How to Create a Payment Gateway and Is It Worth the Effort

What Is a Payment Gateway?

Before discussing the guide on how to setup a payment gateway, we have to determine the terms. After all, this specificity is very easy to get confused in.

Payment gateway is a software solution that acts as an intermediary between the buyer, seller and banks, ensuring secure processing of electronic payments and simplifying the process of conducting transactions on the internet. It encrypts customer data and sends it to payment systems, guaranteeing confidentiality and protection. Thanks to the gateway, the customer can pay for the goods or services and the seller — get money without worrying about data protection.

How to Create a Payment Processor: What’s the Difference?

The payment gateway and payment processor are two key elements of the electronic payments processing ecosystem, but they have different roles. Let’s see the main differences.

The payment processor is a system that actually processes payments: it connects the client’s bank and the seller’s bank to complete the transaction.

Main task:

• Establishing connection with banking networks (for example, Visa or MasterCard).
• Checking the availability of funds in the client’s account.
• Completion of the transaction and transfer of money to the seller’s account.

Typical user: Businesses that handle large amounts of transactions and use the CPU to process financial transactions.

Below, we compare the main criteria that influence the purpose of certain technology and the way of how to create a payment processor.

Situations where the payment gateway and processor work together:

1. The buyer enters the card data on the site (through a payment gateway).
2. The gateway encrypts data and passes it to the processor.
3. The processor contacts banks and card networks to confirm payment.
4. The result is returned through a gateway that notifies the client.

In fact, both payment processors and payment gateways are part of the transaction processing system, but they are never comparable to each other.

Who Might Need a Custom Payment Gateway System?

Sometimes, wondering how to create a payment gateway is superfluous. It’s not something must have for every business in the world.

The payment gateways are most needed in areas where transaction volumes are high and security and customer convenience requirements are particularly critical. The key industries with the greatest need in the guide on how to create a secure payment gateway are:

1. Electronic commerce

This area is definitely leading:

• Large number of transactions of different types (single purchases, subscriptions, installments).
• Need for integration with international payment systems.
• High standards of payment convenience and security.
• Payment gateways are particularly popular among large marketplaces and online shops, where the scale of operations requires flexible solutions.

The creation of its payment system allows implementing multi-currency support for international trade, integrating with e-commerce platforms and also providing high productivity and scalability for peak loads.

2. FinTech

In the FinTech sector, payment gateway is the business base:

• Online wallets and mobile banks require high-speed processing of transactions.
• P2P-transfer systems and cryptocurrency platforms require a special level of security.
• Regulatory requirements force you to create your own solutions for full control.

Support of instant payments (real-time payments), integration with cryptocurrency systems and DeFi platforms and high level of security: encryption, tokenization, protection against attacks - key advantages for this field.

3. Subscription services (SaaS, streaming platforms)

Subscription platforms need solutions that can:

• Automatically write off money on schedule.
• Process international payments in different currencies.
• Work with returns and holds (for example, when cancelling a subscription).

As the advantages for this area can be named the recurring payments function, integration with global payment methods and instant notifications about the status of a payment (successful or rejected).

4. Game industry

Online games and gaming platforms (Steam, Epic Games Store) actively use gateways:

• Purchases in games (donates, in-game currency) require instant processing.
• The young audience expects convenience and support from non-standard payment methods, such as cryptocurrency.

Support for non-traditional payment methods, integration with the API for real-time billing and high bandwidth for mass transactions are important in this area.

5. Services (delivery, taxi)

Food delivery, for example, one of our latest case — global restaurant brand app development, taxi, and rental of transport depend on convenient, fast payment solution:

• Instant authorization and payment processing required.
• High failover requirements: if payment fails, the entire platform is affected.

Key features: Integration with GPS for automatic calculation of costs, instant refunds or adjustments of payments, possibility to support local payment methods.

6. Tourism and travel

Tour operators, airlines, and booking platforms (such as Booking or Airbnb) handle millions of transactions daily. They need reliable and globally adapted payment gateways to:

• Support multiple currencies.
• Provide instant returns and compensation.
• Work with different payment methods (cards, PayPal, local solutions).

This allows for fast transaction processing and high fault tolerance, as customers expect instant confirmation of booking.

Why Are These Spheres Leading?

• High volume of transactions: The more transactions per day, the more indispensable a reliable and fast gateway.
• International operations: These industries often operate in different countries and need support from multiple currencies and payment systems.
• Complex payment scenarios: For example, refunds, installments, subscriptions or multichannel payments.
• High competition: Businesses are keen to improve the user experience, and their own gateway helps reduce fees and offer unique terms.

The process to adapt or make a payment gateway for these areas can be a decisive factor for your business success. You may verify it by estimating Celadonsoft’s experience on our website.

Why Should I Create My Own Payment Gateway?

