How to Build a Payment Processing App: A Step-by-Step Guide

With the global mobile payment market expected to reach $12.06 trillion by 2027, diving into the world of digital transactions is like striking gold. This rapid growth shows there’s a lot of opportunity in the payment app industry. However, turning this opportunity into a successful app requires more than just excitement. It needs careful planning, a deep understanding of technical and regulatory challenges, and the ability to navigate a complex development process. So, how do you turn this golden opportunity into a solid, functional app?

In this step-by-step guide, we’ll take you through the essential phases of building a payment processing app, from initial concept to final launch. You’ll discover the key components needed to create a secure, efficient, and user-friendly system. Get ready to demystify the development process and equip yourself with the knowledge to bring your payment app vision to life.

Understanding Payment Processing

Payment processing is the backbone of modern financial transactions, enabling seamless exchanges between customers and businesses. Whether you’re developing a web app, a mobile payment app, or a full-fledged payment processing app, understanding the key components is crucial.

At the core of payment processing are payment gateways and processors, which facilitate the transfer of funds from the customer’s bank account or digital wallet to the merchant. Implementing robust security measures, such as biometric authentication and encryption, ensures that these payment transactions are secure and compliant with relevant financial regulations. 

Companies that need a custom payment system

Many businesses can benefit from a payment system designed with custom features tailored to their specific needs. Custom payment systems offer advantages such as enhanced security, streamlined operations, and the ability to support various payment methods (P.S. see complete list of advantages below). These systems can be precious for businesses dealing with high transaction volumes or those requiring integration with existing platforms. 

So, what types of companies should seriously consider building a custom payment system?

• Enterprise-Level Organizations

With high transaction volumes and intricate financial operations, enterprise-level organizations require custom payment systems that align with their complex needs.

• Online Retailers and E-commerce Businesses

Businesses managing numerous online transactions benefit from custom payment solutions accommodating diverse payment gateways and processing methods.

• Technology Firms 

Tech companies often build their own payment systems to ensure that their solutions perfectly complement their innovative products and services.

• Banks and Financial Institutions

Financial institutions need custom systems designed to meet strict regulatory standards and secure complex transactions.

Advantages of developing custom payment gateways

Now, let’s get down to the benefits offered by custom payment gateways. 

1. Tailored Integration: Custom payment gateways seamlessly integrate with existing systems, ensuring compatibility with enterprise-level organizations’ complex financial operations.
2. Enhanced Security: By incorporating advanced security features like encryption and biometric authentication, custom gateways meet the stringent requirements of banks and financial institutions, safeguarding sensitive payment transactions.
3. Flexibility in Payment Methods: Custom solutions support a variety of payment options, including alternative methods, making them ideal for online retailers and e-commerce businesses needing diverse payment gateway integration.
4. Scalability: Custom payment gateways can be designed to grow alongside your business, handling increased transaction volumes and expanding features as needed, which is crucial for enterprise-level and tech companies.
5. Regulatory Compliance: Financial institutions and other businesses can ensure that their custom payment systems adhere to relevant financial regulations, reducing the risk of non-compliance and associated penalties.
6. Innovative Features: Custom payment app development allows tech firms to introduce cutting-edge features and optimize the user experience, whether for web app payment processing or mobile payment apps.

After examining the companies that benefit from custom payment systems and the advantages they offer, it’s essential to understand how an online payment system operates.

Understanding Online Payment System Operations

An online payment system facilitates transactions between buyers and sellers over the Internet, ensuring secure and efficient processing of funds. When a customer makes a purchase, the system connects various components to transfer money from the buyer’s account to the seller’s account. 

Here’s how the main components work together:

1. Point of Sale (POS): In the context of online payments, the POS refers to the digital interface where the transaction is initiated, such as an e-commerce website or mobile app. It captures the customer’s payment information and sends it to the payment gateway for processing.
2. Payment Gateway: This technology encrypts and securely transmits the payment information from the POS to the payment service provider. It acts as a bridge between the customer’s bank and the merchant’s bank, facilitating the secure transfer of transaction details.
3. Payment Service Providers (PSPs): PSPs manage the transaction process by connecting with various financial institutions and payment networks. They handle authorization, fraud detection, and fund transfer, ensuring that the payment is processed correctly and efficiently.

Key Features of a Payment Processing App

Curious about what makes a payment processing app truly stand out? Discover the essential features of a payment processing app that can elevate your financial transactions. 

