Thinking about building your own payment gateway? You’re in good company—and the opportunity is real.
Developing a custom payment gateways is a sure way to capture 100% of transaction revenue, build exactly what your business needs, and own the entire customer experience. It’s also how you enter new markets and serve underbanked industries—without depending on third-party processors that don’t fit your model.
Still, building a payment gateway isn’t a weekend project. It takes deep expertise, serious infrastructure, and the right development partner.
In this guide, we’ll walk through how to get it right.
Benefits of Custom Payment Gateways
According to recent industry data, global payment gateway market is expected to reach $132 billion by 2030, growing at 22.2% annually. Why is there such demand despite all the existing solutions?
There are several compelling reasons to move from using existing processors to payment gateway development:
- You process high volumes and want to keep transaction fees in-house instead of paying 2.9% + $0.30 per transaction.
- Your industry has unique requirements that Stripe, Square, or PayPal can’t address.
- You’re building a platform or marketplace that needs custom payment flows, split payments, or escrow.
- You want to own the customer relationship and data—not rent it from a third party.
- You need to serve regions or payment methods that mainstream gateways don’t support well.
Here are some examples of companies that took this path:
Shopify built their own payment processing system (Shopify Payments) to give merchants a seamless checkout experience and keep more revenue in their ecosystem. Today it processes over $200 billion annually.
Uber developed custom payment infrastructure to handle split payments, international currencies, and real-time settlements across millions of daily transactions in 70+ countries.
Airbnb created their own payment platform to manage complex host payouts, guest refunds, currency conversion, and escrow functionality that standard gateways couldn’t support.
Sometimes the best payment gateway is the one you build yourself.
What to Plan Before You Start Payment Gateway Development
Jumping in without proper preparation leads to security breaches or systems that can’t scale past 100 transactions per second. Here’s your checklist for what to focus on before development begins:
☐ Define your business model and revenue strategy.
Are you charging per transaction? Subscription fees? Interchange-plus pricing? Will you serve your own platform only, or become a payment processor for others? Map out your unit economics. Take a look at the cost estimates of creating such a platform and do the math.
☐ Understand the regulatory landscape for your target markets.
Payment processing is one of the most regulated industries globally. In the US, you’ll need money transmitter licenses in most states. In Europe, you need an EMI license or partnership with a licensed institution. PCI DSS Level 1 certification is mandatory if you handle card data directly. Factor in 6-12 months just for compliance and licensing—this isn’t negotiable.
☐ Choose your banking and card network partnerships early.
If you want to build your own acquiring/payment processing infrastructure, you’ll need to establish partnerships with acquiring banks and processors, and obtain certification from card networks like Visa and Mastercard. That process typically takes 3-6 months (or more) and requires significant capital or reserves (often in the hundreds of thousands to low-millions of dollars). Start conversations early to account for the bureaucracy.
☐ Decide between building everything or using infrastructure providers.
Okay, we’re discussing custom development here, but don’t forget about hybrid solutions. Full-stack payment gateway development means building transaction routing, fraud detection, settlement systems, reconciliation, and reporting from scratch. Alternatively, you can use infrastructure like Stripe Connect, Adyen’s platform, or Marqeta’s card issuing APIs and build your interface layer on top. The hybrid approach reduces development time and will obviously cost less.
☐ Select the right development partner.
Find a software development company with proven payment processing experience. Look at their portfolio, ask about their security practices and encryption standards, talk to their clients. Consider offshore providers if you aim for quality results and smaller costs—nowadays you can easily check a company’s reputation no matter where they’re based. Only trust proven reviews, for example at Clutch.
☐ Plan your MVP feature set carefully.
Don’t try to compete with Stripe on day one. Start with core payment acceptance for your specific use case. A minimum viable payment gateway includes: card processing (Visa/Mastercard), basic fraud rules, webhook notifications for transaction status, a merchant dashboard, and refund functionality. Add features like subscriptions, multiple currencies, and alternative payment methods in later phases.
☐ Budget realistically for the full scope.
Ask for cost estimates for the basics: backend infrastructure, API development, basic dashboard, and integration with a payment processor. And ongoing costs: monthly payments for infrastructure, compliance, support, and maintenance. Estimates from different companies will give you an idea whether you can afford additional functionality. Budget accordingly.
☐ Create your technical architecture documentation.
