Payment Gateways: Integration Process

Gateways 101

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on Mar11

The purpose of this article is to discuss ease of integration with a credit card processor’s payment gateway software as a criterion to be considered during payment gateway selection.

If this is the first time you are reading our “Selecting a Payment Gateway” mini-series, please, start with the Introduction to improve your understanding of this post.

While some processors/payment gateways offer good rates to merchants, the cost of integrating with them might offset the savings on going with the “lower-rate” processor/payment gateway. This is especially relevant in cases when there is an already-established merchant relationship and a new player comes in with an alternative option.

The two aspects of integration

When it comes to integration, the things to be considered are the connectivity method and the format of the integration specification.

Communication Protocol

What matters is not only how the message itself is formatted, but also how it is communicated. Some of the processors may still use older (pre-HTTPS) technology and might require low-level socket communication. Virtual private network (VPN) connectivity might be needed, and it takes both time and money to put in place. At the same time, the cost of putting the VPN in place, as well as the time frame that it takes, might not be in line with what a business can afford.

Message Format

In terms of message format, many newer payment gateways support XML/JSON-based formats (web-services/direct post) for real-time processing and simple delimited file formats for batch processing (real-time vs batch processing will be covered in one of the next posts). These modern formats are a lot easier to deal with than the ones used on legacy platforms.
On the older legacy platforms businesses may be required to deal with ISO-8583 or other older formats, which are a lot more difficult to understand and implement. For instance, an integration with a payment gateway using XML message format can take as little as 3-4 days (or more, depending on the features to be implemented), while an integration with a payment gateway using ISO-8583 format will take at least 2-3 weeks.
Beside that, the skills of a developer (and consequently the integration cost) will be higher for the projects that deal with legacy platforms and older standard based technology.

Merchant perspective

It is important for merchants to analyze the scope of integration works, their cost and time frame before making any decisions affecting their existing processing mechanisms and infrastructure.

Example

A health club is already processing cards with payment gateway “SuperPayments”. Then it gets an offer from another payment gateway “SaveOnPayments” allowing it to save $5,000 annually on processing if the club switches to its services. But the cost of conversion (integration with “SaveOnPayments” gateway) might end up being $10,000. While the club would start saving money in the year 3, the first two years would go at loss. Consequently, the club’s management has to think carefully about whether it makes sense to do this.

Conclusion

With all of the above taken into account, the recommendation for merchants is as follows: choose the processor/payment gateway that uses modern communication technology communication and easier-to-deal-with message formats, i.e. go with someone who is new and not archaic.

Reseller perspective

In general, problems faced by a reseller are very similar to concerns of a merchant. However, a single merchant’s inconvenience in day-to-day operations, arising from legacy platform usage, might be multiplied 200 times in the case of a reseller dealing with 200 merchants. That is why in some situations it is more reasonable for resellers to invest money in modernization, in order to reduce future operations’ support cost.

Example

A fitness software company is successfully dealing with a processor\payment gateway using a legacy platform operating ISO-8583 format. Once the term of the contract with this processor comes to an end, the software company decides to consider alternative options and, possibly, go with another payment gateway, which uses modern technology. Initial estimates show that integration process will take about two weeks and cost $8,000, but after the integration is done, fewer development resources will be required, so that in a month or two savings on maintenance will compensate the integration expenses.
Beside that, usage of a modern technology makes it easier to research various types of customer inquiries that might occur during day-to-day operations.

Conclusion

Just like merchants, resellers are recommended to select processors\payment gateways, which use modern communication protocols and provide simple integration APIs. At the same time, while it is important to consider integration costs, resellers need to take into account the cost of operations’ support as well.

Our next installment will cover settlement (capture) mechanisms.

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