If you have never had to deal with electronic money systems directly, this concept might seem a bit confusing. In this article, we will explain payment gateways in greater detail, including how to build a mobile app that accepts payments.
What is a Payment Gateway?
A payment gateway is a software solution that allows for the implementation of electronic refunds for e-commerce services within applications and websites. Without them, there would not be a single trading platform where fees are accepted on the Internet. Such gateways have several advantages including support for the most common financial systems (Visa, MasterCard, and American Express) and the ability to rapidly verify customer data. Thus, payment gateways represent some intermediate element between the software and financial institutions, being complete analog versions of payment terminals in bricks-and-mortar retail stores.
Who Uses Mobile App Payment Gateways?
Payment gateways within software are a kind of analog version of a physical terminal intended for accepting payments in mobile apps. Differences between the virtual and physical terminals are outlined below.
In reality, the payment gateway is an element of the application that ensures the secure exchange of confidential information by encrypting data (card number, pin numbers, etc.). This is useful in cases where the business organizer (regardless of industry) does not want to take responsibility for the concealment and security of private data but, at the same time, wishes to provide payment services within their app. Using such program solutions requires the registration and creation of an account.
A bit of Statistics
According to Moody’s research conducted from 2011 to 2015, the availability of electronic payments contributed to 0,4% of market GDP raise equalling to $74 billion and an average increase of 2,6 million jobs.
How Payment Gateways for Mobile Apps work
Note that, in order to use electronic payment capabilities provided by a gateway, the customer must have an Internet connection. Inputting their bank card data into the appropriate fields of the application’s form, the user expects their processing over a stable high-speed connection, taking no more than a couple of seconds. At this point, the collected data is sent to the payment gateway. Through the gateway, it is then transferred to the bank that issued the card. Next, the banking service validates the request with the payment system (MasterCard, Visa, etc.) which, in turn, analyzes the solvency of the customer and compares it with the cost of the verified purchase. If the system approves the transaction, the bank-issuer returns an authorization code directly to the seller. Finally, the required amount is debited from the client’s card account and transferred to the seller’s balance in a few days (two or more).
What you need to Consider before Implementing Mobile Payment Integration
Let us determine which parameters should be taken into account before integrating a mobile payment system:
- Seller account types. Depending on your needs, you can choose one of two types of seller accounts: dedicated or aggregated. The dedicated trading account is quite an expensive feature. Its cost directly depends on the price of the gateway service provider but, judging by our experience, all of them charge quite highly. Nevertheless, the money spent on the implementation of payment gateway integration with the help of such account is completely justified by such advantages as the possibility to adjust to customer requests (which, in turn, means the comprehensive control over finances), as well as the speed of the money transfer process (this procedure takes, as a rule, no more than three working days). On the other hand, integration with a dedicated account is complex and time-consuming, and requires a thorough check of credit histories in all banks where you are listed as a customer. If you want to employ an easier approach, go for an aggregated seller account. There are a number of flaws, too, but the creation of such a record implies a less detailed study of the financial implications of your business (due to the fact that it will not be as exhaustive, it will not take as much time). On the other hand, money transfers take more time (five days or more), and some services require manual confirmation to complete the process.
- Types of products being sold. The types of products for sale also directly affect the selection of the electronic money system. This is explained by the fact that, depending on whether you sell a physical product or digital content, different methods must be used. Nothing is simpler than installing a trade with physical products, but digital merchandise is a completely different thing. In the latter case, the Google Play Store and Apple App Store mobile markets do not allow the use of third-party e-commerce services if the application is distributed from their storage. Thus, all transactions within your application must be made using appropriate platform-specific user accounts (Gmail or Apple). Then, to carry out online transactions, if your product is physical, you will need to connect a payment gateway.
- Applicable security certificates. In order to assume the authority to handle customer banking data, you will need to purchase a PCI DSS compliance certificate. Even if you use the services of the most trusted gateway providers (such as PayPal or Braintree), you are still required to get this certificate through a rather complicated two-stage procedure. First, you will need to prepare an information system that stores user card data so that it fully meets all the requirements of the PCI DSS standard. Independent pentesters will surely find a number of vulnerabilities in it and offer some recommendations for their elimination. After the respective fixes, your organization will be subject to a thorough audit by one of the certified PCI Security Standards Council companies, with the status of a Qualified Security Assessor. Based on the expert’s conclusion, a decision is made regarding the issuance of the appropriate certificate
Choosing a Payment Gateway Provider
Let’s review the main features of the top five providers of payment gateways, which are most often used by developers of commercial mobile applications. All of them imply the collection of a certain fee from the customer (as a rule, the higher the turnover, the less the commission). Moreover, some vendors employ discount systems, depending on the volume of monthly transactions. What is their advantage? First of all, such aggregators take care of money and data transfers themselves, saving their clients from unnecessary headaches and giving them more time to pay attention to product features and internet promotions. Let’s consider these options.