User Authentication

User authentication is a fundamental feature of any payment system. At a minimum, it should include essential verification processes, like multi-factor authentication, to ensure secure access. For a more robust solution, incorporating advanced methods can significantly reduce risks related to unauthorized access and fraud.

Payment Gateway Integration 

Use payment gateway integration to connect your payment system with various financial networks. You should start with basic integration capabilities to support multiple payment methods, such as credit cards and digital wallets. Enhancing this with more comprehensive integration can offer greater flexibility and convenience for users.

Transaction Processing 

Remember that transaction processing is the backbone of your payment system. To handle transactions smoothly, it’s crucial to implement efficient authorization and settlement mechanisms. For an optimal experience, ensure that your system transfers funds quickly between customer and merchant accounts, reducing any potential delays.

User Account Management 

Any MVP must have basic user account management, including profile creation and basic account settings. However, to meet industry standards and improve user experience, advanced features like user roles, permissions, and customizable profiles should be included for a more complete solution.

Tokenization 

Implement tokenization to secure sensitive payment information. Initially, focus on using tokenization for credit card processing to protect financial data. For added security, consider extending tokenization to other areas, such as token vault management, to further safeguard against breaches.

Reporting and Analytics 

Incorporate reporting and analytics tools to gain insights into transaction data. Start with basic reporting features and consider adding customizable analytics and advanced search capabilities to provide detailed performance metrics and support data-driven decision-making.

Payment Records

Maintaining comprehensive payment records is also crucial for transparency and accountability. Begin with a basic log of transactions and expand to include detailed records that cover amounts, dates, and statuses. This approach helps in reconciliation, auditing, and effective financial management.

International Online Payments

If your business plans to reach a global audience, supporting international online payments can help. Start with functionality for processing transactions in multiple currencies and expand to offer support for a range of international payment methods, enhancing your global market reach.

Customer Support Tools 

Customer support tools can be a great way to resolve payment-related issues. You can begin with basic support features like help desks and ticket systems but aim to enhance these with options for live chat and customizable notification preferences to improve user satisfaction.

Audit and Logging

Last but not least, don’t underestimate audit and logging features since they’re crucial for ensuring compliance and effective system management. Start with fundamental logging capabilities to track system activities. As your system grows, integrate detailed audit trails and extensive logs to facilitate rigorous monitoring and ensure adherence to regulatory standards.

Back-End Components

The role of payment processing app back-end components lies in managing, securing, and executing the behind-the-scenes tasks that ensure smooth and reliable financial transactions. Essentially, they form the technical foundation that supports and enables a seamless payment experience for both businesses and their customers.

Let’s look closer at each component. 

Cloud Infrastructure involves managing virtual servers and storage over the Internet, which allows applications to run and scale flexibly without physical hardware.  For customers, this translates to a reliable and flexible experience where services can grow with their needs without any hardware constraints.

When you make a purchase online, Payment Gateway Integration is the technology that securely processes your transaction. This system handles the communication between your payment method and the merchant’s account, ensuring a smooth and safe checkout experience. 

A Database Management System (DBMS) is like a librarian for your data, organizing and managing it to ensure it’s easy to access and use. By efficiently handling large volumes of information, it provides customers with fast, reliable access to their data, which improves overall service performance.

To safeguard sensitive information, Security Infrastructure involves a range of measures designed to protect data and systems from unauthorized access and cyber threats. Consequently, it acts as a shield against potential breaches, thereby offering customers peace of mind. This is achieved by ensuring that their personal and financial information remains secure and protected from attacks.

The Clearing and Settlement System ensures that financial transactions between parties are completed accurately. It handles the reconciliation and finalization of payments. This component helps transactions be processed correctly and on time, leading to fewer errors and a smoother financial experience.

The last component is The API Layer. It serves as a bridge connecting different software systems, allowing them to communicate and share information seamlessly. This connectivity enhances the user experience by integrating various services and applications, enabling customers to interact with them smoothly and efficiently.

Front-end Components

Front-end components are crucial for creating the visible and interactive elements of a payment processing app that users directly engage with. Here’s how they work:

To ensure that only authorized individuals can access services, the User Authentication Form collects and verifies login credentials. This crucial feature helps customers by providing a secure gateway to their accounts, safeguarding their personal information from unauthorized access.

When you initiate a payment, the Payment Initiation Form Details collect and validate the payment information you enter. This process streamlines your transactions, making it easier and more reliable for customers to complete payments without errors or delays.

