An electronic money issuer (EMA) is an organization authorized to issue electronic money (the digital version of good old cash). There are 479 registered organizations in Europe, more than half of which are in the United Kingdom.
The list of their services is quite diverse, from personal banking and elite credit card issuance to the organization of international money transfers. Moreover, EDIs often provide services to different groups of the population. To become an e-money issuer you have to do a lot of work to improve your functionality. With the support of the financial portal I will tell you in detail how to reduce the cost of a payment gateway for electronic money issuers.
And yet, they all share a common pain. It's about the cost of developing and maintaining a payment gateway.
What is a payment gateway?
A payment gateway is software that is used by payment providers to organize payment processing. This solution allows a merchant to receive payment for its services through a website, mobile app, etc. In other words, it is a system that transfers funds to the merchant's account from the customer's card after the customer clicks "Pay".
The cost of a payment gateway for EDI
It may be hard to believe, but behind the transaction, which often takes only a fraction of a second, is technology that costs hundreds of thousands of dollars to build and maintain. We estimate that, on average, it costs a company $420,000 to create a payment system.
Keep this number in mind if you decide to build a system from scratch. It will help you navigate the market and assess whether your company is ready for this step.
Why is it so expensive?
To begin with you will need to hire a team of experienced professionals with experience in the payment industry. We advise you to start with three developers, a QA specialist, and an information security specialist. On average the salary expectation for a team of this level is about $3,500 per month, which adds up to $17,500 for the whole team.
From my own experience and the experience of our partners in the online payments industry, the development of the system will take from six months to two years. Six months is needed to create the most basic functionality. But keep in mind that with the ever-growing expectations of potential customers, basic functionality won't be enough for you. The demands of your target audience are higher than ever before! So keep your pockets wide - and be prepared for the most expensive outcome. With these calculations, you'll need $420k to build your system.
Unfortunately, the costs don't end there. From the time you launch the platform, your team switches from development to maintaining the system. In addition, at this point you will need to hire two or three payment specialists to monitor and manage the financial flow. This addition to your team will also cost you about $10,500 per month.
We're not exaggerating if we say that only a handful of e-money issuers can afford such a luxury right from the start. So what are the options for those who can't afford their own payment gateway?
White-label payment gateway
Surprisingly, few EDIs are aware of the amazing capabilities of a white-label payment gateway, which allows you to legally sell a turnkey payment solution that is fully branded to your company. As a result, you get a system and the latest technology without having to invest in the development and support of the platform itself.
What's more, such systems are often equipped with a number of innovative features that can take your EDI to the next level.
Key functionality of white-label payment gateway
Smart routing, at its core, is an attempt to increase the number of confirmed transactions by changing their default "route". This feature allows you to route each payment to a pre-selected channel with the highest probability of passage. Smart routing is a real salvation for high-risk business owners. And at the same time, it's great for those whose businesses are not considered risky.
With this feature, you give your customers the opportunity to enjoy a seamless payment process, thereby improving their brand image in their eyes and nurturing their loyalty.
2. Smart Invoicing.
This is one of the most coveted features in a payment system. Smart invoicing allows you to dynamically determine which customer actions to charge a commission. To set it up, you need to predetermine payment actions and triggers for each individual client. As a result, you will be able to earn more due to the flexible commission structure.
Other benefits of this functionality include time and resource reduction through automation of processes, simplified invoice management and reduced cost of processing for the client through customization of commissions.
Unfortunately, this functionality is quite complicated in its implementation and is offered only by some providers of payment software.
Tokenization remains a rather underestimated feature, although it has the potential to be the deciding factor in building customer loyalty to your brand through implementation of one-click payment. And given that tokenization always comes with a number of security measures, it could be a real boon for your company.
While smart-routing prevents rejected transactions by directing them to the channels most likely to miss them, cascading offers a solution to the problem of already existing rejected payments.
The system allows the merchant to track and clearly understand the cause of each individual rejection, and to analyze them and make the right business decisions to avoid a repeat of the situation.
5. Fraud prevention module
Online fraud is a constant headache. It is real and ruthless.
About 82% of organizations experienced some form of online fraud in 2018, according to the Association of Financial Professionals.
It's what can be a major threat to your EDI business if you choose the wrong payment gateway. When choosing, pay attention to whether the system meets the highest security standards.
A white-label payment gateway can be a solution to the pain that EEDs often experience. You don't have to invest hundreds of thousands of dollars to get a quality payment solution. By choosing a white-label system, you don't have to spend money on developing and maintaining a complex infrastructure. In addition, you can save up to 50% on processing costs.
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