Document your expected transaction volumes, peak load requirements, geographic distribution, and integration patterns. Will you support hosted payment pages, direct API integration, or both? What potential disasters can happen, and what will be the recovery plan? How will you handle PCI scope reduction? Your team needs this context to architect a system that scales and passes audits. You don’t have to have all these answers ready, any professional team will go through these points with you before starting the project. But it won’t hurt if you give them a thought beforehand – the clearer picture you have, the better will the developers understand how to deliver the perfect final product.
How to Build a Payment Gateway
After you’ve chosen your development partner, here’s what you need to do to ensure successful payment gateway development:
Make Security and Compliance Non-Negotiable
Start by architecting for PCI DSS compliance from day one. PCI DSS (Payment Card Industry Data Security Standard) is the set of security requirements that anyone handling credit card data must follow—it’s not optional, and getting certified typically takes 3-6 months. Here’s what to consider:
1. Use tokenization to protect card data. Instead of storing actual card numbers in your database, tokenization replaces them with random reference tokens. When a customer saves their card, you send the real card number to a secure vault (either your payment processor’s or a dedicated tokenization service), and they return a token like “tok_1a2b3c4d5e”. You store the token—if hackers breach your database, they get useless random strings, not real card numbers. This approach dramatically reduces what you need to secure and audit.
2. Encrypt everything, everywhere. All payment data needs encryption—both when it travels across the internet (in transit) and when it sits in your database (at rest). Use industry-standard encryption like AES-256, which is the same encryption banks and governments use.
3. Manage your encryption keys properly. Work with your offshore team to set up proper key management. Your encryption keys (the “passwords” that lock and unlock your encrypted data) need special protection. Use Hardware Security Modules (HSMs)—dedicated physical devices designed to protect cryptographic keys—or cloud-based key management services from AWS, Google Cloud, or Azure. The critical rule: never store encryption keys in the same place as your encrypted data.
4. Implement certificate pinning for your API. When your payment gateway talks to other services, certificate pinning ensures you’re actually talking to the real service and not an imposter. It prevents man-in-the-middle attacks where hackers intercept communication.
5. Build comprehensive logging without storing sensitive data. You need detailed records of every transaction: who processed it, when, what happened, whether it succeeded or failed. These audit trails are essential for PCI audits and investigating fraud. But here’s the catch—you must log transaction events without storing actual card numbers, CVV codes, or full magnetic stripe data. Use tools like Splunk, the ELK stack (Elasticsearch, Logstash, Kibana), or cloud-native monitoring solutions that can mask sensitive fields automatically.
6. Test your security constantly. PCI DSS requires regular penetration testing and vulnerability assessments—these are simulated attacks where security experts try to break into your system to find weaknesses before real criminals do. Schedule these quarterly at minimum. Payment systems are prime targets for attackers, so treat security testing as ongoing maintenance, not a one-time checkbox. Work with your development team to prioritize and fix discovered vulnerabilities immediately. In payments, “we’ll fix it next sprint” isn’t acceptable.
Build Your Core Payment Processing System
Your transaction engine is the heart of everything. It needs to handle authorization requests, capture settlements, process refunds, and manage transaction state—all while maintaining ACID compliance in your database.
Here’s the basic flow your system needs to handle:
- Authorization: Receive payment details, validate format, check fraud rules, route to appropriate processor, return approval or decline in under 300ms.
- Capture: Mark authorized transactions for settlement, batch them appropriately, send to acquiring bank, handle partial captures and multi-capture scenarios.
- Settlement: Reconcile transactions with processor, handle currency conversion, calculate fees, trigger merchant payouts, manage reserve accounts.
- Refunds and disputes: Process full and partial refunds, handle chargeback notifications, provide merchant tools for dispute evidence, track chargeback ratios.
Use message queues (RabbitMQ, Apache Kafka) to handle async operations. Implement idempotency keys so duplicate requests don’t create duplicate charges. Build proper state machines for transaction lifecycle management.
Implement Multi-Layer Fraud Detection
Depending on the business type and risk exposure, fraud losses typically range from around 0.03% of transaction value in low-risk markets (according to the European Central Bank) to as high as 2–3% of revenue for some U.S. merchants in higher-risk e-commerce segments.
Start with basic rules: velocity checks (same card used 10+ times in an hour), geographic mismatches (billing address in US, IP from Russia), unusual amounts (first transaction for $10,000).
Add machine learning models that score transactions in real-time. Train on your transaction data to detect patterns. Use features like: device fingerprinting, IP reputation, email domain analysis, shipping vs. billing address comparison, time-of-day patterns, and user behavior history.
