The current financial industry requires a modern solution to make the payment process more convenient and faster. The digital world continues moving forward, therefore in many countries, there is a necessity in starting a payment processing company to meet the changing needs.
According to The McKinsey 2022 Global Payments Report, the payments services industry is rapidly growing, uniting banks and technology providers to create similar seamless and convenient digital experiences. For instance, banks are optimizing their core systems and updating their payment infrastructure, largely in response to the continued rise of online payments, open-banking requirements, and cloud technology.
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The key definitions to know before starting a payment processing company
There are different payment processing services that finance companies can offer to businesses: payment service provider, payment facilitator, payment gateway, and payment processor. That’s why you have to choose what type of service you want to provide. Some payment processors serve only as gateways while others become acquirer banks and are partners with Visa or Mastercard.
For online payments, MPGS (Mastercard Payment Gateway Service) enables businesses to integrate payment processing into their websites and mobile applications. Customers can pay securely using a variety of payment methods, and businesses can manage their payment transactions through MPGS’s online portal.
Mastercard MPGS is a secure solution for fintech companies looking to improve their payment processing capabilities and stay ahead of the competition. Read our article on Mastercard Payment Gateaway Services Integration, to explore how to revoluzionize your payment business.
Within this spectrum, there are two additional payment options – becoming a payment service provider (PSP) or a payment facilitator. Each of these roles necessitates a registration process and is subject to different regulations, which standardize online payment processing activities.
What is a payment processing company?
A payment processing company is a financial institution or a third-party entity that facilitates electronic payment transactions between buyers and sellers. These companies play a crucial role in the payment ecosystem by providing the infrastructure and services needed to process various types of electronic payments securely and efficiently.
Payment processing companies act as intermediaries between the parties involved in a transaction, including customers, merchants, banks, and payment networks. They offer a range of services that enable businesses to accept payments from customers and manage their payment operations.
What is a payment service provider?
A payment service provider (or PSP) is a third-party company that helps your business with getting digital payments (from credit cards, debit cards, e-wallets, etc). A PSP is responsible for the transaction verification process and helps to accept payments from the customer to the merchants.
What is a payment facilitator?
A payment facilitator is a service provider for retailers. If you need to process payments online, you can use a merchant account from a payment facilitator. There are two types of retail accounts: PSP and ISO (Independent Sales Organization).
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How does a payment processor work?
At first sight, payment processing is a simple automated set of actions that needs only 3 seconds to be done. In fact, it is a multi-step process that consists of customer authentication, authorizing, and settling the payment. The payment processor manages the credit card transaction, working as the mediator between the merchant and the financial institutions involved.
Let`s observe the payment processing in more detail.
- Using the card by the customer for online payment processing.
- Transmitting an amount of money to the payment processing service provider.
- Sending the information to the card associations.
- Checking the request by an issuing bank.
- Receiving confirmation (or cancellation) of the transaction.
- Sending the response to the provider by card associations.
- Forwarding the response to the merchant by an online payment service provider.
- Approving (or delaying) the credit and debit cards.
This is how payment processing works indeed, consisting of many steps to be done. Therefore, it is essential to provide an uninterrupted stable process to prevent any problems with the transaction.
What are the main features of a decent payment processing solution?
A payment processing solution is a reliable service that must have the following features: easy integration, security, and convenient transaction processing, detailed reporting, customer and merchant onboarding, payment initiation, and acceptance.
For more info, see our post on Top 7 features of a PSP software.
SDK.finance payment acceptance software features
You can start your business by providing a complete stack of online and offline payment acceptance services for merchants using the payment platform SDK.finance, without having to start from scratch. We offer the software to build a world-class payment service provider business. It serves different types of businesses – from online shops to marketplaces to brick-and-mortar stores.
SDK.finance payment platform offers such features:
|Feature||SDK.finance fintech platform|
|Customer onboarding:||Online account creation, document uploading|
|Transactions management:||Transaction history, view details of each transaction, transaction history export, transactions on the map|
|Refunds initiation:||Initiating refund transactions on the customer’s demand|
|Merchant’s digital wallet:||Opening a digital wallet for the merchant’s personal use|
|Payment acceptance:||In-store payments, online payments, tips acceptance, bill payment processing|
|Online POS:||Online POS registration, web-payments acceptance, configurable checkout page|
|Regular payouts:||Receiving settlement amounts to the merchant’s|
|Receipts generation:||Manually, from transaction history, via sending email receipts after the transaction|
|Roles & permissions management:||Individual, merchant, administrator, accountant, compliance manager|
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How to start a payment processing company?
