Payment Gateway Cloud

In our previous article we described collaborative payment processing, based on payment gateway cloud concept. Although payment gateway cloud concept is a new one, it incorporates the results of a long evolution of payment technologies. This evolution was spurred and directed by the needs of merchants and other payment processing industry users. In order to understand it better, we are going to analyze it in comparison to a similar evolution process, which took place in web hosting industry.

Shared hosting – Payment gateway

Small online businesses and bloggers often face the need to create and maintain their own web-sites. To save money, they use a classical shared hosting, where they create their web-sites, alongside thousands of other hosting users. A similar need in payment services industry is faced by startup merchants and (again) small-size businesses. An equivalent to shared hosting in payment systems world is integration with a payment gateway. Startup merchants use the services of such companies as Authorize.Net, Stripe etc.

Virtual private server – Hosted or white-label payment gateway

With time users of a shared hosting face its limitations resulting from throughput constraints, viruses, problems with server, caused by other people, unavailability of support personnel, etc. For some businesses these problems are tolerable, while others choose to go to the next evolutionary phase, which is the virtual private server (VPS), giving them greater control over their environment and less of impact from the actions of others. An equivalent from the payment processing world is a hosted payment gateway solution, where a payment gateway instance is allocated for a specific merchant or a group of merchants.

Often VPS-based solution is also better for web-design companies with many sites and clients because it provides them with greater control over the process. In the merchant services world web-design agencies have their analogues: payment service providers and payment facilitators. PSPs and PayFacs often search for dedicated hosted payment gateway instances, commonly known as white-label payment gateways.

Dedicated server / Licensed payment gateway

While virtual private servers do guarantee significant efficiency improvement, they have their own flaws, because physical hardware is shared among several virtual machines or appliances. As a result, new limitations become evident, particularly, in cases, when high availability and fault tolerance are required. In such cases, large business users switch from VPS to dedicated servers. In payment processing world the equivalent of a dedicated server is an on-premise license of a payment gateway and deployment of the gateway in the company’s own PCI-compliant environment.

Dedicated servers solve most of the problems of web-design agencies, large online businesses etc., but support of such systems is a very complex task. Similarly, in the payment processing world, to support a licensed payment gateway solution, one has to face new issues related to server hardware, PCI compliance, etc.

We should mention a particular problem, specific to payment technologies, that doesn’t exist in the web-site hosting world. We are talking about implementation of payment integrations (with banks, processors, gateways). From technical viewpoint, integration between a gateway and a bank should not take more than a month. However, in practice, as a result of human factor, lack of organization, bureaucracy related to certification agent assignment, and instability of test servers, the process may take 8 to 12 months. If you are not familiar with integration process, you can read about it here.

Payment gateway cloud

Until recently there was no solution, allowing businesses with on-premise gateway deployments (particularly PSPs and PayFacs) to reduce the costs associated with new integrations. However, a new technology (implemented by such companies as United Thinkers) does allow your business to solve this problem.

The idea of payment gateway cloud technology is that an existing payment ecosystem can implement protocols (for transaction processing, chargeback disputing, and merchant provisioning), that are supported by the cloud within itself. If these functions are implemented, the payment ecosystem becomes capable of communicating with any other ecosystem, also connected to the cloud, where these protocols are implemented as well. As a result, any node of the payment gateway cloud can use the local integrations, implemented by any other node of the cloud.

Conclusion

If you face regular problems with integrations and the need for more back ends, but do not have the time and funds to invest in respective development efforts, you can consider exploring a UniPay-backed payment gateway cloud technology.

Credit Card Processing for Startups

Online commerce, electronic payments, and credit card processing have become fundamental aspects of today’s economy. As a result, almost all startup companies need to decide, how they are going to process payments for themselves or on behalf of their clients.

People often tend to ask questions like: “What are the best payment processors?” (sometimes “What are the best online payment processors?”), “What is the best payment processor for accepting micropayments?”, “What is the best processor for honest pricing?”, “With regards to fees, what is the best payment processing service for a SaaS company with a low monthly price ($5 per user per month)?”, “What is the best Payment gateway for Java which can only validate cards without posting any charge on the card?”, “What’s the best payment gateway for an online factoring invoices marketplace?” etc. In fact, there are no universal answers to these questions, as the situation is a bit more complex and context-dependant. In our article we are going to explain why, and provide some guidelines, which startup businesses can follow to find optimal solutions for themselves.

As we wrote in “Payment Gateways” series, when you are choosing a potential solution to implement, before you look at credit card processing costs, associated with a particular gateway, you need to understand, whether it supports all the functionality you need.