PayPal Payments Pro
PayPal is probably the most famous service used for electronic payments from e-commerce apps. Founded back in 1998, PayPal supports 25 currencies and customers from 202 countries, and will be an ideal choice for those developers who previously had no experience creating financial routines for mobile software. Payments Pro offers its customers the opportunity to open a personal account, that is then tied to the online store or other software. The transaction fee is 2.9% of the transfer sum plus $0.30. Additionally, PayPal charges a monthly subscription fee of $35. Its major disadvantage is the limitation on single transactions to a maximum of $10,000. To date, this is the most widely used e-commerce service, with more than 100 million users worldwide.
Braintree, a subsidiary of PayPal, is the manufacturer of payment gateways which are characterized by incredible usability. Among its main features are advanced attack protection, fast detection of scammers (both individuals and legal entities), direct integration with PayPal, 24/7 technical support (responses to user requests are received incredibly quickly), support for 130 currencies, compatibility with seven programming languages (including those intended for mobile platforms), as well as short terms for customer transfers (within two days). Until the total turnover of your trading account reaches $50,000, service usage is free of charge. After that, the standard transaction fees of 2.9% and fixed monthly charges are billed. The nuance of working with Braintree is the need to request a manual update of attached card balances in real time.
Dwolla service is known, above all, for their reasonable pricing policy. Regardless of the number of transferred funds, Dwolla charges $0.25 cents per transaction. If the transfer amount is less than $10, the transaction fee will not be levied. Advantages of this service include the ability to use the mass payment feature (similar to PayPal), which allows transferring money to several recipients at once (up to 2,000 people). Unfortunately, Dwolla is not without its drawbacks. At present, this provider is only available to US residents and supports only direct bank transfers (unlike Paypal, which also allows using credit and debit cards, as well as ACH).
The Authorize.net payment provider, which cooperates with customers in the US and Canada, provides an incredibly reliable and easy-to-use service. Sellers are registered for this service with special accounts. The main advantage of Authorize.net lies in its high-class security mechanisms. In particular, it is equipped with advanced fraud detection algorithms (Advanced Fraud Detection Suite). On the other hand, Authorize’s disadvantages include a relatively high cost in comparison to the competition. The monthly tariff for Authorize.net usage is $25, with a registration fee of $49 and each transaction charged at 2.9% + small fixed fee.
As an option, you may wish to avoid turning to the services of such financial aggregators, and try collecting the payments directly. The advantages to this approach include smaller transfer commissions and extreme flexibility in setting up electronic payment systems; however, there also are problems with this method. Such faults include considerable integration costs and self-sustainment of security measures, making this procedure practically inaccessible to beginners. In fact, the integration of gateway APIs will automatically shift the responsibility for the security of credit card validation to your shoulders, as the data will now pass directly through your mobile application. As practice shows, a correctly configured payment system can easily increase the number of successful transactions by up to 20%.
Using SDK for integrating payment gateways in the application
Having explored all the factors that must be taken into account to integrate the payment gateway in a mobile app, we can now confidently say that such an operation somewhat complicates its architecture.
All providers of payment gateways (including those already described) supply developers with software development kits for connecting to the existing application functionality. Such SDKs include a number of mobile platform libraries, and can be downloaded from official websites of respective suppliers. Libraries make supporting and maintaining the resulting software much easier because they completely take control over the operations that are carried out during transactions that include details from your customers. In addition, the use of these libraries rid you of the need to purchase a PCI certificate.
If the main functionality of your mobile application is aimed at selling or lending digital merchandise, you will have to deal with payment gateways of the respective mobile operating systems – Apple Pay for iOS, or Google Wallet for Android. The principle of operation is extremely simple, and users can easily pay for goods using provider-supplied interfaces. Moreover, all the transactions are handled and client card data is stored by the respective platforms.
Cost of integrating payment gateways into mobile apps
Now, let’s estimate how much time and resources payment gateway integration will consume. Regardless of the chosen payment gateway provider, the connection procedure takes around 40 hours. Then, the mobile application with updated functionality is tested, which takes about 20 more hours. That’s not all. The connected gateway is likely to require technical support throughout the entire operation of the application (approximately 5-10 hours monthly), even after integration is completed.
Depending on the app complexity and taking into account hourly rates of developers from ex-USSR countries, the typical music streaming app development can cost anywhere between $3000 and $10000.
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