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 to modern, new-generation cores and updating their payments infrastructures, largely in response to the continued rise of instant payments, open-banking requirements, and cloud technology.
The key definitions to know before starting a payment processing company
There are different payment processing services that finance companies can offer to the 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.
Within this spectrum, there are two additional 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 the company’s payment processing activities.
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 from the customer to the merchants.
What is a payment facilitator?
A Payment Facilitator is a service provider for retailers. If you need to accept 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).
The difference between a payment gateway vs payment processor
It is possible to overlook the difference between a payment gateway and a payment processor, because they both perform the same function, transferring money from the client’s card to the merchant’s account. That’s why it is important to figure out what a payment gateway and a payment processor mean and how they differ.
A payment gateway is a technical system that your website interacts with to run a transaction. It is a place for customers to enter credit card information on a merchant’s website while a payment processor transmits card data from a merchant’s POS (point-of-sale) to card networks and banks involved in the transaction.
The payment processor is a system that manages the payment process that transmits data from the customer’s credit card to the financial institutions that are involved in the transaction.
The main differences between payment gateway and payment processor
| Payment Gateway | Payment Processor |
| Gathers and encrypts credit card information | Connects the issuing bank, the retailer and bank to transfer money |
| Mediator between client and business | Mediator between business, customer’s bank and merchant’s bank |
| Works as an online POS terminal to make sure the card is valid | Works as a an in-person POS terminal to make sure the card is valid |
| Used in сonnection with a payment processor | Used as a stand-alone service |
Consequently, a payment gateway is a system that gathers and confirms a customer’s credit card information before addressing it to the payment processor. A payment processor is a service that directs the credit card information of the client to POS systems and banks.
How Does a Payment Processor Work?
At the 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.
- 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 a provider.
- Approving (or delaying) the merchant by credit card.
This is how payment processing works indeed, consisting of many steps to be done. Therefore, it is an essential part to provide an uninterrupted stable process to prevent any problems with the transaction.
How to Start a Payment Processing Company?
There are two ways to start a payment processing company: develop payment software from scratch or use a white-label solution. The first one requires a huge amount of time and resources, while the second one means buying a ready-made
software from a vendor, implementing your label and brand design into it and customizing to fit your requirements. Let’s consider each of these ways.
Building the payment processing software from scratch step by step
- Business and trademark registration.
- Establishing a partnership with banks, and payment providers to be competitive in the market
- Acquiring a domain name and the equipment needed for software building.
- Hiring a development team.
- Developing your payment processing software. It is the main part that requires most of your resources and takes a couple of (1-2) years to complete. Also, you need server infrastructure and security appliances to continue development.
- Getting PCI DSS(Payment Card Industry Data Security Standard) certification. You need to have industry compliance as a payment business.
Completing all these stages provides the following benefits: full control of the payment process and security that protects your business from the risks.
Applying a White-Label Solution
Using a white-label solution is a faster approach than building your software from scratch and gives such advantages as effective use of time and money. Instead of all steps needed for developing your own payment software you have to register your business, open a bank account, and choose a reliable provider to work with. SDK.finance can help you with starting a payment processing company. We provide you with a platform that saves your time and money, building a payment processing system.
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 following factors affect it: location, the team, features that are needed, platform and tools which you are going to use for development.
Factors Affecting The Cost of Starting a Payment Processing Company
There are 5 main factors to consider that affect the cost of building a payment processing company. The final price depends on:
- Features you want to implement. You need to understand what features are necessary for your service .The complexity of your company determines the cost.
- Platform you use. The platform you have to use is determined by your customers. It could be Microsoft or macOS or multiple platforms to capture a larger target audience.
- Development tools. It is also important to recognize what programs do you need to build, test and debug software.
- 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 developing a payment processing company, the cost of the project can vary.
SDK.finance payment acceptance software and its features
You can start your business by providing a complete stack of online and offline payment acceptance services for merchants using the payment platform by 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.
What are the main features of payment processing?
Payment processing platform is a reliable service that must have following features: easy integration, security and convenient transaction processing, detailed reporting, customer and merchant onboarding, payment initiation and acceptance.
What does the payment platform have to offer?
SDK.finance payment platform offers such features:
| Feature | SDK.finance fintech platform |
| Customer onboarding: | Online account creation, documents 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 |
| 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 |
If you need any details, you can contact SDK.finance to get necessary information.
Wrapping up
The demand for the solution to make the transaction process more convenient and faster, there is a need in starting a payment processing company.
Therefore, 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. It also can support multi-currency payment methods and implement useful features for your business needs. The platform provides you with a basis for starting a payment processing company.
SDK.finance is a shortcut for building a payment processing solution via its software, so reach out to us and let’s talk.