Let us list the fundamental questions, which are relevant for you as a startup company.

Fundamental questions regarding credit card processing

  • Do you need to process payments for yourself only, or do you need to process payments on behalf of your clients (i.e. do you need to function as a payment facilitator)?
  • Do you need only card-not-present (CNP) solution for online recurring payments, or is card-present solution (EMV) also necessary?
  • Do you need to support multiple currencies or not?

In many cases before thinking about your pricing options, you need to verify, whether the listed functions are supported, and whether the gateway supports your MCC code. Beside that, if you are trying to get a merchant account abroad, you need to check, whether you can get it with the gateway you are planning to partner with.

For example, if you are an Indian merchant, trying to get a merchant account in the US, you need to check, that you have all the necessary documents to be underwritten in the US. In the very least you must have a tax ID in the US.

Then (as we’ve mentioned), you need to verify the MCC code and check, if the logic you need is available within the gateway.

As a result of this analysis, it may turn out, that your choice of payment gateways/processors can be reduced to one or two payment platforms.

Reality check

Before addressing a particular payment gateway or processor, you can also perform a “reality check”. Keep in mind that a processor’s revenue amounts approximately to 1% of your processing volume. So, if your processing volume is $ 5000, the processor gets $50. For such a modest reward processors will not offer you complex or customized solutions.

True, Stripe and PayPal may seem to be costly solutions for your business. However, if your processing volume is not very high yet, they may be the only solutions available in your case, because they have a well-developed infrastructure, allowing them to work with the so-called micro-merchants. Larger processing companies may not have such an infrastructure.

Card-present solution

If you need a card-present solution, it is important to analyze the technology you are planning to implement, the upcoming integration, and the cost of devices you are going to use. You should also verify, whether you have all the necessary EMV certifications.

PayFac model

If you need to function as a payment facilitator and issue merchant accounts, then you should pay attention to merchant onboarding and underwriting rules, adopted by your potential processing partner. You should also check, whether your potential partner has some API in place, which allows to simplify onboarding of new merchants.

Availability of starting capital

Being a startup, you may have the funds, allowing you to rent a payment platform for your business needs. If you have both money and time, you can even develop a processing platform using your in-house development team. Finally, you can license an existing white-label payment gateway solution, as we explained in our previous articles.

In these latter cases you can expect lower processing costs, but you will have to pay for support of the necessary infrastructure.

Conclusion

If you have neither the starting capital, nor processing volume, you should not try to find the “cheapest” credit card processing solution, because you are getting what you pay for. If the profit the processor gets from your transactions is low, you are going to be treated accordingly.

In these cases it might be more secure to pay slightly higher processing fees, but partner with a company, which offers robust technologies and has no funding delays. If you save 25 cents on a transaction, but then find that your account is suddenly frozen or closed, it is not a preferable option.

What is payment gateway software?

What is payment gateway software?

Payment gateway software is a server application facilitating exchange of payment related data (cardholder and transaction information) between a merchant and a payment processor or an acquiring bank. For example, payment gateway software can provide connectivity between merchants’ POS systems and a legacy processing platform used by some bank; often it also handles PCI-compliance-related issues, such as credit card tokenization, reducing merchants’ PCI scope exposure.

What is a licensed payment gateway solution?

In case of licensed payment gateway solution a company (a merchant or a payment service provider) licenses, either in a binary form, or in the form of software code, a payment gateway software from another company and deploys it within its own PCI-compliant infrastructure.
It allows the licensee to have greater control of payment gateway infrastructure. Licensed payment gateway cost is more significant upfront, but subsequent use of the payment gateway solution doesn’t impose any per-transaction processing fees.

What is a hosted payment gateway solution?

In case of hosted payment gateway solution a merchant (payment service provider) uses (“white-labels”) an existing solution that resides within a PCI-compliant environment of the hosted payment gateway provider. This payment gateway solution does not require merchants to incur any gateway maintenance costs or to have their own PCI-compliant environments, but merchants do have to pay per-transaction processing fees. In case of hosted solution the merchant might be required to go through payment gateway integration before transaction processing is possible. More information on hosted and licensed payment gateway solutions can be found here.

What is a white label payment gateway?

White label payment gateway is a hosted payment gateway solution, which is sold by a company under its own brand, while the actual service provided by one of its vendors on sub-contractual basis. The white label payment gateway concept allows the company to bolster its image in the eyes of its customers by providing a new critical service under its own brand. More information on the subject can be found here.