Following a transaction, the Transaction Confirmation Dialog Window provides immediate feedback by displaying the details and status of the payment. This feature reassures customers by confirming that their transactions have been successfully processed and gives them a summary for their records.

The Transaction History feature keeps a detailed record of all past transactions made by the user. This highly benefits customers as it allows them to track their spending, review previous activities, and manage their finances with greater transparency and control.

The Help Center Interface is designed to assist users by providing access to FAQs, support articles, and contact options. This feature enhances the customer experience by offering timely help and information, making it easier to resolve issues or find answers without frustration.

How to Build a Payment Processing App?

Now, we’re diving into the heart of what makes a payment processing app truly successful: the development process. In this section, you’ll uncover the crucial steps Mangosoft takes to bring your vision to life, illustrating how to build a payment processing app that’s perfectly tailored to your business needs.

Step 1. Concept Development

We begin by collaborating with you to brainstorm and refine the core idea of your payment processing app. This stage involves understanding your vision, identifying essential features, and ensuring that the concept aligns with your business goals and market needs.

Step 2. User Experience Design

Next, our design team crafts a visually appealing and user-friendly interface that resonates with your brand. We focus on creating intuitive navigation and seamless user interactions, ensuring that the design enhances both functionality and user satisfaction.

Step 3. Development Phase

With the design in hand, our development team starts building the app, turning concepts into reality. We carefully choose the right technology stack and implement the core features, including secure payment gateways and user authentication, all while maintaining close communication with you.

Step 4. Testing and Quality Assurance

Before your app goes live, our quality assurance team rigorously tests every aspect of the application. We identify and resolve any issues, ensuring that the app is secure, reliable, and performs flawlessly in real-world scenarios.

Step 5. Performance Optimization

We then optimize the app to ensure it runs smoothly and efficiently. This stage includes fine-tuning the code, enhancing performance, and making sure the app provides a seamless experience across all devices and platforms.

Step 6. Product Launch

Once everything is polished, we launch your payment processing app to the market. We manage the release process, help you with the necessary app store submissions, and support you with marketing strategies to reach your target audience effectively.

Step 7. Ongoing Support

After the launch, our work doesn’t stop. We offer continuous support and maintenance to keep your app running smoothly. We monitor performance, update features, and ensure that your app adapts to evolving user needs and industry standards, giving you peace of mind as your business grows.

How Much Does It Cost to Make a Payment System?

The cost of creating a payment system can vary depending on several factors, including the complexity of the features, the required security standards, and the platform you choose. Building a basic payment system with essential functions like user authentication, transaction processing, and integration with financial institutions starts at around $50,000 and goes up to $100,000.

For more advanced systems that include custom features, enhanced security protocols, multi-currency support, and extensive scalability options, the cost can range from $150,000 to $250,000 or more. This investment reflects the level of detail and sophistication required to ensure your payment system is secure, efficient, and capable of handling a high volume of transactions. 

Payment Processing App Development Case Study

Mangosoft developed a secure cryptocurrency wallet designed to store and invest in both digital and conventional currencies. Serving more than 20 million customers and offering some of the most competitive transaction fees available, this platform has earned a reputation as a reliable option for storing and managing cryptocurrencies.

The Challenge
The client needed a wallet that could track currency fluctuations in real-time while ensuring the highest level of data security. Additionally, the existing verification processes relied on unverified third-party systems, raising concerns about the safety of funds and personal information.

Our Solution
Mangosoft’s team created a highly secure e-wallet, integrating advanced analytics tools to monitor currency fluctuations and blockchain technology to guarantee the safety and transparency of financial operations. The platform was designed to support both cryptocurrency and fiat currency transactions.

The Results

• Enhanced data security by 80%
• Increased multicurrency conversion efficiency by 60%
• Improved verification processing by 70%

Conclusion

Building a payment processing app involves several critical stages, each contributing to the final product’s effectiveness and user satisfaction. From conceptualizing core features and designing an intuitive interface to developing robust functionality and implementing high-security measures, every step is essential for creating a successful system. A well-planned approach to payment app development not only ensures a functional and secure system but also enhances user experience and operational efficiency. This comprehensive guide will better equip you to navigate the process and achieve a successful outcome for your payment processing app project.

At Mangosoft, we specialize in translating these insights into action. Our experienced team is here to guide you through every stage, from initial concept to final launch and beyond. Speak with our experts today to leverage our expertise and build a payment processing app that perfectly fits your needs and goals.