries and support for 25 currencies Paypal might just be your best choice.

With Paypal Pro, you can even host the solution on your server, which means that the customer can complete their transaction without ever leaving your app/website. This is one of the most flexible options that I’ve come across so far.

FEATURES:

1. It follows PCI DSS which is a security standard created by an international council
2. 25$/month for Pro membership and PayPal takes a certain percentage of your transactions depending on the type of transaction.
3. You can integrate the payment gateway with your app such that the user won’t have to leave the app/website.
4. Zero maintenance charge
5. You can withdraw money any number of times once your account is successfully registered. Works with the free tier as well
6. Great around the clock customer support

2. PayU

With over 100 different payment options PayU is one of the most popular gateways in India. They too like PayPal offer a free and a pro tier.

Customers can complete their purchases without leaving the app/website. Along with the various payment options, you can receive payments from over 100 different currencies as well.

It also has an API available which you can use to integrate with your app. The API is well documented and PayU also offers a test environment for you to learn how to use the API.

FEATURES:

1. PayU boasts PCI DSS standard security
2. Supports over 100 different currencies
3. API available for integration with apps
4. Works well on both mobile devices and desktops
5. Can be integrated with Shopify, Magento and other web store building applications
6. You can manage and collect monthly subscription fees from customers
7. Around the clock support

3. PayTM

With PayTM being one of the leading e-wallet services in India it makes sense for them to also offer a payment gateway.

The Paytm gateway is one of the most trusted gateways in India. For the customer, the brand PayTM is synonymous with trust.

Although PayTMs popularity is limited to India only, so in case your target audience is people from other countries I’d recommend not using this service.

FEATURES:

1. PayTM boasts PCI DSS standard security as well
2. Accepts payments from over 200 countries
3. It has a robust and easy to integrate SDK
4. Your account gets activated as soon as you create it.
5. Can be integrated using API
6. Accepts UPI payments
7. Has instant refund for customers
8. Can collect recurring payments
9. Can extend bank offers to customers
10. Charges up to 3% on transactions depending on the type of transaction
11. Merchant can withdraw money whenever required

How to make a payment gateway

Finally, getting into the meat and bones of today’s topic let’s talk about how you can create a payment gateway.

Let’s start off with the easier part, which is to decide which language to use. This is going to be deployed on our server where our payment gateway is to be hosted so we need to choose appropriately.

You want to choose a language that is frequently used for such applications as well as great documentation. In case you’re willing to hire a team you also need to see how easy it is to find experts in that specific language.

Your choice of language needs to balance out the performance benefits of using that language and the cost of building the gateway.

Naturally, languages that have a smaller developer base would be costlier to develop your gateway in since the few developers who might know how to code in that language might charge much higher rates. Hence your choice of language can affect the cost of building the gateway as well.

Which programming language to use?

Here I have compiled a few different languages which might be used for this application, you should consult a professional before going forward with any plans though.

Python

First on our list is python. It is one of the easiest languages to learn hence development costs might be lower but on the other hand, python is known to not be a very inefficient language hence increasing your running cost.

C language

C is one of the oldest languages and is known to be a difficult language to master. Finding developers for this language is pretty hard since very few people take the time to master this language since it’s so difficult.

C language is known to be one of the most efficient languages hence will reduce running costs.

PHP

Finally, we have PHP. It can be used to create such apps according to my research but I wouldn’t recommend it. PHP on average is less efficient than C but is more efficient as compared to python.

Even though the language is old it is still widely used and hence has a huge developer base. It’s very easy to find experienced developers in this language.

What are the steps involved in creating a payment gateway?

1. Find payment processors:

Before you start developing the gateway you would need to find payment processors, payment processors are banks and other institutions which hold the users’ money (examples: SBI bank, PayTM wallet)

2. Create payment gateway:

Now that you have established relations with the payment processors you need to create your product. First, you need to develop software that can run on the server where the gateway will be hosted. This is the core of the payment gateway.

3. Develop CRM :

Once your core codebase (the server) is ready you can move on to developing a CRM system (Customer Relations Management system). CRM is a tool that can help you reduce running costs by identifying patterns in usage and can prove to be a useful point of differentiation against other such products.

4. Ensure PCI DSS compliance :

Finally, you have to comply with the PCI standard rules since PCI compliance is pretty much a must if you want to handle any online transaction. Apart from this, I would recommend developing anti-fraud systems to take the level of security up a notch.

All in all, these are the basic steps that you need to take to make a basic payment gateway but this is just the tip of the iceberg in terms of creating a payment gateway. I have abstracted most of the process here so it might sound a bit easier than it is.

Comparison of Paypal, PayU and Paytm

	PayPal	PayU	PayTM
PCI DSS security	Yes	Yes	Yes
Can be integrated with the app	Yes	Yes	Yes
UPI payment fee	4.4% to 3.4%	2%	₹0 to ₹6
Credit card processing fee	4.4% to 3.4%	2%	1.99%
Debit Card processing fee	4.4% to 3.4%	2%	0% to 0.9%
Netbanking fee	4.4% to 3.4%	2%	1.99%

*These are the price listings that I could find off of the official websites although other sources do differ on these numbers.

My opinion

Unless and until your annual turnover is very high it does not make sense to create your own payment gateway since, as mentioned earlier, it is a painstakingly long and expensive process. The white-label options available are more than enough in my opinion. All the three gateways that we’ve talked about so far can be integrated into your app/website giving the user a seamless experience on your platform.

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