Step-by-Step Guide to Open New Payment System: What to Do
The payment sphere is dynamic and interesting, constantly attracting businessmen from various industries. Former bankers, employees of large holdings, and even those from iGaming are launching their own payment systems. Due to this, competition in payment market is rapidly growing, and surviving in the constant stream of new Payment Service Providers (PSPs) is not easy. Although the continuous emergence of new options might make it seem like creating a payment system is a simple task that anyone can handle, but this impression is deceptive.
Launching a truly respectable payment organization capable of processing large volumes of payments with quality, having a proper license, and with all necessary permits requires attention and investment. How can you do it? Let’s look at the basic steps needed to launch your own payment solution.
Study the Market and Competitors
The first step, in our opinion, is to find out what services the market currently needs, how you will provide them, and most importantly, who is already doing this?
Studying competitors and market evaluation are the must and among top priorities when launching any business, especially payment business. Take your time and allocate enough time for this stage, as it will determine your further actions and chances of success. You can use services of consulting companies and order a market study (for example, from Monoup) or try to conduct such an analysis yourself. If you have been in the industry for a while, survey your current partners, look for potential clients, and find out what might interest them within your capabilities. Conduct a survey of professionals and test the market with relevant service that will be less than you can do, but enough to see the first impression.
If you can solve a truly serious problem, it will undoubtedly allow you to enter the market faster and with better quality, and clients will seek you out themselves.
Choose Software or Develop Your Own
The next important step is to determine the technical component of your payment system. Flexible and modern software is necessary for high-quality service and quick response to market changes. There are two paths here: independent development or purchasing a ready-made solution. There is a third option actually — using someone else's software under the White Label model, i.e., renting, but it has many disadvantages, and most serious PSPs do not choose to depend on a third-party provider in this regard.
If we consider purchasing in more detail, it can be quick and cost-effective, but buyers often encounter not-so-good developments that need to be finalized or modified. If you have capabilities for this but are not ready to create from scratch, this can be a good option. The main thing is to ensure the integrity of the software provider, the absence of loopholes, and any possibilities to interfere with your further activities. It is also important to define the purchase terms — whether it will be exclusive or if you will receive only a copy of the system used by many of your competitors. Additionally, you should test the system and understand its main functions, what is missing, and how to work with it. This process is not simple, and you definitely cannot do without a professional in this field. Therefore, we do not advise saving money on this. Invest in your future options.
Development is the best option for those who are well-versed in the subject, do not want to depend on others, and have at least a year to implement such a complex project. The cost will depend on the number of specialists you attract, complexity of your product, and the number of required payment methods. In addition, standard set should include anti-fraud, routing, at least minimal cascading, and functionality for managing payment methods both internally and for clients. The complexity of such a project is indeed high, considering the need to create an internal system and business itself, as well as personal accounts for users of different levels and additional systems. If you need to launch quickly, many combine approaches and initially work with rented or purchased software, gradually developing their own. But, of course, everything depends on the cost and initial investments, as well as the potential of the payment offering itself.
Obtain a License
A permit document is your ticket to the fintech world, and its reputation depends on a lot. Recently, licenses from Canada for conducting Money Service Business have gained significant popularity, but their respectability remains questionable. Due to the relative ease of obtaining them, they have not gained the trust of the European market and cannot be considered the best choice for operating in European Union.
At the same time, many European licenses are not as easy to obtain as they might seem at first glance. The entire process is fraught with bureaucratic procedures and can take more than a year, as well as become a significant expense. In addition to the licensing fee, you will have to pay for legal services, salary to specialists required to comply with regulatory rules, rent or buy of various software, and functional improvements, especially in the AML (Anti-Money Laundering) direction.
For PSPs today, the most popular license is EMI in Lithuania. Crypto exchange can be opened by obtaining a MiCA in EU countries. Financial licenses such as PI are in demand in the UK, Malta, and Cyprus. The UK can be called the most popular jurisdiction for opening payment systems, as it has the largest number of fintech businesses registered among European countries. The local regulator, FCA (Financial Conduct Authority), although considered strict, works very efficiently and constantly improves its approaches. The process of obtaining a license is clear and has been refined over the years, as evidenced by dozens of successful cases. FCA certainly does not allow to relax, but this also helps payment organizations be confident in safety of their funds and quality of services.
Obtain Contracts and Find Partners Among Banks
Perhaps one of the most difficult stages in developing a payment solution is concluding a partnership with an acquiring bank, especially if you are a startup. Under current conditions, few banks will be willing to cooperate with a new fintech product, as such partnerships carry a high level of risk and uncertainty, which traditional banks try to avoid.
However, it is definitely possible to find partners, and there are banks loyal to promising startups. The entire process is complex, takes a certain amount of time, and requires a number of bureaucratic procedures. But once it is completed and integration is done, you can start working. Despite the difficult position of most startups, do not rush to cooperate with the first bank you come across, especially if it is located in the CIS or African countries, China. The best option would be a European acquirer, but you will have to work hard to sign an agreement. On the other hand, you will be sure of its solvency and strong market position. Europeans are pay an excessive attention to detail, conduct complex compliance, and lengthy processes, but in most cases, they turn out to be worthy acquirers who meet their obligations.
AML and Fraud Solutions
This point is often overlooked in the rush to launch, but don’t make this mistake. In addition to basic measures required by the license, it is important to take care of the security of your company and clients. Gaps in this area can cost much more in the end than the initial investments in a good transaction monitoring system and AML department. This investment definitely pays off, although not everyone notices it.
Among businessmen, it is commonly believed that such expenses are a waste of money since their benefits are not visible until something bad happens. But that is the point: to keep the system in such a state that nothing happens. Gaps in security can lead not only to the theft of clients' personal data and leaks of payment information but also to the loss of a license for this reason. Not to mention the fact that insufficient customer monitoring can involve payment system in money laundering schemes, and it will be considered an accomplice. Also, do not forget about chargebacks and refunds, especially in middle- and high-risk segments. Exceeding the thresholds can also negatively affect the reputation of payment system before partner banks or payment networks like Visa and Mastercard, which, in turn, can even lead to disconnection from card processing.
In general, do not put last investments in transaction security, as they will help ensure the safety and functionality of the entire system you just have built.
Acquire Merchants
The final stage is entering the market and finding merchants, basically market activity. You can probably start searching for clients in advance, but you can declare yourself as a successful organization only when real reviews about you appear in the market. And this is only possible after completing all the previous steps and creating a high-quality payment processing system.
Building a reputation and developing a payment system is also an important stage that will be with you for years after its establishment. It is unlikely that you will reach a stage where development is complete; there is always room for growth. But the longer you are in the market and the better you meet client needs, the easier it will be to expand. After completing all the procedures for opening and launching, you can, of course, take a break, but only to start developing your payment system with renewed vigor.
These are the steps we consider relevant and inevitable for creating a payment company today. If you have additional questions on this topic or other topics about payments (including for iGaming), Monoup is always happy to talk to you during a consultation. Reach out to schedule the best time.
