The global payment processing market size is expected to reach USD 68.4 billion by 2027, growing at a CAGR of 13.9% from 2020 to 2027 according to Grand View Research. This growth is driven by the increasing adoption of digital payments, especially in emerging economies. The niche is constantly evolving, with new technologies and payment methods emerging all the time.
Meanwhile, this industry has a high barrier to entry because it requires significant capital investment, extensive regulatory compliance, and complex technical infrastructure. It reduces competition and creates barriers to market overheating. Modern payment processing companies position themselves as essential partners for businesses of all sizes, helping them to accept and process payments securely. By offering value-added services such as fraud prevention, chargeback management, PSPs and acquirers can become an integral part of a business’s operations.
If you are confident in your intention to enter this niche and are thinking about options on how to start a payment processing company, you should compare in-house development and using a ready-made payment software platform. The second way usually saves years and hundreds of thousands of dollars, but you should choose the one that best meets your business needs. Consider factors such as fees, flexibility, security, user-friendliness, and integration with other systems.
But in addition to a digital product that provides payment processing and a business environment for your team and merchants, you will need other resources and actions.
Register your business and obtain the licenses
Register your payment processing company with the appropriate local and state agencies. Payment processing is a highly regulated industry, and you must comply with all applicable regulations. At least you will need to obtain a PCI DSS certificate, and if you plan to interact with the financial flows of clients, you will also need a PI/EMI license. For acquirers, it’s necessary to receive Visa/Mastercard affiliate/principal member status.
Partner with acquiring banks or payment processors
Acquiring banks and payment processors are links in a chain for payment processing companies. These organizations are responsible for transferring funds between buyers and sellers and have regulated relationships with payment systems such as Visa and Mastercard. Usually, to provide more favorable service for merchants and earn more PSPs connect with multiple acquirers, as well as acquirers choose different payment processors.
A multi-acquiring strategy that involves partnering with multiple acquiring companies to process transactions on behalf of merchants allows PSPs to:
- increase reliability and uptime,
- improve payment acceptance rates for merchants by ensuring that transactions are routed through the most appropriate acquiring bank,
- get greater geographic coverage,
- reduced risks by spreading transactions across multiple acquiring banks,
- provide competitive pricing.
Develop strong security protocols
Security is a top concern for starting a payment processing company. Develop a security ecosystem to protect your customers’ sensitive financial information. Most of them are usually a part of payment software platforms, that PSPs and acquirers use to run their businesses.
- Encryption to scramble sensitive data, such as credit card numbers, so that it can only be read by authorized parties.
- Tokenization to replace sensitive data with a unique identifier, or token. This helps to reduce the risk of data breaches, as sensitive data is not stored in plaintext.
- Payment processors are required to comply with the Payment Card Industry Data Security Standards (PCI-DSS), a set of security standards designed to protect cardholder data. Your software and infrastructure must comply with these requirements, among other things.
- Fraud Detection to identify and prevent fraudulent transactions.
- Two-Factor Authentication to verify the identity of users and reduce the risk of unauthorized access.
- Data Backup and Recovery are in place to ensure that data is not lost in the event of a disaster.
- Employee training on security best practices and compliance requirements to ensure that staff are aware of their responsibilities and can identify potential security threats.
- KYC/AML compliance processes, including customer identification, risk assessment, sanctions screening, transaction monitoring, suspicious activity reporting, and compliance training.
Build a strong team
Hire a team of experienced professionals to start a payment processing company. Look for individuals with experience in finance, technology, and customer service.
- Management team, including CEO, CFO, and COO.
- Technical team to ensure that the company’s technology infrastructure is up-to-date and functioning properly. This team may include software developers, system administrators, and network engineers.
- Compliance team, responsible for ensuring that the company is in compliance with all relevant laws and regulations. This team may include compliance officers, risk managers, and legal professionals.
- Customer service to handle inquiries and issues from customers. This team may include customer service representatives, technical support staff, and account managers.
- Sales and marketing team to generate new business and promote the company’s products and services. This team may include sales representatives, marketing professionals, and business development managers.
- Finance and accounting team, responsible for managing the company’s finances, including accounts payable, accounts receivable, and financial reporting. This team may include finance professionals, accountants, and bookkeepers.
The cost of launching a payment processing company can vary depending on various factors such as the size of the company, the complexity of the payment system, the number of payment methods offered, and the regulatory requirements in the target market.
In general, you should consider expenses for these areas:
- Technology development: payment platform to manage payments and transactions, and building or renting server infrastructure.
- Regulatory compliance: receiving PCI DSS certification and financial license.
- Marketing and sales to attract customers and build a user base. This can involve marketing and advertising campaigns, sales staff, and other promotional expenses.
- Payment processing fees: Payment processors and systems typically charge a fee for each transaction they process.
Overall, the cost of launching a payment processing company can range from hundreds of thousands of dollars to several million dollars or more, depending on the size and complexity of the company.
As you see starting a payment processing company is a highly challenging and costly business, so you should find partners with relevant experience and complex approaches, providing services such as turnkey PSP or turnkey acquirer launch to save your resources on developing from scratch and unforeseen issues.