According to the research, the total transaction value digitally in the market is projected to reach US$11.55 Tn in 2024. By developing payment processing software can increase the ROI of the businesses if they are thinking to invest in such gateways and can make the businesses to be part of this monumental shift. 

So if you are also wondering how to build a payment software gateway in 2024, then don’t worry. In this blog we tried to cover all the important points that are required to know by the budding entrepreneurs or growing businesses to be part of the changing market trends. So let’s get started with the blog and know first  how payment processing software works. 

What is Payment Processing Software, and How does It Work?

Forgot to bring cash with you and want to do urgent payment at the moment, now what? There comes the other options such as swiping cards but what if you forgot your pocket purse where you put all these things. Then comes the online payment options to rescue. One of the most used methods in the past few years is getting over the cash system. 

An online payment system is a digital platform or service that enables the transferring of the funds between two businesses or individuals. The system uses the internet as a primary transaction channel, eliminating the need for the cheques and physical money. This Payment Processing Software enables a fast and convenient way for users to pay for services and carry out any financial transactions online becoming a safe option of the fintech industry trend. 

For an online payment system to function smoothly, it requires the following key components:

Point of Sale (POS): 

This is where the transaction begins. The user starts the payment process there. This could be a real-world gadget, such as an online shopping cart on an e-commerce website, or a credit card reader in a physical store.

Payment Gateway:

 This acts as a bridge between the payment processor and the point of sale. To guarantee secure delivery of information, the payment gateway encrypts sensitive data, including credit card details.

Payment Service Providers: 

These organizations oversee the entire procedure. These could be independent financial service providers, banks, or credit card corporations. They oversee the settlement of payments, control the flow of transactions, and make sure that different requirements are followed.

Their role is crucial in ensuring that online transactions are conducted securely and efficiently.

So now let’s see how the system works exactly:

At a terminal or point-of-sale (POS) system, the customer starts the transaction. The payment gateway solution receives information from the merchant bank via a credit card or debit card, digital wallet, or other comparable payment methods. Before sending cardholder information to the card’s issuing bank for payment processing, it additionally encrypts and tokenized card numbers and other sensitive data.

After receiving the request and card data, the payment processor, often managed by the card issuer, conducts multiple authorizations and security checks. These verify if the information about the transaction from the source and the merchant account match.

Prior to approving or rejecting the transaction, the payment processor also confirms the amount in the bank account or the available credit limit. The acquiring bank will be given permission to release or accept monies for the transaction if the processor approves it.

Although using a third-party payment gateway provider to handle debit or credit card payments can offer that feature, it is not the best option. Creating a payment system from the ground up gives you greater control over its functionality and features, enabling you to create the perfect payment platform for your unique requirements.

Types of Payment Processing Gateways

To decide on the best payment processing software for your business, you can classify the options into three categories, which are explained below in this section.

Hosted Gateways

When a consumer is sent from the merchant’s website to the payment processing website, this is known as a hosted payment gateway. The transaction will happen over this hosted gateway. For businesses who lack the resources to meet the security requirements of hosting the payment gateway on their server, hosted gateways are a suitable solution. However, this also means that the merchant’s ability to influence the customer’s payment experience is diminished.

In addition, it takes the customer away from the merchant website and increases the transaction time. However, in order to protect the transaction and the customer data, these compromises are required.

Self-hosted Payment Gateways

Merchants install self-hosted payment gateways on their own servers. However, they send data to a third-party payment gateway URL for processing and verification. This allows the retailer greater control over the customer’s payment experience.

API-hosted Payment Gateways

API-hosted payment gateways are the most in demand by merchants of every size because it gives the merchant complete control of the buying and payment experience. However, because their servers will be storing every customer’s payment information, retailers must comply with PCI DSS.

Read more: Embedded Software Development – A Detailed Guide

How To Create A Payment Processing Software?

There are multiple Custom Software Development Companies available who provide different services and follow a variety of methods. At Octal, we make sure that we provide the best and top development process to our clients making sure of every detail. Here are the steps that our expert developers follow to create a payment processing software and how it can increase your business ROI.

Step 1-Conduct Proper Analysis 

Duration: 1–3 weeks

The experts at Octal carefully examine the distinct payment processing requirements of each of our clients as well as their current IT setup to determine whether developing a custom payment gateway would be financially feasible for their specific industry. We present a list of concrete advantages that a custom payment gateway can offer the business based on the study results, along with a high-level estimate of development costs and a return on investment calculation.

Step 2- Design and Planning

Duration: 4–7 weeks

The team at Octal offers a thorough list of specifications for the payment gateway that includes the following:

• All of the features that a payment gateway ought to have.
• The kinds of data that the system must be able to handle, such as credit card information, e-wallet credentials, and personal client information.
• needs that aren’t functional for the payment gateway, like availability, scalability, performance, and integrity.
• You must fulfill requirements for security and compliance, such as PCI DSS for safe credit card payment processing and KYC/AML requirements to prevent payment fraud.
• Specifications for a checkout page’s layout, content, and visual design.

A precise and comprehensive requirements definition serves as the foundation for design:

• The payment gateway’s architecture and how it interfaces with the necessary systems.
• a feature set that includes security features for a personalized payment gateway.
• The checkout page’s UI and UX.
• APIs to improve the integration possibilities of the payment gateway.
• A development project plan that outlines the deliverables, timeline, risk mitigation strategy, project objectives, and key performance indicators.

Step 3: Select Right TechStack 

Duration: 2–3 weeks

The experts and equipment needed to create an online payment gateway and integrate it with pertinent external systems and business solutions are specified by Octal. In light of the defined business requirements, we evaluate the available technicians and tools and design an ideal tech stack while taking the client’s priorities—such as quick development and low project cost into consideration.

