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March 15, 2023

How to Create a Payment Gateway System [Ultimate Guide]

With this guide, you will learn about the different types of payment gateways and how to create a perfect solution for your business. Check it out!

Alex Drozdov

Software Implementation Consultant

In today's digital age, payment gateway systems have become an essential part of online transactions. This technology facilitates the exchange of money between buyers and sellers in a secure and seamless manner. Developing that system requires a deep understanding of payment processing, encryption, and security protocols. In this article, we will provide an ultimate guide to help you create a payment gateway system from scratch.

What is a payment gateway?

This is a crucial component of online transactions, securely connecting customers, merchants, and payment processors. The information is encrypted and sent to the processor, which verifies and authorizes the transaction. The gateway notifies the merchant of payment acceptance, allowing for transaction completion and product/service delivery to the customer.

How payment gateway works

Why build one?

Off-the-shelf solutions are readily available, but building a custom gateway can be the right choice for some businesses. Custom gateways can be tailored to specific needs, offer greater control, streamlined processing, and increased security.

Benefits of payment gateways

Who needs a custom gateway?

A wide range of businesses may consider creating a payment gateway, but it is particularly useful for businesses that have unique requirements not adequately met by off-the-shelf solutions. Some examples of businesses that may benefit from a custom solution include:

  1. High-volume businesses: They may find that off-the-shelf options are not optimized for their needs.

  2. Businesses with complex processing needs: Some businesses have complex payment processing requirements, such as multi-party or payments in different currencies. 

  3. Businesses that require specialized features: For example, a subscription-based business that provides installment plans may require recurring or customized payments.

Who needs a custom gateway?

Pros and cons of creating a custom solution

A custom solution can provide many benefits to businesses, but it also comes with some drawbacks. Here are some pros and cons to consider when deciding whether to create a custom solution:


  1. Tailored solution: It can be designed to meet the specific needs of a business, providing features and functionality that may not be available with off-the-shelf solutions.

  2. Increased control: Businesses have more control over the payment process, from the user experience to the back-end operations.

  3. Enhanced security: A custom product can be designed with advanced security measures to protect payment data.

  4. Competitive advantage: By providing a unique payment processing experience, businesses can differentiate themselves from their competitors and attract new customers.


  1. Higher costs: Creating a custom solution requires a significant investment of time and resources, including development, testing, and ongoing maintenance.

  2. Complexity: Building a custom solution is a complex process that requires specialized expertise, including knowledge of processing, security, and compliance.

  3. Increased risk: Creating a custom product can be risky, as any issues or bugs can have significant consequences for the business.

  4. Limited support: Unlike off-the-shelf solutions, a custom solution may not have extensive documentation or support available, which can make it challenging to troubleshoot issues.

Pros and cons of creating a custom solution

Types of payment gateways

In this section, we will discuss the most common types of payment gateways. Understanding them can help businesses make an informed decision and ensure a smooth processing experience for their customers.


Unlike other types, these gateways redirect customers to a separate payment page hosted by a third-party processor, rather than handling the information directly on the merchant's website.


Unlike hosted payment gateways, self-hosted gateways enable the merchant to process and store the information directly on their own website or server.

API hosted

They allow businesses to integrate payment processing into their own websites or applications using an API (Application Programming Interface).

Local bank integration

This type of payment gateway is particularly useful for businesses that operate in a specific country or region and need to accept payments in the local currency.


These enable businesses to accept online payments by using a third-party platform, such as a marketplace or an e-commerce platform. This type of solution facilitates payment processing for businesses and streamlines the experience for customers. 


These allow businesses to accept payments through mobile devices, such as smartphones or tablets. This type of payment gateway is particularly useful for businesses that sell products or services in-person or on-the-go, such as food trucks, street vendors, or event vendors.


These allow businesses to process online payments directly, without the need for a third-party intermediary. This type of payment gateway typically requires the merchant to have their own merchant account and processing system.


This type enables online transactions without the need for customers to enter their information directly into a website or mobile app. Instead, customers are redirected to a secure payment page hosted by a third-party provider, where they can enter their payment details and complete the transaction.


