How to Integrate a Payment Gateway: A Brief Guide

Any business that sells online wants to provide a fast, secure, and easy-to-use service that meets both customer and business needs.

To achieve this high level of service, every business owner should take measures against fraud, offer various payment options, integrate with third-party platforms, improve the customer experience, and much more.

To manage financial transactions, e-commerce businesses should turn to banking software services to embed payment gateways.

The careful selection or development of a gateway plays a leading role in determining the flow of the purchasing process, including accepted currencies, transaction fees, supported payment methods, and more.

This article will help you choose the right payment gateway, understand different types, and effectively integrate one into a website, e-commerce platform, or app.

What Is a Payment Gateway?

A payment gateway is a vital part of any buying/selling process online. It allows customers to purchase goods and services much easier by enabling the transfer of money from the customer’s account to the seller’s account within a few seconds.

Apart from sending and receiving payment data, payment gateways ensure that transactions performed are secure. They encrypt transaction data and use security protocols to pass and receive the data.

Integrating with a payment gateway offers many advantages both for businesses and clients. Here are some simple benefits:

• Faster Transactions: Payment gateways process transactions quickly, saving time for both businesses and customers.
• More Payment Options: Businesses can offer diverse payment methods, which makes it more convenient for customers to pay.
• Fewer Mistakes: Integration reduces errors in payment processing, guaranteeing a smoother experience for everyone.
• Safer Transactions: Payment gateways use advanced security features to protect customer information, building trust.
• Global Reach: Businesses can accept payments from around the world, adjusting to different currencies and preferences.
• Easy Tracking and Reporting: Integration provides real-time tracking and generates useful reports for analysis.
• Regulatory Help: Payment gateways assist businesses in meeting industry standards and regulations.
• Efficient Refunds: Handling refunds and chargebacks is simpler thanks to payment gateways, which adds to customer satisfaction.

How Does Payment Gateway Work

A payment gateway covers a wide range of financial operations from money authorization, when the system verifies that the buyer can pay for the ordered item, to a refund in case of a canceled order.

Below is a detailed description of how it works:

1. The customer confirms the order and fills in the transaction data. Encrypted data reaches the merchant app’s server via a secure connection.
2. The app passes the transaction data to the payment gateway. The gateway reads the data and verifies it with the issuing bank, e.g., that the transaction performed won’t exceed the buyer’s bank account balance or credit limit.
3. After that, the encrypted card information is sent to the card’s network for data verification, e.g., Visa, Mastercard, or American Express.
4. As the card network approves the transaction, the data goes to the issuing bank that connects to the acquiring bank to move money. This way, the money from a buyer, aka an issuing bank, goes to a seller, aka an acquiring bank.
5. When the transfer is complete, the issuing bank sends back the confirmation within the same chain of participants.

The scheme below might seem complicated; however, the whole process takes just a few seconds.

The Types of Payment Gateways

There are several types of payment gateways to choose from depending on the size and needs of your business.

Let’s highlight their pros and cons as well as consider their integration difficulty so that you can easily choose the one for your company.

Hosted Payment Gateway

The hosted gateway redirects your customers from the app to its platform to make the purchase and takes them back when the transaction is complete. Among the most famous of them are PayPal, Amazon Pay, SagePay, etc.

One of the key advantages of such a solution is a simple integration process: for the apps using popular e-commerce platforms (like Magento or Shopify), it might be enough just to install an extension.

In case you have a custom web or mobile application, you might want to hire software developers for help, but most service providers have detailed guidelines explaining how to integrate their payment gateway.

Integrated Payment Gateway

With an integrated gateway, the customers stay in your app, and the transaction gets completed without redirection elsewhere. This type of solution is provided by Authorize.net, MangoPay, SagePay Direct, etc.