Best practice- To expedite payment gateway development, guarantee high quality of the solution, and minimize project cost, we employ frameworks and ready-made components wherever possible.

Step 4: Build a Payment Gateway

Duration: 4–7 months

When a payment gateway is developed with ScienceSoft, the following steps are often involved:

• Setting up environments for delivery and development automation.
• Creating a custom payment gateway’s back end, including integration APIs.
• Creating an admin interface and checkout page that are viewed by customers in order to track the success of the payment gateway.
• Putting in place a safe database to hold the private information that clients supply.
• You can verify the payment gateway’s quality and address any issues by implementing quality assurance processes concurrently with development, before putting it into use.

Best practice: ScienceSoft uses an iterative approach to software development in payment gateway creation projects in order to introduce essential functionalities first and facilitate faster return from the payment gateway deployment.

Our team can do MVP software development payment gateways in 3-5 months and constantly work on the growth of it to make it fully functional with major releases every 3-4 weeks. 

Step 5- Deployment

Duration: 1–2 weeks

After the payment gateway has successfully completed both functional and non-functional testing, including security testing, the Octal team sets up the solution’s infrastructure. They then initiate backup and recovery processes. Finally, the payment gateway is launched automatically.

As a best practice, Octal advises implementing permission controls for APIs. Additionally, they recommend setting up firewalls, DDoS prevention algorithms, IDS/IPSs, DLP systems, and other security measures. These steps ensure that a payment gateway’s infrastructure is well-protected.

Step 6-Integrate With Other Systems

Duration: 1–8 weeks

To guarantee a smooth and safe data flow between the parties involved in the payment initiation and settlement processes, Octal’s team installs and verifies the gateway interfaces with the necessary systems.

Step 7- Support and Maintenance

Duration: continuous.

• As a software testing services company we ensure to keep an eye on the performance of the payment gateway and resolves any potential problems.
• Expands the solution to meet the increasing volume of payments.
• Upgrades the payment gateway functionality when required (adds additional payment currencies, payment methods, UI components, etc.).
• Assesses payment gateway compliance on a regular basis for compliance with PCI DSS and other data security laws and standards.

Industries That Benefit from Developing a Payment Gateway

Payment software development can be done for multiple sectors. Thus keeping this in mind Octal provides various software consulting services to many industries. This help them get the best outcome and raise their ROI. 

Retail

Payment processing software transforms the shopping experience by speeding up in-store and online transactions. It supports various payment methods and integrates smoothly with POS systems, making checkout quicker and managing inventory more efficiently.

E-Commerce

For online stores, payment processing is key to handling transactions securely and efficiently. It supports multiple payment gateways for ecommerce and provides a seamless checkout experience, while also keeping an eye out for fraud to protect both merchants and customers.

Hospitality

In hotels and restaurants, payment processing software simplifies everything from check-in and check-out to managing reservations. It offers multiple payment options and enhances guest satisfaction with quick and easy billing solutions.

Healthcare

Payment processing features in healthcare software development enhances patient billing and manages insurance claims efficiently. It ensures secure handling of sensitive medical payments and reduces billing errors, making the financial side of healthcare smoother for both providers and patients.

Fintech

Banks and financial institutions rely on robust payment processing to handle a wide range of transactions. The software integrates with banking systems, enhances security, and provides real-time monitoring and reporting for better financial management. Including the payment gateways in the fintech software development project can also enhance your whole project. 

Travel and Tourism

For travel agencies and service providers, payment processing software makes booking and payment handling a breeze. It manages currency conversions and integrates with travel management systems to ensure accurate and smooth transactions for travelers.

Real Estate

Payment processing is a very important part of any industry thus in real estate software development you can with the help of this can help collecting rent and handling property payments straightforwardly. It integrates with property management systems, supports secure transactions, and simplifies payment for both tenants and landlords.

Education

Schools and universities use payment processing software to manage tuition payments and other fees efficiently. It integrates with student information systems and offers flexible payment options, making the financial side of education smoother for everyone.

Read more: Software development Life Cycle – Everything you need to know!

How Creating a Payment Processing Software Development can Benefit Your Business?

There are multiple benefits of opting Payment software development for your business. In this section we have mentioned all the benefits in brief. Let’s have a look.

One-time development cost

You must pay a fee on each transaction when utilizing third-party payment gateways like PayPal and Stripe. This price can add up over thousands of transactions.

In contrast, you only need to make a single investment and never pay a dime for payment gateway services when you construct your own.

Save up to 3% on every transaction

As previously indicated, you are exempt from paying the standard gateway cost while using your bespoke payment gateway. This implies that you could save as much as 3% on each transaction.

Easy refund & query management

Refund processing is one area where businesses require assistance when utilizing third-party payment gateways since it delays the claim-settlement process. However, you may monitor refunds and receive real-time updates regarding them through your payment gateway.

Your foray into the payment collection business

By enabling other merchants to utilize your payment gateway, you can create passive income in addition to saving money on fees associated with custom payment gateway construction. If you allow merchants to utilize your payment gateway, you have the ability to charge them up to 2-3% per transaction.

Conclusion

If you are looking for great software development ideas for your business to invest in, going for the payment processing software is the best. It is important for almost every sector and can enhance the productivity and ROI at the same time for the particular business. If you are wondering about the cost of the development.

As a software development consulting company, we have noticed that the cost to develop payment processing software can vary based on the specific requirements. of the business or client. Therefore, one can obtain a quote tailored to their business needs. On average, the cost to build an MVP can start from $50,000. However, this is not fixed and may change depending on the requirements. Hope you understood the processes and the benefits related to the payment processing software from our blog. If still facing issue, you can contact to our experts 24*7 and get all the answers to the queries.