Payment System Inside Existing Business: What are Pros and Cons

Many successful gaming companies eventually face the question: should they launch their own payment gateway? This would allow them to avoid paying fees for third-party services, keep money in-house, and even generate revenue by selling such a payment system to competitors.

It's worth noting that many payment systems were indeed launched within large operating projects. For example, Amazon Pay, Alipay, and Mercado Pago have long become separate companies with large customer bases and in-demand services. They grew out of major marketplaces that at some point decided to process their own payments. Following this logic, should every business do the same? Is launching your own payment system a logical next step, or is it beyond the reach of most? What about iGaming?

Let's delve deeper into how to create a payment gateway, potential risks, and benefits.

Main Considerations of Payment System Launch

Despite the promising sound of having an "in-house PSP" (Payment Service Provider), many business owners don't fully understand the process and expenses. Additionally, they may not be aware of the potential risks. In modern iGaming, where the payment component accounts for 50% of your success, the benefits of independently managing payment related issues are obvious. However, let's consider the components of a successful processing company:

• Personnel;
• Technology;
• License and banking partners;
• Go-to market strategy.

First and foremost, it's important to recognise that a payment system is a separate business, even if it is designed to serve an existing one and process its transactions. For quality functioning, such a structure will need its own team of professionals, including experienced C-levels, technical specialists, anti-fraud experts, customer support, lawyers, and finance department. Payment processing has its own nuances that you need to know and consider. Therefore, the existing team of your iGaming project may not be able to equally well manage both gaming business and payment system. Additionally, this is a significant workload, and thus, a division of responsibility would be necessary. Therefore, the first factor to consider is personnel. Do you have access to professionals in this field, and how quickly can you assemble a good team?

The regulatory component is no less important, constantly changing and becoming more complex in fintech. Keeping up with new laws and financial regulations is a must, without this it is difficult to ensure the long-term existence of your future payment company. Regulatory requirements vary from country to country, so initially, you need to choose the geography of operation and a convenient country for legal launch. After that, you will need to constantly undergo audits, inspections, and report to the National Bank or another regulatory body in your country of registration. This is a very important process that cannot be left to chance, as any missed necessities can lead to the loss of a license, which is not easy to obtain. Obtaining a license for financial activities can take months, or even years. It all depends on the initial data and desired functions of the future PSP. The more extensive range of services payment system can provide, the more requirements and restrictions it will face. Connecting a partner bank is also not an easy task and will require, at a minimum, lengthy compliance procedures. Additionally, not all banks are willing to work with startups in the payment services sector, and here you will often need a quality network or reputation.

Next, technical capabilities, including PCI DSS certificates and payment platform itself. Obtaining third-party certificates is a significant expense, and developing systems such as routing and cascading can be a lengthy and complicated process. To operate payments effectively, flexible management is essential, so these functions are necessary from the start. On the other hand, there are currently many options of ready-made payment system software solutions on sale that can significantly reduce development time. It is important to choose the right software and not allow a mistake with its source, as any imperfections (especially in terms of security) can become a loophole for fraudsters and contribute to the theft of funds. As we have repeatedly said in our previous articles, security in payment processing is top one priority.

Considering launch of your own payment system from the perspective of a gaming business operator, several additional factors should be taken into account:

• iGaming business itself is complex, both regulatorily and operationally. Therefore, it may seem that a payment system is somewhat simpler, especially given how many there are today. By taking on the obligation to create a PSP, it is important not to live in your dreams and calculate all expenses and revenues in advance. If it pays off and brings profit, the idea is worth implementing.
• The payment system must be separate from gaming operator and operate in accordance with the law and regulatory norms. Otherwise, there is a high risk of violating laws and controversial operational situations.
• Competition between payment solutions for iGaming is very tough, and selling your development can be a difficult task, especially if it does not offer any unique features. Given the cost of the entire setup, working only for yourself may not pay off eventually. Many falls into this trap, as we may see from the frequent sales of such internal PSPs. Can you afford to operate a financially unprofitable project?

All of this cannot be directly attributed to any disadvantages of establishing your own PSP, but it is certainly worth adding to the “examine more closely” folder. The payment business is an interesting and multifaceted area, but it is filled with many nuances. What about the advantages then?

Advantages of Having Own Payment System

Among the main motivational factors that often prompt businessmen to develop their own payment services, the following can be highlighted:

• Optimization of processing costs, as business will be free from various markups that are often present in standard sales. This includes the margin of payment system, aggregator, and other partners that may be involved in creating the payment solution. Depending on the market of operation and the type of payment methods, savings can be either small or very significant.
• Technical flexibility in integration and further. A known problem in the gaming industry is the poor-quality APIs of payment systems or a number of limitations and difficulties that prevent implementation of certain features. All of this can be avoided with your own payment system. It will be able to fully comply with your business model, be adaptive, and change depending on your needs. This is an undeniable advantage that can also help to save on some fees.
• Quality support and 24/7 service. Many payment systems and aggregators cannot provide specialist availability around the clock, which often complicates the workflow. Establishing a work schedule convenient for your own business, which would meet current needs, will help remove this factor and prevent disruptions in work.
• Management of the payment processing system completely in all its aspects is also a significant advantage. There will be no need to conduct additional negotiations with partners or insist on them to meet your updated requirements. The main thing is to find a balance between the two organizations and ensure quality functioning of both.

At the same time, remember that by having your own payment system and relying solely on it, you will not be able to press on the counterparty and obtain more favorable conditions or a turnkey solution for your problem. After all, now you are your own counterparty. Additionally, if you operate in many markets, you may need a large set of payment methods, which is difficult to obtain quickly and independently. Quality and long-standing, experienced payment systems are excellent partners who can bring not only a payment service to the table but also deep knowledge and expertise. The opportunity to work with professionals, exchange ideas, and implement new features is also part of business and sometimes it turns out to be much more profitable.

In conclusion, if you are thinking about setting up payment system, consider all the important factors and do not follow market panic. The decision should be made carefully and based on clear figures from P&L. In the meantime, if you have any questions about payment industry, payments themselves, and approval ratio, we will be happy to discuss them during a consultation.