Building an online payment gateway – how to create your own payment system?

Were you wondering why there are so many payment gateways on the market and why so many companies ask how could they create a payment gateway for their own app? Then just look at how much companies can earn from mobile purchases. 

Approximately 50% of non-game and 79% of game apps use in-app purchases nowadays – and earn it from it quite well, as mobile users spend $380 billion worldwide on app purchases. 

But to let your app users use the in-app purchases, you first need a payment gateway. A gateway account is now pretty much essential to any business that wants to accept debit and credit card payments in their applications. But choosing the right payment solution might be a bit tricky. 

We already talked about what is a payment gateway and how it works in the previous article. Continuing the topic, we’ll now talk about whether you should

create your own gateway from scratch or maybe rather integrate a payment gateway coming from a third party.

Create your own payment gateway solution – is it worth doing that?

If you were thinking recently about adding a payment gateway to your application as well and started researching your options, then you surely noticed there are two main ways of doing this. Namely, either using one of the many third-party payment gateways or building a payment solution yourself. Which one would be better? We’ll be honest here – in most cases, building a payment gateway that is custom-made for your company has far more drawbacks than benefits. It is simply too expensive and complicated to build a whole new one just to accept payments in your app. 

You would have to build a partnership with a payment processing company, create tech specifications from scratch, and take care of all required security standards such as PCI DSS, EMV, EMV 3D, Tokenization, and P2PE. If you wanted your gateway to support multiple payment methods, including international payments, then you would also have to negotiate contracts with multiple acquirers (banks or financial institutions). And that’s just the tip of the iceberg – owning a payment gateway would mean you also have to pass regular audits on how are you storing and managing cardholder information and what tools you use to secure payments going through your gateway. 

So unless you plan to build your business around the new payment gateway and have a well-thought-out strategy for how you will make, secure and maintain your new product, creating a gateway from scratch is hardly worth it. You’d need to hire someone familiar with the payment regulations and fintech to design the application and follow the payment processor regulations and the building process will be very time-consuming and costly as well. 

If you just want to offer in-app payments, then going for one of the available third-party payment gateway solutions will be a much better option, as they are much faster to implement and cheaper.  

Alternative for building your own payment gateway – white label online payment systems

Okay, building your own gateway is not exactly an option – getting an out-of-the-box gateway integration definitely would be far less costly and time-consuming. But what if you still want to somehow tailor the ready-made application to your brand? In that case, how about choosing a payment gateway that is sold as a white label? 

When it comes to white label gateways, they work just like any other gateway – have the same features, level of security, and certifications. But as they are not branded by the provider, businesses can customize the online checkout process with their own names, logos, or brand elements or add new features they need.  

Why though should you look in the direction of white label gateways? Most importantly, those will save a lot of your time. When building your own gateway, you would have to spend time on creating technical regulations, designing your token system, applying for certifications, and negotiating contracts with the payment providers. Third-party gateways meanwhile have already all those technical requirements ready – you can just take the ready solution, configure and customize it to match your brand, and that’s it. 

And also:

• You can leave handling all purchase-related issues, maintenance, security certifications, and audits to the getaway provider. If you built a gateway yourself meanwhile, then all those things would be on your side.
• White label gateway providers regularly add new features, technologies, payment methods, and security measures to their platforms. And as their partner, you can use those features straight away after implementation, with no extra costs.

• Gateway providers have several anti-fraud mechanisms and strategies already implemented, so you can be sure that the gateway and all data passing through it is fully secure. With your own payment gateway, you would have to design the security measures yourself. Also, most white-label gateways can be easily integrated with third-party security, anti-fraud, and KYC Solutions if you need an extra security layer.

• White label payment gateways can be easily integrated with your main system, back-office, and any applications you might need through an API. Plus, many of those platforms also have features that can help you with filling reports for tax and compliance purposes.

Of course, white-label gateways have drawbacks as well, though they don’t really outweigh the benefits. For example, when you build your own payment gateway, you won’t have to pay transaction fees or any costs associated with using a third-party service.

That might seemingly look like a reason to go for the custom gateway, but actually, the third-party fees and transaction costs are minimal when compared to the costs of building and maintaining your own payment gateway.

When making your own gateway, you can also have full control over the design, navigation, features, and integrations inside the gateway – which means you could create a custom-fit gateway for your business. The white label applications meanwhile are typically pretty limited regarding what you can (and what you can’t) customize.

Again though, creating such a custom-made gateway will take a large amount of time. You would need to first build a project team with members that are specialized in creating financial applications and have enough experience to keep the entire process smooth and then watch out for any unexpected issues during the development process.  That kind of project could take months if not years to be completed successfully – while implementing an out-of-the-box gateway will take far less time.

What are your white label payment gateways options?

As we mentioned earlier, with so many fintech companies already offering their own gateways, it would be far faster and cheaper for you to just pick one of them rather than getting a custom application. So, what exactly can you find on the market? Let’s first look at the available types of payment gateways: 

• Hosted or onsite. Hosted gateway is a third-party checkout system that redirects users to the payment service provider’s (PSP) page when they want to make a purchase. Basically, this means that the user will have to leave your website to pay for the product and then be sent back to your website to finish the checkout process. Onsite gateways work as a part of your website meanwhile.

