Are you thinking about starting a payment processing company but aren’t sure how to go about it? We hope that this article will serve as a helpful starting point for you as you learn more about the payment processing industry and the many business models available.
Starting a payment processing company could be approached from different angles. One approach would be building the payment software from scratch. The other would be to opt for a white label solution where you would piggyback off the services of another provider. Either way, you must undertake thorough research and planning before you officially open for business.
Article Contents
Why Would You Want to Start a Payment Processing Company?
Not many business have benefited from the COVID-19 pandemic. However, payment processing companies are one of the rare the acceptions. While already on the rise due to many countries’ gradual shift to a paperless economy, online payments have been boosted by global banking limitations. Consumers were obliged to make purchases online rather than visit actual stores to keep them safe at home. As a result, the payment processing industry has become tremendously wealthy.
Building Payment Software from the Ground Up
Before you do anything else, conduct market research and develop a business plan. Determine your operations and services, what you’ll charge, and how you’ll draw in clients, just as you would with any other business. It’s time to act once you’re ready:
- According to the requirements of your jurisdiction, you should register your business and apply for any trademarks.
- Join forces with a bank to open a business account. You’ll need a comprehensive business plan for this step.
- Get a domain name as well as the necessary equipment. You can purchase, rent, or lease it, depending on your budget.
- Employ a development team to create payment software.
- Create and develop your payment system. It may appear to be a minor item on the to-do list, but it will consume most of your time and energy. Its quality is crucial to your success.
- As you progress with the development, you’ll require solid server infrastructure and security appliances.
- PCI DSS certification is required if you work in the payment industry and process card transactions.
- Associate and join forces with banks, payment gateways, payment providers, systems, processors, and other solutions. The more institutions you work with, the broader your service offering, and the more attractive your services will be to clients.
Overall, completing all the steps and launching the MVP will take more than two years. After that, you’ll likely need to engage with upkeep, support, and updates, as well as pass security and financial audits regularly. You’ll need to hire legal, marketing, sales, and support experts to promote your product and ensure its long-term viability.
Things to Do When Starting a Payment Processing Company from Scratch
Investigate Your Market and Industry
Conduct market research, including assessing the number of retail establishments in your area. Look into what your competitors have to offer and how much they charge.
Make a Business Strategy
Make a marketing strategy for your new business. Plan how you’ll run your company, and consider the services you want to offer. Also think about your product or service pricing. Determine the size of your sales staff and how they will be compensated. Make a list of how much money you’ll need to get things off the grounds and operate for a while. You’ll also need to consider how you’ll get it.
Build your Payment Gateway
Various ready-to-use payment methods esixt which can be seamlessly incorporated for use on your online store. However, none of them will give total control over the payment process. Furthermore, there will always be things you wish to tweak or add.
Join Forces with a Financial Institution
Your transactions must be underwritten, and a Visa/MasterCard bank must handle interbank routing.
Equipment Leasing Companies to Contact
A leasing company can help you generate revenue by financing credit card processing terminals, equipment, and ATMs for cash-strapped small-business owners.
Recruit a Sales Force
These individuals will be in charge of making phone calls to business owners and seeking their business. Most operate as independent contractors and are paid on commission or a salary plus commission basis. All business done by his sales team will be given to the management as an override.
Recruit a Marketing Group
Your sales force can create leads by contacting potential clients and developing relationships with them. Marketing staff is also necessary for promoting your company online and through digital, print, and even broadcast advertising.
Locate Wholesale Equipment Providers
Find a wholesale equipment supplier. You’ll need a distribution agreement with one or more transaction systems manufacturers to profit or compete successfully with other providers.
Consider the Case of American Express
This is a separate entity from Visa and MasterCard, and it charges retailers a higher transaction discount rate. It does, however, have a devoted and wealthy customer base that spends more over transactions than other cardholders. Link up with American Express.
Quick Tip
If you need a business loan to start, you’ll need to present a bank with a professional-looking business plan.
Suppose you opt to rent or acquire commercial office space. In that case, you’ll need extra money to get started, as well as property and liability insurance.
Working with a White Label Solution
Starting a payment business with a white label payment system is more than twelve times faster. The reason for this is that your payment software will be of a high level right out of the gate, saving you money, time, and resources for development.
In this case, market research is critical since you need to identify a dependable and trustworthy solution supplier with whom to collaborate.
The steps for registering a business and creating a bank account are also on your to-do list. However, once you selected a suitable white label partner to work with, you’ll need to integrate the solution with your stock and then bring your clients onboard.
Your solution supplier will take care of keeping the software up to date and stable, freeing up your resources for business development and acquiring new clients.
What Does It Take To Start a Payment Processing Company?
Estimating costs for a self-developed payment solution is complex. According to early estimates, it might cost anything from $250k to $1 million or more. It relies on various elements, like the features you want in your solution, equipment costs, salaries, regulatory framework, and so on. Registration, design and development, hosting, domain, security appliances, certifications, and licensing are all included in this diagram.
The solution provider sets the pricing in the white label model. You’ll know it ahead of time by looking at the vendor’s website or asking for a quote.
On the other hand, the affiliate model can be initiated with little to no funding.However, it does take a great deal of time and hard word to implement. All you have to do is identify a provider with a partner program and refer them clients to earn a commission. However, as the previous two alternatives do, it does not make you the proprietor of a payment firm.
Conclusion
Despite the industry’s appeal and profitability, payment businesses confront several obstacles, including:
- Keeping up with the industry’s rapid pace of innovation. It is critical to innovate and enhance functionality to remain competitive and provide robust and versatile services.
- Maintaining security is critical when dealing with payments.
- Fraud prevention and chargeback reduction.
- Regulations must be followed. It’s extremely difficult for cross-border companies.
The payment business model you select determines the amount to which these issues will affect you.
