May 13, 2021
Written by
James Davis
Written by James Davis
Senior Technical Writer at United Thinkers

Author of the Paylosophy blog, a veteran writer, and a stock analyst with extensive knowledge and experience in the financial services industry that allows me to cover the latest payment industry news, developments, and insights. Read more

Reviewed by
Kathrine Pensatori
Product Specialist at United Thinkers

Product specialist with more than 10 years of experience in the Payment Processing Industry. I help payment facilitators and PSPs solve their various payment processing issues. Read more

Credit Card Processing Risks and International Payment Gateway Setup

Key Takeaways

  • For startups in Asia, Africa, and Latin America seeking to accept international payments, establishing a relationship with an acquiring bank is paramount, as it facilitates access to the Visa and MasterCard network essential for global transactions.
  • Navigating credit card processing risks involves understanding and managing interchange fees, ensuring PCI compliance in data centers, and aligning payment gateway features with the capabilities of processors and acquiring banks.
  • A strategic approach to payment gateway integration should include finding a suitable acquiring bank that underwrites merchants in diverse geographies, supports required currencies, offers necessary functionalities, and provides competitive pricing.
  • Utilizing a white-label payment gateway solution post-acquirer partnership can simplify the process, allowing startups to process payments under their own brand without incurring significant upfront licensing costs.

Many startup businesses from Asia, Africa, and Latin America are facing problems finding a proper payment gateway solution. Merchants from these geographies are often interested in accepting payments from customers in the US and Europe. However, sometimes they are unaware of serious credit card processing risks, particularly, those related to geographical location.

What payment gateway integration might look like

A startup can explore the different options for having its own payment gateway. A typical strategy of a startup businessman for implementation of a payment gateway solution is as follows.

  1. Find a cheap payment gateway software platform, or a free, open-source solution to avoid any processing fees. (Some businesses might be looking for a high risk payment gateway solution).
  2. Deploy the payment gateway software in a data center.
  3. Integrate your POS system or website with the payment software.
  4. Start processing transactions in different currencies.
  5. Receive money to your (local!) bank account.
  6. Resell the payment services to other businesses.

Payment gateway integration and credit card processing risks

In reality, the most important factors that a business should consider when planning a payment gateway integration, are as follows.

  1. Entry point into the banking system. Having gateway software is not enough to accept payments. To make your payment gateway work, you need to be connected with issuing banks through the Visa and MasterCard network. This connection is only possible through an acquiring bank relationship.
  2. Interchange fees. Even if you have your own payment gateway, processing is not free. For each transaction processed through a credit card network, the card brands such as Visa or Mastercard charge a fee. The official term for it is interchange fee. Beside it there will be markups, charged by processors and any other middlemen involved. And cross-border transaction processing will cost even more.
  3. PCI Compliant Environment. You must deploy your payment software must be deployed in a PCI-compliant environment. Not every data center has the features necessary to complete a PCI audit. Moreover, PCI-compliant data centers are significantly more expensive than regular ones.
  4. Support for critical features. Payment gateway functionality depends on the capabilities of processors and acquiring banks. Certain features available within your gateway (such as payment pages, or mobile payments) can only work if processor has support in its API for this certain functionality.

How underwriters minimize credit card processing risks

Underwriting procedures deserve a separate section. Providing merchant services in specific geographies is associated with high risk because of potential credit card chargeback disputing. Moreover, every time a bank suspects credit card fraud, it can freeze the respective account. So, international banks and payment gateway providers are unwilling to underwrite businesses that belong to jurisdictions where they are not physically present. Even if they do underwrite a merchant, they might withhold massive reserves or charge higher fees. In this way they are trying to offset potential losses from fraudulent credit card transactions and chargebacks.

So, what is the gateway integration strategy, minimizing credit card processing risks?

In reality, successful implementation of an international payment gateway solution, should include the following steps.

  1. Locate an acquiring bank that is willing to:
    • underwrite your merchants,
    • support your target currencies,
    • provide the necessary functionality,
    • offer acceptable pricing,
  2. Request processing specifications from this bank to be able to have a meaningful discussion with a future payment technology provider.
  3. Find a payment gateway provider and share the banking specifications with it so that technical people can confirm the feasibility of the project.
  4. Start planning a software deployment process.

Once you have processing specifications, you can significantly simplify the process of setting up your own payment gateway. Particularly, if you use a white-label offering. Using a white label solution, you’ll be able to process payments under your own brand without the upfront licensing costs.  

To summarize

If you want to accept international payments, the first thing you should think about is your acquiring partnership. Once you find an acquirer, you should get processing specifications from its representatives. And only then you can start the implementation of your own or a white label payment gateway solution.

You are welcome to consult our payment specialists and learn more about our white label payment gateway solution.

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