Integrate with third-party fraud services like Sift, Kount, or Signifyd for additional signals. Combine their scores with your own rules for multi-factor decisions.
Build Your Merchant Dashboard and Reporting
Merchants need visibility into their payments. Build a dashboard that shows real-time transaction data, success rates, decline reasons, settlement status, and payout schedules.
Include these essential features:
- Transaction search: Filter by amount, date, status, customer email, card type. Export to CSV for accounting.
- Real-time analytics: Transaction volume, success rates, average ticket size, geographic distribution. Show trends over time.
- Settlement reporting: Show pending settlements, completed payouts, fees charged, reserves held. Reconciliation data for their accounting systems.
- Refund management: Search transactions, process full or partial refunds, track refund status, handle refund failures.
- Dispute handling: Notify merchants of chargebacks, provide deadline tracking, enable evidence submission, show case status.
- Customer management: Store customer payment methods securely (tokenized), enable one-click repeat purchases, manage subscriptions.
Use frameworks like React or Vue for the frontend. Design for mobile-first—many merchants manage payments from phones. Work with your team to implement proper role-based access control so merchants can add team members with different permission levels.
How to Scale Your Payment Processing System
Scaling payments is different from scaling typical web applications. You’re moving money—downtime means lost revenue and angry customers.
Architecture for High Availability
Deploy across multiple availability zones in your cloud provider. Use active-active configurations, not active-passive. Every component should be redundant: load balancers, API servers, transaction processors, databases.
Implement proper circuit breakers. If your primary payment processor is down, automatically route to your backup processor. If a specific card network is having issues, queue those transactions and retry when service returns.
Use database read replicas for reporting and analytics. Keep transaction processing on the primary database with proper connection pooling. Implement database sharding when you hit 50,000+ transactions per second.
Handle Geographic Distribution
If you’re processing payments globally, deploy regionally. Run infrastructure in US-East, EU-West, and Asia-Pacific. Route transactions to the nearest region to reduce latency.
Store payment data according to regional data residency requirements. EU customer data often must stay in EU. Some countries require local payment processing licenses.
Implement proper currency conversion with real-time exchange rates. Partner with foreign exchange providers for better rates than card network conversion. Show customers the exact amount they’ll be charged in their local currency and make sure to integrate local payment systems for each country.
Plan for Growth
Start with infrastructure that handles 10x your expected load. Payment systems are spiky—Black Friday, Cyber Monday, and flash sales create massive traffic bursts.
Use auto-scaling for API servers and transaction processors. Pre-scale before known high-traffic events. Load test regularly—aim for 5x your peak historical load.
Implement rate limiting per merchant. Don’t let one large merchant overwhelm your system during their sale. Use token bucket algorithms for smooth rate limiting.
Build in proper database connection management. Connection pool exhaustion is the #1 cause of payment system outages. Monitor pool usage and alert before you hit limits.
What to Avoid When Building Payment Infrastructure
Here are the critical mistakes companies make when building payment gateways—and how to avoid them:
1. Underestimating compliance complexity. PCI DSS is an ongoing operational requirement. Budget for a full-time compliance person and quarterly audits. Factor compliance costs into your unit economics from day one. Trying to “add compliance later” doesn’t work—you’ll rebuild everything.
2. Storing card data you don’t need. The more card data you store, the larger your PCI scope. Use tokenization to store payment methods. Never log full card numbers. Implement proper data retention policies—you don’t need transaction data older than 7 years for most use cases.
3. Building everything from scratch. Don’t reinvent fraud detection, currency conversion, or card network protocols. Use existing infrastructure where it makes sense. Build differentiation in your user experience, pricing model, and vertical-specific features—not in commodity infrastructure.
4. Ignoring performance from the start. Payment APIs need to respond in under 300ms for good checkout conversion. Architect for speed from day one. Database queries should complete in under 10ms. Every network hop adds latency. Optimize the critical path ruthlessly.
6. Underinvesting in testing. Payment systems need extensive integration testing, load testing, and chaos engineering. Test everything, because each bug will have real costs.
In Short
Start with a focused MVP—card payments for your specific use case. Partner with an experienced team that understands fintech. Build security and compliance into the foundation. Ship fast, iterate based on merchant feedback, and scale carefully.
At UniRidge, we’ve helped numerous companies handle their payments systems, and we constitute to support their operations. We work with engineers who understand the difference between building a website and building financial infrastructure.
If you’re looking for a partner who’s built payment infrastructure that processes millions in transactions—let’s talk.