This type combines the features of both on-site and off-site payment gateways. Customers can choose to either enter their payment information directly into a website or mobile app, or they can be redirected to a secure payment page hosted by a third-party provider.

Types of payment gateways

How to create a payment gateway system

Creating this type of software is a complex process that requires careful planning, expertise, and security measures. In this section, we will discuss the essential steps involved in creating an online payment gateway.

Define the scope and objectives

The first step is to determine the scope and objectives of the future solution. This includes defining the features and functionalities, understanding the target market and competition, and identifying any regulatory requirements.

Design the architecture

Once the scope and objectives are defined, it’s time to design the architecture. This involves creating a flowchart of the payment process, defining the components of the future solution, and identifying any third-party integrations that may be required.

Choose the right technology stack

Choosing the right technology stack is critical to the credit score software’s success.. Select the tech stack based on the payment gateway’s requirements, including scalability, security, and performance.

Develop an API

The API is the backbone of the payment gateway, and it enables communication between the gateway and the merchant's website or application. The API should be designed and developed based on industry standards and should be well-documented.

Implement payment processing and transaction flow

Once the API is developed, payment processing and transaction flow should be implemented. This involves integrating the payment gateway with payment processors, acquirers, and other financial institutions.

How to create a payment gateway system illustration

Develop admin panel and dashboard

The final product should be thoroughly tested to ensure that it is working correctly and providing a seamless user experience. Quality assurance should be conducted at every stage of the development process to identify and address any issues.

Launch and Maintenance

Once the product is tested and ready to launch, it should be introduced to the market. After launch, it should be maintained and updated regularly to ensure that it continues to meet the needs of the users and comply with industry standards.

How much does it cost to build a payment gateway?

The cost of building a custom gateway solution can vary widely based on several factors such as the complexity, the required features and functionalities, the development team's experience and expertise, and the technology stack used to build it. 

Typically, building it from scratch can range from tens of thousands of dollars to several hundred thousand dollars or more. Additionally, ongoing maintenance, security, and compliance costs must also be taken into account. It is essential to work with experienced developers to ensure that the final product is secure, reliable, and compliant with industry standards.

How long does it take to build it?

The time it takes can vary depending on several factors such as the complexity, the required features and functionalities, and the experience of the development team. Typically, building a payment gateway from scratch can take several months to a year or more. However, it is essential to prioritize quality and security over speed when building a payment gateway as it deals with sensitive financial information. 

How Yellow can help you develop a solution for your business

Yellow's fintech and custom development expertise helps create a secure system that meets your business needs. Experienced developers work with you to define requirements, choose tech, design interface, and follow agile practices for flexibility. Ongoing maintenance and support ensure system security and reliability. Trust Yellow for high-quality and professional development of your tailored system.


Ensure platform success by defining requirements, selecting tech, designing user-friendly interface, and using agile practices. Yellow offers expert guidance for developing a high-quality platform. Invest in an online trading platform to connect global buyers and sellers for easy, secure, and low-cost transactions. Contact us to discuss your idea.

💸 What programming languages and frameworks are commonly used for developing payment gateways?

Some of the most commonly used languages include Java, PHP, Python, Ruby, and C#. Frameworks like Ruby on Rails, Laravel, Django, and Spring are also popular for developing these solutions. The choice of language and framework largely depends on factors such as the size and complexity of the payment gateway, the existing technology stack of the organization, and the preferences and expertise of the development team.

💸 How do I integrate it with my website or application?

This process involves several steps, including setting up a merchant account, obtaining API credentials from the provider, integrating the API with your website or application, and testing the integration thoroughly to ensure that it works smoothly.

💸 What is the Payment Card Industry Data Security Standard (PCI DSS), and how does it apply to payment gateways?

The Payment Card Industry Data Security Standard (PCI DSS) is a set of security standards that organizations handling credit card data must comply with to ensure the security and confidentiality of sensitive information. Compliance with the PCI DSS involves implementing several security measures, including maintaining secure networks, protecting cardholder data, regularly monitoring and testing systems, and implementing strong access control measures.

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