You might still consider a guide on how to build a payment platform is not your piece of cake, so let us give you some more arguments and benefits. The proprietary payment gateway allows businesses to adapt the system to their needs, minimize costs for third-party services, and improve customer engagement.

1. Lower transaction processing costs: The use of external payment gateways is often accompanied by high commissions per transaction.
2. Process control: The custom payment gateway gives you full control over all aspects of transaction processing.
3. Flexibility and customization: Third-party gateways may be restricted in the functions they provide. 
4. Increased security: Data processing through external gateways may involve risks associated with the transfer of data to third parties.
5. Transaction acceleration: Outsource services may process transactions more slowly, especially during peak load periods.
6. Independence from third party providers: Using third party solutions makes you dependent on their infrastructure, pricing, and stability.

When Creating Your Own Payment Gateway Is Not the Best Idea

1. Your business is just starting to grow, and you don’t handle a lot of transactions.
2. You are not prepared to invest significant resources in infrastructure development and maintenance.
3. Your market is limited to a local audience, and standard solutions meet all needs.

Step-By-Step Guide on How to Create a Payment Gateway

Of course, since you are wondering how to make your own payment gateway, you are expecting from us to provide some guide. So we tried to gather all the information we got from our own experience in payment gateway creation and form a certain sequence of development phases.

Following these steps, you will prevent maximum amount of troubles and cover all the areas of payment gateway development. 

Research and Planning

Before launching the project, you should prepare carefully:

Market and competitor analysis: Explore existing payment gateways such as Stripe, PayPal, Adyen, and others. Identify their strengths and weaknesses. For example, they may have high commissions or limited customization capabilities.

Target audience definition:

Select who your gateway will be useful to:

• Online stores.
• Financial start-ups.
• Company working with subscriptions.

Requirements formulation:

Determine what functions should be in your gateway, for example:

• Support for multiple currencies.
• Automatic returns.
• Risk management and fraud prevention.

Technical Aspects of Development

The creation of a payment gateway requires high security standards and good technology selection.

Choice of architecture:

Decide whether the system will be monolithic or microservice.

• Monolithic architecture: simpler in design, but more difficult in scaling.
• Microservices: allow dividing the system into modules (transaction processing, user management, analytics), which simplifies scaling and adding new functions.

Technologies for development:

• Backend: Node.js, Java, Python, or Ruby for building server logic.
• Frontend: React or Angular for admin panel.
• Databases: PostgreSQL for storing transaction data, Redis for caching.

Data security:

• Encryption: Use SSL/TLS to encrypt data between client and server.
• PCI DSS compliance: This is the standard for payment data, including card data protection, regular security checks and storage encryption.
• Two-factor authentication (2FA): To prevent unauthorized access to the administration panel.

Integration with external systems: Connect the gateway to major payment systems such as Visa, MasterCard, PayPal, and local providers (e.g., Alipay in China or UPI in India).

Development Process

The stages of development of the payment gateway include:

Interface design:

• Create a user-friendly interface for users and administrators.
• Consider the scenarios: setting up a gateway, managing transactions, reporting.

Functionality development:

• Payment processing: Gateway should support authorization, write-off, refunds, and cancellations.
• Support of different payment methods: Bank cards, e-wallets, cryptocurrencies.
• Risk management: Implement algorithms to prevent fraudulent transactions (for example, blocking suspicious IP addresses).

Testing:

Testing is the most important step on which the system reliability depends:

• Functional testing: Checking the performance of all functions of the gateway.
• Load testing: Learning how the system handles numerous transactions.
• Pentests: Attack simulation to identify vulnerabilities.

Legalization and Compliance Requirements

Financial license:

You may need a license to work with payments. For example:

• In the EU — a payment service provider (PSP) license.
• In the US — registration with FinCEN and obtaining MSB licenses in each state.

Regulatory standards:

• PCI DSS: Mandatory for all systems that work with bank card data.
• GDPR: If you work with customers from the EU, ensure their personal data is protected.

Implementation and Scaling

After you have completed the development and received all permissions, start up:

Test run: Allow a limited number of users to use the gateway in real time. This will help you identify and correct errors.

Integration with businesses: Provide a clear API and documentation so that stores can easily connect your gateway.

Scaling:

• Increase the server capacity with increasing number of users.
• Add support for new currencies and regions to get into the international market.

Analytics development: Include tools that help clients view payment statistics, analyze revenue and manage finances.

Make a Payment Gateway: Summary

The journey of how to start a payment gateway business might be a complex but promising process that opens up new opportunities for business. The success of a project depends on careful preparation, selection of the right technologies and strict compliance with safety standards.

In the future, payment gateways will increasingly use artificial intelligence to analyze transactions and manage risks, as well as support innovative payment methods such as cryptocurrencies and open banking systems. Successful implementation of your own gateway will help not only optimize costs, but also transform your project into something more successful.

To create your own payment system that answers all the queries of your project, Contact Celadonsoft.