Payment Gateway Branding

It is more and more common for present-day businesses to use white label payment gateway software. The purpose of this article is to familiarize merchants and PSPs with the concept of payment gateway branding and the role it plays in merchant services industry. It also covers some payment gateway branding solutions commonly implemented by industry players in order to achieve greater flexibility and gain competitive advantage.

Payment gateway branding concept

The concept of payment gateway branding comes into play when a company utilizes the technology of one of its vendors to deliver services to its customers under its own name. The key idea behind payment gateway branding is to make availability of services on sub-contractual basis more transparent and simple, and, thus, allow relatively small businesses to strengthen their image and reputation in the eyes of their customers.

Payment gateway branding levels

Within the payment services industry branding is possible on several levels. Each branding level represents a relationship between three actors:

  • vendor – usually, represented by a merchant service provider (MSP). MSP, in turn, can be either a gateway, PSP, bank or an actual processor
  • business – represented by a merchant, a reseller or a PSP
  • consumer (customer, service user) – represented by a cardholder, a merchant or a reseller

Generally, the components to which branding is applicable, can be divided into two groups:

  • components related to processing and operations (such as gateway URL, e-mail notifications about successful payments, logo on merchant statements etc)
  • support-related components (such as integration specifications, knowledge base, tutorials and support e-mails)

Let us take a look at specific items to which branding can be applied at each of the levels.

Level I: MSP (gateway)-merchant-cardholder

Vendor: MSP or gateway
Business: merchant
Customer: cardholder

Items (or components) to be branded on this level include:

  • Payment pages (or payment portals)
  • Virtual terminal
  • URL, company name and logo for self-service portal
  • various e-mail notifications (account setup, payment notification, chargeback summary)

Example

An example of level-one branding would be a cardholder who opens a payment page, using merchant-specific URL, and sees the merchant’s name and logo on the page, as opposed to generic logo and name of the underlying gateway that provides this page.

Level II: Payment gateway (MSP)-reseller-merchant

Vendor: MSP or payment gateway
Business: reseller
Customer: merchant

There are two common models on which relations between merchants and resellers can be based.

  • A reseller functions as an agent of the larger underlying entity (processor or other) and requires no branding, for the most part.
  • A reseller functions as an ISO or PSP, and in some cases full branding is preferable.

In addition to items that can be branded on Level I, the components at this level include:

  • merchant statements
  • integration specifications
  • tech-support e-mails

Examples

An example of level-two branding would be a merchant statement received by a merchant from a reseller (even if actually generated by the gateway), bearing contact information and logo of the reseller, as opposed to contacts and logo of the underlying PSP or gateway.
A reseller would like to have a support e-mail (for instance, support@reseller.com) for its customers, but does not have technical staff to answer the e-mails. In such cases a gateway owner can supply a branded e-mail, maintained on the domain of the reseller, and have its own technical personnel responding to the e-mails on behalf of the reseller.

Level III: MSP/gateway/processor-PSP-reseller

Vendor: MSP or payment gateway/ processor
Business: PSP
Customer: reseller

In addition to items which can be branded on Levels I and II, the components on this level include:

  • reseller statements
  • management tools (CRM)

Example

An example of level-three branding would be a reseller statement received by a reseller from a PSP (even if actually generated by the gateway), bearing contact information and logo of the PSP, as opposed to contacts and logo of the underlying gateway or processor.

For most payment systems it is still problematic to support level-three branding. There are two approaches that can be used to attain this branding level:

  • Deployment of a separate server instance for every PSP – a separate server with a separate database is set up for each PSP. Merchants (or resellers) of a given PSP are stored in that database. The disadvantage of this approach is that multiple independent instances of an application have to be maintained, and it is extremely difficult to provide single sign-on for the technical personnel of the PSP, that manages the servers
  • Support of a three-level hierarchy architecture within payment gateway software – all PSPs together with their merchants and resellers are stored in one and the same database. A single server cluster is used as opposed to independent servers. This approach allows to have the same code deployed across all PSPs and makes access to data considerably easier for support people, that have to perform cross-PSP support functions and access information of different PSPs at the same time

Conclusion

The payment gateway branding concept is rapidly gaining importance in today’s business environment. Regardless of whether you are a merchant, a reseller or a PSP, when you make your next decision about the payment technology to use, you should take into consideration the branding capabilities of the payment gateway you cooperate with.

It is particularly important for large payment service providers with complex payment systems to use payment gateway software capable of supporting all three levels of branding, without the necessity of maintaining separate service instances.