Starting a payment processing business can be a complex process, but we will outline the steps to help you get started.
Building the payment processing software: start from scratch or get it off the shelf?
Building payment processing software from scratch can be a daunting task, as it requires a lot of your resources and may take a few years to complete. You will also need server infrastructure and robust security measures in place, and an expert development team capable of handling a complex fintech project (and plenty of time to implement your project from the ground up).
If you’re into cost- and time-efficiency, using a pre-developed white-label solution might be a more beneficial way to go. It enables you to brand and customize the ready software according to your product needs and seriously accelerate the release. In addition, working with a reliable vendor can help save your team resources, and costs, plus reduce CAPEX.
If you’d like to start earning revenue as soon as possible rather than spending months or years on a from-scratch project, let us guide you through the process of building a payment processing system using SDK.finance Platform as a foundation. With our payment acceptance solution, you can start growing your revenue by providing a complete stack of online and offline payment acceptance services for merchants faster. Read this article to explore how to build a payment solution like Stripe.
How to develop a payment processing system with the SDK.finance platform?
Setting up the infrastructure and services
This step involves configuring environments, such as development, pre-production, and production, to ensure a smooth and efficient development process. It also involves setting up services that will aid in the deployment, monitoring, and maintenance of your e-wallet platform. By taking the time to configure these components correctly, you’ll create a strong foundation for the success of your e-wallet platform.
Configuring development, pre-production, and production environments
SDK.finance infrastructure consists of 3 servers: developers instance (for development and testing of the software); production instance (live operation server with end-users and real operations); pre-production or Sandbox (infrastructure with the same specs as the production instance used for debugs of integrations with third-party components).
Requirements of the instance for production and test environments
- CPU – 1
- RAM – 2 GB
- SSD – 40 GB
- OS: Ubuntu 20.04 LTS
- Software: NGINX 1.14.0
System management basically allows you to create certain standards and rules for their behavior as well as to determine main services and functions that will be available for your customers (individuals and merchants).
There are the following use cases within the system management:
Contract management includes creating custom contracts, adding commission rules, editing system settings, and activating provider commissions.
Payment gateway management involves configuring exchange rates and currency management.
Reports and analytics offer the opportunity to generate transaction-based reports, which can be downloaded for further analysis.
Explore our knowledge base to find out more about system management.
This step involves 4 main stages: KYC management, user profile management, user registration, and revision.
User profile management covers registration( by email or by phone number) and profile deactivation. The administrator can also update profile and business details and manage security settings.
KYC management allows you to cover basic compliance processes such as uploading the documents, verifying documents and users, and requesting users’ actions to complete the compliance procedure. For more sophisticated KYC and AML functionality we can recommend integration with specialized third-party providers.
Read our knowledge base to get more details about user management.
Merchant products management
Merchants can create, view, update, and delete products using the available functionalities. This module provides merchants with the ability to manage their products’ prices and measure units as well.
Further, the functionality can be extended by allowing users to tag the transactions for merchant products to control their spending. This functionality is not provided on the UI but is fully functional on the backend and covered by APIs. The administrator can update the following use cases:
- merchant product and categories creation
- merchant measure units updation
- merchant product prices configuration
Check our knowledge base to find out more information about merchant product management.
This module allows merchants to add, view, edit, and delete their POS systems, as well as generate new secret codes to ensure security. It also enables merchants to view a list of their POS systems and access detailed information about each system, including transaction history per each POS.
Additionally, the module allows merchants to edit their POS systems to ensure accurate and up-to-date information is reflected. You can find more information about POS management in our knowledge base.
Payments and transactions
This functionality includes funds transfer, bill payment, recurring payments setting up, currency exchange, invoicing, and merchant payment services.
This functionality is available on UI provided out of the box and has the following flow:
- The user creates the transfer and specifies the following information: source wallet for transfer; recipient wallet serial number; transfer amount
- The system validates the recipient’s wallet serial number
- The system calculates the commission and checks the limits
- The user checks the commission and confirms the transfer.
