How can you launch your own payment system?

3 November 2017

Doing a business in the payment services industry is an ongoing trend, and looking at the success of multiple enthusiasts creating their startups out of nothing, it may seem that tapping into the industry is as easy as winking. This is our post dedicated to the question of how to start a payment processing or electronic wallet startup, and whether you may build it out of nothing.

Start with a trivial thing: research the market

Any business idea needs a thorough market research to collect the required information on existing trends and offerings in the industry selected as a field of commercial activity. A potential business owner should get to know how densely the target market is stuffed with the merchants and retail locations, who will become probable consumers of payment processing services. It is important to learn what financial instruments they are already using and the shortages, which merchants experience with existent market players.

Market research agencies may come expensive for a beginner business person, therefore he/she would better launch a free survey on his/her own. This survey would allow the business dummy to obtain more details about the operating retailers and their contact data. Another important aspect here is to determine the free niche: an area poorly developed or addressed by most payment services in the given territory.

Start with a trivial thing

Decide on the source of money

This is the key point in the whole business epic, as starting a payment services provider company requires at least minor financing for the essential pillars of the future corporate structure. Where does a potential businessman find required money? We will stop short of talking about self-financing, and focus on other sources, playing a crucial role for a business owner experiencing hard up times.

One of the conventional options to find money is to apply for a bank loan. This option involves preparation of a well-thought detailed business-plan that could satisfy the bank clerks ruling the destinies of borrowers. However, a business plan will be definitely a key factor determining the decision to invest into a new venture, if a business owner weighs up to forgo a bank loan and use financing provided by startup accelerators, abundant across the globe. Fintech startup accelerators help talented individuals to get required experience and seed capital to realize their business ideas. They may provide their assistance in the form of workshops, useful contacts and money amounting up to $500,000.

Some of these accelerators include the following entities:

– Wells Fargo Startup Accelerator – for the US startups

– Bright Bridge Ventures – for the European region

– Barclays Accelerator – for London and New York

– Seedcamp – a UK venture capital accelerator

– Matchi – for Hong Kong

– Chinaccelerator – for Chinese companies

– Fintech Innovation Lab APAC – for Asia and other regions worldwide


Legislation of most countries around the world requires a business providing payment services to register its activity and obtain special licenses, in some cases including PCI DSS certification. Becoming an independent sales organization (ISO) or a member service provider (MSP) for the purpose of making merchants join your payment platform and route their card transactions through it, involves ISO registration or licensing.

If a business owner wants to become an independent registered ISO with the Visa/MasterCard processing permissions, a fee should be paid for the registration that may be up to $10,000 with additional $5,000 charged annually to maintain the registered status. With this document a payment services provider may sublicense other startups. There is an option to operate under the existing registered ISO license or be directly linked to a bank, and in this case no fee is required.


Deciding between Visa/MasterCard and American Express

It is better to have all three card processing gateways in your portfolio, because most users across the globe have access to Visa or Mastercard, while American Express provides a range of perks and incentives motivating customer loyalty. American Express customers are likely to spend more per one single transaction as compared to cardholders using brands of other payment gateways. Thus, many industry specialists recommend signing a separate agreement with American Express and notify customers of a possibility to conclude an additional contract on using AmEx services.

Equipment aspect

Getting a distributor agreement with providers of payment processing equipment may be an advantage over your competitors in the market, as you get a discounted price and constant availability of terminals for the retail owners and merchants you service. You may opt for signing an agreement with a leasing provider. Leasing companies provide vital financing for small businesses to pay for the equipment. Payment startups may offer a choice to their merchants: take a terminal on installment basis paying some fixed amount every month, or purchase it making a full payment of the price.

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