DIY or Delegate? The Ultimate Guide to Payment Processing Solutions

 

 

A smooth and safe payment process is essential for any organization in this digital age. Customers expect a smooth checkout process, regardless of whether they’re swiping a card in-store or entering information online. 

 

Fifty-five percent of consumers claim that a frustrating checkout process causes them to give up on a purchase in the middle. As per PYMNTS.com, that abandoned cart might account for a considerable portion of lost income for a business. This highlights the importance of offering a smooth payment experience for both in-store and online transactions.

 

But behind the scenes, managing payment processing can be a complex task. Many businesses face the dilemma: should they build their own in-house payment system, or outsource payment processing to a third-party provider?

 

In this guide, we will equip you with the knowledge needed to make an informed decision. We’ll discuss both options, explore key factors to consider, and help you choose the right payment processing solution for your business.

In-House Payment Processing

Building your own in-house payment processing system offers a sense of autonomy. You have complete control over the security mechanisms in place, as well as the system’s functionality. Additionally, in-house solutions allow for complete customization. This enables you to tailor the system to seamlessly integrate with your existing infrastructure and cater to your specific business requirements.

However, the path of in-house development comes with its own set of challenges. This option requires a significant upfront investment in hardware, software, and skilled IT personnel for setup, maintenance, and ongoing updates. 

Managing PCI compliance can be a significant burden on internal resources. PCI compliance means following the rules and standards established to protect card transactions and prevent the illegal use of cardholders’ personal information. All card brands must meet the Payment Card Industry Data Security Standard (PCI DSS).

According to TechTarget, the most recent PCI DSS upgrade occurred in March 2022. It updated multifactor authentication and password regulations while also introducing new phishing and e-commerce rules. Additionally, in-house systems might not be as readily scalable as outsourced solutions, potentially hindering your ability to adapt to future growth.

Outsourced Payment Processing

Outsourcing payment processing to a dedicated provider offers several advantages. SmartPayables notes that payment processors specialize in this domain, boasting extensive experience and expertise in handling secure transactions. They take care of everything, from managing PCI compliance to fraud prevention and system maintenance. 

This translates to cost-effectiveness for businesses, as you eliminate the need for hefty upfront investments in infrastructure and personnel. Furthermore, outsourced payment processing solutions are highly scalable. As your business grows and transaction volume increases, transitioning to a higher plan within the same provider is often much easier and faster. 

According to Emergen Research, the payment processing solutions market is expected to hit a valuation of $150.21 billion by 2030. An yearly growth rate of 13.9% has been projected. This highlights the increasing adoption of outsourced payment processing. 

However, giving control over your payment system to a third-party vendor can be a concern for some businesses. Integration with your existing platform might require additional work, and switching providers later can be a complex process with potential fees involved.

Key Factors to Consider

Choosing between in-house and outsourced payment processing requires careful consideration of several factors:

 

• Transaction Volume: High transaction volume might justify the investment in an in-house system for greater control and potentially lower processing fees.

 

• Technical Expertise: If your business lacks the internal IT resources or expertise to manage a complex payment system, outsourcing is more practical.

 

• Security Needs: Statista reports that the financial industry is highly targeted by cyberattacks leading to data breaches. In 2019, First American Financial’s breach leaked 885 million records. Businesses handling sensitive financial data might prefer the control of an in-house solution. 

 

• Scalability Needs: If you anticipate significant future growth, the scalability of outsourced payment processing might be a key advantage.

 

• Budget: In-house development requires a substantial upfront investment, while outsourcing offers a more predictable and potentially lower cost structure.

Additional Considerations

Aside from the basic elements, consider the following while making your decision:

 

• Reputation and Customer Service: Research the reputation and customer service record of potential outsourced payment processors.

 

• Integration Capabilities: Ensure seamless integration with existing systems for a smooth customer experience. Forbes notes that an integrated payment gateway is a white-label payment gateway. Sending customers to the payment gateway’s website uses a third-party payment gateway, which is not as convenient.

 

• Compliance Requirements: Verify that the provider adheres to all relevant industry regulations and data security standards.

The Final Verdict

When it comes to payment processing, there is no one solution that works for everyone. Your priorities and particular company scenario will determine which approach is ideal. You may make an informed selection for safe and effective payment processing that meets your demands by weighing these aspects. Remember that the perfect solution should be adaptable enough to develop with your company, as well as fulfill your present demands.

FAQs

What is a payment processing business? 

A payment processing business acts as a middleman between you and your customers. When a customer pays electronically, the processor verifies the funds, transfers them to your account, and handles any security checks. These businesses ensure secure and smooth transactions.

Can I have my own payment gateway? 

While technically possible, having your own payment gateway is a complex and expensive endeavor. It requires significant technical expertise and resources to maintain robust security and comply with industry regulations. Outsourcing to established payment processors is a more practical solution for most businesses.

What is transaction process outsourcing?

Transaction process outsourcing refers to delegating tasks related to handling customer payments to a third-party provider. This can include everything from authorization and settlement to fraud prevention and customer service. Outsourcing helps firms to concentrate on their primary operations while maintaining reliable and effective payment processing.

 

In conclusion, navigating payment processing boils down to a trade-off: in-house control for customization or outsourced ease for affordability and expertise. While all systems assure safe transactions, the best choice depends on your company’s specific requirements.

 

Carefully consider factors like transaction volume, technical capabilities, security concerns, and scalability to find the perfect fit. Remember, the best solution fosters not just current efficiency but also the adaptability to thrive alongside your growing business.