The advantages of an integrated over a hosted gateway are:

• A smoother user experience – your customers don’t need to switch from platform to platform and enter their data several times
• Enhanced integration with other company’s software, e.g., transactions can be automatically sent to accounting software
• Better branding and customization to the needs of a certain company, e.g., automatically adding tax

Along with these pros come several cons: you have to take care of fraud protection and users’ data security (PCI DSS compliance), as well as spend more effort on the solution integration process.

Custom Developed Payment Gateway

This type of payment gateway improves the features of the previous one, providing the best possible level of control over the transactions while requiring deep technical expertise.

Using your own custom gateway, you do not need to rely on third-party services and share any data with them. Moreover, it allows adding any modifications and changes you might need.

This type also comes with drawbacks, including cost (for custom financial software development), time (due to the development, testing, and integration processes taking a while), and challenges related to security (meeting PCI requirements and managing documentation issues).

Reasons to Choose Custom Payment Gateway Development

Although the development of a custom payment gateway involves much time, development effort, and money, a wide range of companies still prefer building their own payment gateways.

Some of the motives for that include:

• Adjustment to Your Business: Custom development allows the payment gateway to be designed specifically for your business requirements, circumstances, and conditions.
• Scalability: Custom solutions can be scaled parallelly as your business grows, adapting to rising transaction volumes and expanding functionalities.
• Improved Security Measures: Adapting security features to your business model provides a higher level of protection against fraud and cyber threats.
• Brand Consistency: A custom payment gateway can be designed to fit your brand and maintain a consistent and professional image for your customers.
• Integration Flexibility: Custom solutions offer greater flexibility in integrating with other business systems and third-party applications.
• Adaptability to Industry Regulations: Custom development can incorporate specific compliance features to establish adherence to industry regulations and norms.
• Competitive Advantage: Having a unique and customized payment gateway can provide a competitive edge and distinguish your business from others.
• Cost-Effectiveness in the Long Run: While initial development costs may be higher, a custom payment gateway can lead to long-term cost savings by avoiding fees associated with third-party solutions and unnecessary features.

How to Integrate Custom Payment Gateway Development: Common Steps

Adding a custom payment gateway to your website or app involves careful planning. Here are the basic steps for developing and integrating it:

1. Understand Your Needs: Before starting, analyze your business requirements, including the types of payments, currencies, and features you need from the payment gateway.
2. Follow Regulations: Ensure compliance with standards like PCI DSS for secure payment transactions and customer data protection.
3. Choose Technology: Pick a technology stack that suits your preferences and business needs, considering factors like programming language and database.
4. Design User Interface: Create an attractive interface for payments, designing transparent and straightforward checkout pages and forms.
5. Test: Test the integration for various situations, including successful and failed transactions. Use both unit testing and end-to-end testing.
6. Ensure Security: Enforce strong security measures, including secure communication protocols (like HTTPS) and hashing sensitive information.
7. Handle Errors: Develop an error-handling mechanism to manage errors during payments. Provide clear error messages to users.
8. Create Documentation: Prepare detailed documentation for developers and users, covering integration processes, API details, and other relevant information.
9. Compliance Inspections: Fulfill compliance testing to confirm your payment gateway goes in line with the industry standards. Work with auditors to affirm security and compliance.
10. Monitor and Maintain: Add monitoring tools to track performance. Configure warnings for unusual activities and regularly update the system for security and compatibility.

Bottom Line

Adding a payment gateway is important for online businesses aiming to perfect their services since a well-chosen or custom-built gateway ensures quick, secure, and user-friendly transactions, meeting the needs of both businesses and customers.

To successfully integrate a custom payment gateway, businesses need to pay attention to different factors like regulatory compliance, appropriate technology, user-friendly design, security measures, and others.

And even though it may seem complicated and confusing, a well-integrated payment gateway can become your guarantee for a smooth and trustworthy online transaction experience.

If you aim to create a reliable and solid custom payment gateway solution, the SCAND development team is ready to assist you. With over 20 years of experience in custom software development, SCAND offers a team of professionals skilled at simple payment gateway creation and integration.