- Funds are transferred to the recipient’s wallet.
Here you can get information about funds transfers, templates, and contract payments.
Accounting plays a critical role in managing the flow of funds and ensuring financial accuracy and transparency. We have pre-implemented a dedicated dashboard for the accountant role which is available out of the box and provides some basic functionality:
- Transactions. It is possible to view and filter all transactions, providing oversight and maintaining records for future reference.
- Withdrawal. You can manage withdrawal requests and bank operations, either accepting or declining transactions based on the system’s requirements.
- Top-up via bank. Accountants can execute top-ups for users and view all top-up requests, ensuring that funds are properly added to user wallets.
- Cash desks. It allows you to view and manage cash desks, transactions, and withdrawal requests, as well as accept closing day requests to maintain accurate records and balance cash desk accounts.
- System operations. Accountants can initiate various system operations, such as cash input, cash collect, investments, and gate investments, to manage the flow of funds within the e-wallet system.
Our knowledge base provides you with detailed information about accounting capabilities.
The system offers users the opportunity to generate transaction-based reports, which can be downloaded for further analysis. All data is securely stored in the system’s database, which can be integrated seamlessly with any reporting or monitoring tool.
Users with all roles can view statement reports in the transactions section, but downloading reports is limited to the individual role for security reasons.
In conclusion, the system’s database offers unparalleled integration possibilities with any report engine or analytical tool, providing users with a seamless and customizable reporting experience.
How much does it cost to start a payment processing company?
It is difficult to estimate the final cost of starting payment processing vendors because it depends on a number of factors.
Factors affecting the cost of starting a payment processing business
The key factors to consider when building payment processing software are listed below.
- Features you want to implement. You need to understand what features are necessary for payment solutions. The complexity of your company determines the costs.
- Development tools. It is also important to recognize what programs do you need to build, test and debug software. To get more info about payments stack and development tools, check our post on the Best payment tech stack for the financial industry.
- Development team. The cost depends on the team you work with, for example, if you need to hire a development team the cost will increase.
- Location. Depending on which area you are starting a payment processing business, the project cost can vary.
Using a pre-developed SDK.finance payment acceptance software you can save time and money resources, without starting from scratch. You can start with an affordable subscription-based option or use an on-premise one that comes with the source code license, available for a one-time flat fee.
For the sake of compliance with regulations and security, the central database is hosted on your own server, while the app is deployed using cloud providers like AWS or Azure.
If you want to build a payment processing system, you can choose a ready-made solution, saving your money, and speeding up the market entry process. Nevertheless, even a pre-developed platform is far from being a turnkey solution and requires efforts to adjust it to your particular business needs. In other words, it provides you with a software foundation for starting a payment processing business.
SDK.finance is a shortcut for building a payment processing solution via its software, so reach out to us and let’s talk.
What is a payment service provider?
A payment service provider (or PSP) is a third-party company that helps your business with getting digital payments like online banking, credit cards, debit cards, and e-wallets. PSP is responsible for the transaction verification process from the customer to the merchants. It also can provide PCI DSS compliance, fraud detection, and support for different currencies.
What is the difference between a payment gateway vs payment processor?
A payment gateway is a system that gathers and confirms a customer’s credit card information in advance of addressing it to the payment processor. A payment processor is a service that directs the credit card information of the client to the POS system and bank.
How do payment processors make money?
Payment processors make money by receiving a commission. The fee is calculated as a percentage of the transaction between the customer and the merchant and relies on the last one. It also could be a fixed price per transaction.
How do payment processors work?
Sellers send a request to the payment processor, which transmits the transaction information to the card associations. They communicate with the issuing bank that charges the cardholder's account for the amount of the transactions.
How much does it cost to start a payment processing company?
It is difficult to estimate the final cost of starting a payment processing company because the price depends on many factors such as the useful features that you want to implement into the service, the platform you use, the development tools, how much customization you require, whether you have an in-house team, your niche, and global reach.
How to start a payment processing company?
You can start a payment processing company by building the software from scratch or use a white-label solution by SDK.finance. Each of these ways has its advantages, for example, creating your own software provides independence and flexibility in the platform management system, however, using a ready-made solution reduces resources and speeds up market entry.