• Dedicated. If the regular white label gateways don’t exactly match your needs, then you should look in the direction of dedicated payment gateways. Besides having more checkout customization options and specific features added to the gateway at your request, you would also get a dedicated server (or servers) for hosting the gateway.

• Licensed. This one is the “best of both worlds” as it allows you to customize the gateway in any way you need but without having to build an entirely new one (though you still need to go with the PCI audit and certification). After you buy a license for a chosen payment gateway software, you can adapt it to suit your business needs. Since you typically also get access to the source code, you get full control over the gateway infrastructure and can change the source code as much as you need.

Each type has its own benefits and its own set of drawbacks. For example, hosted gateways are the easiest ones to set up, but you don’t have any control over the gateway’s security. Dedicated and licensed meanwhile can give more features and customization options, but they come with a higher price tag as well.

What are the most popular payment providers?

One more drawback of setting up your own payment gateway we didn’t mention yet –  connecting your new payment gateway to different banks, card providers, and payment services. Looking at how many payment methods are there now (and the more the gateway can support, the better), mean you would have to negotiate with several issuing banks, payment services, and credit card processing companies and then integrate the payment gateway with all of them.

The biggest payment service providers (PSP) meanwhile already have those connections established and secured, and can offer several different payment methods for your online store – from credit cards and e-wallets to cash cards, instant payments, and even cryptocurrency. 

Let’s take a look at a few payment solutions that are especially popular with businesses.

Paypal

Paypal is an eCommerce payments platform that allows people to pay for their purchases without sharing any of their bank information (like their credit card number). And as it works in 200 countries and accepts 25 currency types, it’s one of the most popular gateways when it comes to online shopping. More than 1.6 million websites now use PayPal – the gateway is equally popular for mobile purchases.

Stripe

Like Paypal, Stripe helps merchants accept and manage online transactions coming from anywhere in the world and in various types – credit cards, mobile wallets, cryptocurrency, and even the buy now, pay later services. Currently, Stripe is available in 120 countries and can process over 130 different currencies – so it works great for international brands.

Skrill

Skrill (previously Moneybookers) is a payment gateway and digital wallet provider from the UK, established in 2001. Since its launch, Skrill has expanded to work in more than 120 countries and accepts 40 different currencies and over 100+ local payment methods, including cards, digital wallets, instant bank transfers, and cryptocurrency. Skrill is also a very popular purchase method among online casino and sports betting players. 

Braintree

Braintree has been created by Paypal as a payment system aimed at higher-volume eCommerce businesses that want more control over their transactions. Along with a payment gateway and merchant account, Braintree offers small-business customers tools and services to streamline internal processes, such as customizable sales reporting, recurring billing, and integration with third-party apps. Braintree operates in 45 countries worldwide and supports 130 currencies. 

Authorize.net

Authorize.Net processes over one billion transactions for over 430,000 merchants every year. However, it has a short list of accepted currencies compared to its competitors. For U.S. and Canadian businesses, Authorize.net only supports payments in USD and CAD. For U.K. and European businesses, it supports eight currencies, and for Australian companies, three. A plus for them is that they offer several features for the merchants – recurring payments, invoicing, mobile purchases, a virtual point-of-sale (POS) system, and an optional card reader. 

Apps using payment gateway – examples

Nearly every type of application, from productivity tools, e-learning apps, weather widgets, and of course, games, has a built-in freemium model. Freemium means that the app is free to download and use, but if you want to access any of the extra features, then you need to pay for those. And since app users nowadays are not really eager to pay for an app they’ve never tried before, using a freemium model to let the users try the app before buying a subscription is an excellent way of convincing them the app is worth their money. 

In fact, 97% of Google Play Store applications are now working as free apps with optional in-app purchases inside. 

80% of the mobile apps we’ve built in Crustlab have an integrated gateway for smooth in-app payments as well – take a look at a few examples.

• Sportech PLC – A horse-racing betting system where users can bet through the payment gateway.
• PelviFly – an app for regular kegel muscle exercises for women. Users here can make in-app purchases to access special exercise programs or schedule a consultation with a fitness expert. 

• Solver – an e-learning platform where users can schedule online lessons and pay for them using the Stripe payment gateway.

• SmoothRemote – Application for adding remote work offers.

Are Google Pay and Apple Pay available as payment methods in the gateways?

Want to offer Google Pay or Apple Pay as a payment option in your app? Then you should look for gateways that support both payment methods- sadly, not all gateway providers have those on their supported list. 

On the Apple Pay website, you can check which gateway providers for your region support this method of payment – Authorize.net, Stripe, and Braintree are, for example, listed as those that have added Apple pay as an available method of payment. 

The list of available places that accept Google Pay payments meanwhile you can find on the Google Pay API website.

Conclusion 

If you want to use in-app payments in your new product, then adding a payment gateway to your app is simply a must. And in most cases, just going for one of the available gateways providers will be enough – that will take you far less time, frustration, and budget compared to building an entirely new one.

If you feel confused just looking at the available payment gateway providers though, or want to discuss which gateway would be best for your new product, then feel free to reach out to us. Many companies have already asked us for help selecting the right provider and integrating it into their applications, so there’s a good chance we can do the same for you. And the easier and safer you will make for your users to pay for the in-app services, the better the chance you will convince them to click on the “Buy” button.