The purpose of this article is to familiarize various merchant services industry players with the benefits of an open source payment gateway.
During the last several years more and more open source software products emerged.
One of the reasons of rapidly growing popularity of open source software products is their collective development, where each company using the software benefits from any development that any other party introduces. Consequently, the concept of open source software development became particularly prevalent among the companies that developed programming tools and libraries; however, it was also adopted by business software providers, such as shopping cart and POS software vendors etc.
Payment gateways, on the other hand, traditionally, were commercial closed-source products. Source code represented strategic value for payment gateway operators. Payment gateway software was, originally, developed by the company, which operated the payment gateway. Payment gateway operators did not sell the software code to other parties and left all the implementation know-how to themselves as a trade secret. Now, however, we are witnessing the emergence of companies, which offer payment gateways as licensable platforms (technological commodities); they do not host them themselves, but rather license them for others to host and use. As a result, the open source concept became especially popular in such cases, because usage of open source in technical products of such kind is a convenient and practical option.
Who might need open source payment gateways?
Many people think that payment gateway software is needed only by companies that accept credit card payments. In reality, companies that facilitate payment processing or process transactions on behalf of others would also greatly benefit from open source payment gateways.
Here are the three types of companies that might benefit the most from payment ecosystems, built on top of open source technologies:
- Payment facilitators (or payment service providers), i.e. entities, that process large transaction volumes, but do that through some third-party processor (acquirer))
- Mainframe platform users, i.e. legacy system users
- Software and service companies, integrated with multiple payment systems and gateways (such as Authorize.net, PayPal, Stripe, Square, etc.) (check the article on various types of payment processing solutions here)
Let us now look at each of these three groups of companies in greater detail.
Open source payment gateways for PSPs
Payment service providers, traditionally, relied on several payment gateways, because the combination of these gateways could offer a broad scope of functionality, and wider access to acquirers. As a consequence of that, they had to define their operational procedures around multiple unrelated payment systems.
Open source payment gateway architecture could function as a universal, unifying and flexible solution in such cases. On one hand, the open source payment platform could be used as an intermediary system that all additional gateways would be integrated with. In this case, it would function as a single point of record and, potentially, single point of integration for customers of a PSP. On the other hand, such an open source platform with the ability to implement direct connections into acquirers could serve as a replacement for other legacy gateways the PSP uses.
Example
Open source payment gateways for legacy system users
Legacy systems are mainframe-based software packages. Initially they were written 30 to 40 years ago using languages such as Fortran, Cobol or RPG. They are still widely used in financial and banking sectors and many of the billing companies rely on those.
A legacy system was usually developed to satisfy the needs of a particular company, which used it. Today, such a company might need to replace the outdated (but still working) system with a new one, because it becomes too complicated to maintain the existing legacy system. However, it is really problematic to find an alternative system, so perfectly fitting into the business model of the company. And it is equally difficult for the company to develop a replacement system using its internal team from scratch.
In this situation, an open source payment gateway is a viable solution, because, it already has all of the foundational logic implemented (so no significant upfront development is required). At the same time, its open nature allows the company, that uses it, to introduce any changes that it needs to make it fit better into its business model.
Example
Open source payment gateways for software companies
There are many software companies today, that have implemented support for various payment gateways within their products. Examples of such products include event reservation systems, shopping carts, POS systems, restaurant software etc. These companies, traditionally, wanted to distance themselves from payment processing and concentrate exclusively on domain-specific functionality. At the same time, they wanted to support the widest number of payment gateways and processors available.
As the number of supported gateways increased, it became more and more difficult to maintain all the connections by the internal development team. Relying on third parties for development of the necessary plug-ins is not always the best option. Since such integrations are, generally, tightly coupled with the main application code, changes to the application can cause malfunctioning of pre-written integrations, especially, those delivered by third parties.
Consequently, such companies could benefit from an open source payment platform by delegating all of the payment processing logic and management of the payment connections to the external payment system, and by maintaining a single unified integration with that system from the core product.
This way any changes in the core product will, probably, have minimal effect upon the existing integrations, and all new integrations can be developed in a unified fashion, taking advantage of the open source nature of the payment platform.
Example
Conclusions
If your company in the course of running its business has to deal with multiple payment gateways or payment processors with a need for a unified entry point, you would, likely, benefit from an open source payment gateway technology, and we encourage you to research that topic more.
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