Startup merchants, especially those from developing countries often have problems when finding a gateway partnership. Many of them are unaware of credit card processing risks associated with implementation of an international payment gateway solution. Even if they manage to find a suitable payment processing solution, they might think that it costs too much.
So, let us explain, what it really takes to implement an international gateway solution.
Startup business owners often have common misconceptions regarding payment solutions and how to implement them.
Example
A typical startup merchant might just look for a cheap custom or white label payment gateway software product. His plan might be to deploy it in a data center and integrate his payment system with it. Thus, he thinks, he will be able to support all target electronic payment methods and currencies. And receive the money to his local bank account, wherever the bank is located.
In reality, payment gateways work in a different way.
Credit card processing risks associated with payment gateway implementation
Here are some important points a startup business should keep in mind:
Point of entry into the banking system
Even a high risk payment gateway partnership cannot work without some point of entry into the international banking system. Such point of entry can only be provided through an acquiring bank partnership. Acquirers from the US or the EU are often reluctant to underwrite merchants from countries where they have no representation. Reason 1: potential credit card chargeback disputing in foreign countries might be a problem. Reason 2: credit card fraud risk is very high, while financial liability for merchant’s operations lies on the acquirer.
Other considerations
1. You cannot eliminate all the fees even if you have your own payment gateway. Interchange fees that card networks charge will always be there.
2. In order to accept electronic payments, you have to be PCI compliant, or at least clarify your PCI compliance status. Moreover, you might need to go through PCI audit procedures. And remember: PCI compliant data centers are more expensive to maintain than regular ones.
3. Both your acquirer/processor and payment gateway should support all the critical features you need. These might include specific payment methods, currencies, MCC codes etc.
How to implement a payment gateway and minimize credit card processing risks
Based on the listed considerations, we can outline a payment gateway implementation strategy that a startup should follow.
1. Before thinking of a gateway solution, it should find an acquiring partner that is willing to underwrite it as a merchant. The acquirer should also support all the necessary features at an affordable cost.
2. It should get payment processing specifications from the acquirer. Based on these specifications, it can plan integration with the future gateway solution.
3. Only then it is time to look for a payment gateway provider, that can follow these specifications.
4. Finally, the startup can devise a payment gateway deployment strategy.
Concluding remarks
In order to implement a custom or white label international payment gateway solution, a business should follow a specific sequence of steps. The key misconception that many startup merchants follow is that they can do without an acquirer. While in reality acquiring partnership goes first.
International acquirers and gateway providers are often reluctant to partner with merchants from foreign geographies. Reason: the risk of fraudulent credit card transactions, is too high. In order to offset the risk of fraud and potential chargebacks, they might charge higher fees or withhold merchant services reserves.
One of the ways to significantly reduce the gateway-related costs is to implement a white label payment gateway solution.
Feel free to consult our payment experts and learn more about our white label payment gateway technology.