Make Vs. Buy: The Pros and Cons of a Home-Made Payment Solution

 October 2nd, 2017

Make v. Buy: The Pros and Cons of a Home-Made Payment Solution


With the increasingly rapid growth of e-commerce, online businesses have difficult choices to make regarding how they will manage their payment ecosystems to best serve their customers and their individual business needs. When it comes to managing an efficient payment system, online enterprises have two main options: seek services from a third-party or design their own, home-made solution. Before deciding on which of these two options is the best for your business, the entities in the payments chain should be thoroughly understood.


The Payment Path


The main entities involved in online payments are payment processors and payment gateways. An easy comparison for visualizing the relationship between these two entities is to see the payment processor as a messenger and the payment gateway as the center that chooses which messenger should send and receive the message, or in this case, the transaction. Payment processor is the entity responsible for any authorizations or returns of transactions. It sends messages about the transaction to both the merchant’s and the customer’s bank. Businesses must have agreements with their chosen payment processors regarding the type, quantity, and conditions of transactions to be processed.

Before transactions are passed to the payment processor, they go through a payment gateway for routing and optimization. A payment gateway assists the business in choosing which payment processor is best to use based on the transaction type, amount, geographic location or other unique conditions predefined by the online business. Additionally, payment gateways can determine the risk level of a transaction to minimize risks. It’s important for online businesses to have access to a payment gateway with the capabilities necessary to handle their unique transaction volume, types, and risk level. The payment gateway is the more flexible part of the payments path, giving online businesses ample opportunity to optimize their payments ecosystem. So, where should online businesses turn to find access to a payment gateway?


Home-Made Payment Solutions: Pros and Cons


Self-made payment solutions are generally a better fit for large corporations or online businesses with extremely high transaction volumes and a well-defined customer base. This type of payment solution can better handle demanding transaction levels, as customized features can be created according to the needs of the business. The biggest advantage to a self-designed payment gateway is the simple fact that nobody knows your business better than you. Creating your own payment ecosystem allows you to develop a network of staff with the expertise required to provide personalized service.

However, designing your own payment solution also requires a lot of groundwork and certification processes that can be costly and tedious to handle alone. The merchant would need to go through the process of obtaining PCI DSS certification, the proper legal certification to work directly with payment processors, and handle sensitive customer data. Besides, although having a dedicated team of in-house professionals can seem beneficial, it still might be too costly. Finally, an in-house design team may lack the expertise necessary to anticipate different features that the business will need as it grows, which ultimately leaves room for error.


Third-Party Payment Solutions: Pros and Cons


Using a third-party payment solution can solve some of these issues. The first major advantage is the elimination of work the business must do. The third-party provider will take care of all the design and technical development, allowing the business to indicate which features it deems necessary for inclusion. Although third-party solutions generally entail a per transaction cost for the merchant, in the long run the lack of a need for a dedicated in-house development team can save the business time and money. The third-party will also be in charge of customer service and trouble-shooting. This ease of use is a huge advantage for businesses, allowing them to invest more time in other aspects of their operation.

Using a third-party payment gateway can give businesses greater access to a wide variety of payment methods in one tool, rather than managing agreements with each payment method individually. Overall, third-party payment solutions can provide a reliable and convenient payment experience while easing the burden of design, implementation, and maintenance on the business.


What to Consider?


There are several key features to keep in mind before a business chooses to purchase the services of a third-party or design their own payment solution. The foremost concern for any online business should be that the payment solution can offer adequate fraud protection and risk management. This will save not only the earnings of the merchant, but also their reputation with customers. The second most important consideration is integration with local and global payment methods and processors. Support for recurring payments may also be important in the event such a payment type fits the business model. For more information on how to choose a third-party payment solution, please read our blog article on that topic here.

A well-managed payment gateway is imperative for an online business’ payments strategy. Without its adequate support a business may encounter severe obstacles, such as poor customer experience, steep fees or high number of fraudulent transactions. While the home-made option may work well for businesses with highly specific needs, a third-party provider can offer speed, convenience, and safety for online businesses looking for an easy yet reliable payments solution.

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