Build or Buy: Making the best payment infrastructure decision

Choosing whether to build or buy a payment infrastructure is a pivotal decision for businesses that handle diverse payment methods. This detailed exploration delves into the essential considerations and advantages of each option, guiding you toward the optimal choice for your payment infrastructure. Key aspects such as merchant-facing and administrative tools are discussed, emphasizing their importance in streamlining payment processing and management. This analysis is especially critical for Payment Facilitators (PayFacs), Independent Software Vendors (ISVs), Independent Sales Organizations (ISOs), and large retailers who require a robust and scalable system to manage high transaction volumes effectively.

Understanding payment infrastructure platforms

A robust payment infrastructure is indispensable for businesses handling multiple payment methods. It seamlessly integrates crucial components to guarantee smooth, secure transactions. Essential features such as merchant-facing tools and administrative resources are core to this integration, enabling efficient management and operation of payment systems. This platform not only streamlines processes but also fortifies transaction security, making it a critical asset for any business aiming to thrive in a complex payment processing environment.

Key Components of a Payment Infrastructure Platform :

1. Payment Orchestration: Manages various payment methods and processors, optimizing routing and reducing costs.
2. Fraud detection systems: Monitor transactions for suspicious activity to prevent fraud.
3. Compliance tools: Ensure adherence to industry regulations like PCI-DSS and GDPR, crucial for maintaining trust.
4. Administrative tools: Used by program managers, these include user management, company/merchant account management, logs, billing, and payout processing.
5. Analytics and reporting tools: Provide insights into transaction data, helping businesses make informed decisions.

Importance of payment infrastructure

A robust payment infrastructure is essential for business success. It ensures seamless transactions, enhances customer experience, and boosts revenue. Poor payment infrastructure leads to transaction failures, customer dissatisfaction, and revenue loss. 

Studies show that failed transactions can cost businesses about 5% of their annual revenue, underscoring the importance of reliable payment systems. Efficient payment processing is linked to a 15% improvement in customer satisfaction, highlighting the critical role of payment infrastructure in maintaining customer loyalty.

The need for modernizing payment infrastructure

The payment industry is evolving rapidly, yet many businesses rely on legacy systems. Developed in the 1970s and 80s, these systems can’t handle today’s transaction volumes and customer expectations. Over 80% of global card acquiring volume is still processed by outdated infrastructures. Thus, there’s an urgent need to modernize or replace these systems entirely.

The shift towards cloud-native and API-focused technology is ushering in Payments Infrastructure 2.0. This new wave offers enhanced scalability, better analytics, and integration with modern services. Adopting these advanced systems improves operational efficiency and keeps businesses competitive in a fast-changing market.

Should businesses build their own modern payment infrastructure or buy a ready-made solution? This decision is crucial for PayFacs, ISVs, ISOs, and large retailers navigating these technological shifts to ensure robust, scalable, and efficient payment processing systems.

Build or buy a payment infrastructure: The case for building

Building a payment infrastructure platform is a significant undertaking. It requires substantial investment, time, and resources. However, some businesses may consider it to gain complete control and customization.

Initial investment

Building a payment infrastructure demands a significant initial investment. Businesses can expect to spend over €2 million, covering development costs, staffing, and compliance efforts. The initial phase involves substantial expenses for software development, integration, and infrastructure setup.

Time-to-market

Developing a custom payment infrastructure is time-intensive, with an average time-to-market of around 18 months. During this period, businesses design, develop, test, and deploy the platform. This lengthy development phase can delay the launch of new products and services.

Maintenance requirements

Maintaining a custom-built payment infrastructure involves ongoing efforts. Businesses need to update software, apply security patches, and ensure compliance with industry standards. These activities require a dedicated IT team, leading to continuous operational costs. According to Gartner, maintenance and support account for 50-70% of the total cost of ownership of software systems, necessitating significant resources post-development.

For a comparative analysis of traditional vs. embedded payments, read this article.

Delays in integrating new Payment Methods

Legacy systems often struggle with integrating new payment methods quickly. As Finextra points out, these systems lack the flexibility needed to adapt to evolving technologies, making it difficult for businesses to stay competitive.

Technical debt

Building a custom platform often leads to technical debt. As the system evolves, it accumulates outdated or inefficient code. This technical debt can hinder future development and innovation. Regular refactoring and updates are needed to manage and reduce technical debt, further increasing maintenance costs.

Resource allocation

Developing a payment infrastructure requires a skilled team, typically costing around €49,000 per month. Over an 18-month period, staffing costs alone can amount to €882,000. Recruitment and training time for these employees must also be considered. Ensuring the team is proficient in payment systems is crucial for successful development.

Compliance challenges

Compliance with industry standards like PCI-DSS and GDPR is mandatory and resource-intensive. Achieving PCI-DSS certification alone can cost around €50,000. Ongoing audits and updates are required to maintain compliance, adding to the operational burden. Non-compliance can result in fines ranging from $5,000 to $100,000 per month and damage the business’s reputation. Robust security measures and regular audits are essential.

> For more insights on PCI-DSS v4.0 compliance, read this guide.

Revenue loss during build

While developing a custom payment infrastructure, businesses may face revenue loss. The 18-month development period delays potential revenue from transactions. During this time, businesses might lose customers to competitors with established payment systems.

Build or buy a payment infrastructure: The case for Buying

Buying a payment infrastructure platform can be a cost-effective and time-efficient option for many businesses. It involves subscribing to a Platform-as-a-Service (PaaS) model, which provides ongoing support and updates.

Cost efficiency

Buying a ready-made platform involves predictable SaaS fees and moderate setup costs, significantly lower than building a custom platform. Deployment is quick, typically within a month, allowing businesses to start processing payments almost immediately.

Rapid deployment

The significantly reduced time-to-market (1-3 months) is a major advantage of buying a platform. Businesses can quickly integrate and start using the platform, avoiding the lengthy development phase associated with building.

Minimal maintenance

Bought platforms offer maintenance as part of the subscription, reducing the burden on the business. The provider handles software updates, security patches, and compliance, ensuring the platform remains up-to-date and secure without requiring significant internal resources.

Scalability

Bought platforms are designed to handle varying transaction volumes. They can scale up or down based on business needs, providing flexibility and supporting growth without major overhauls or additional investments.

Innovation and updates

Providers of bought platforms continuously invest in innovation to stay competitive. This ensures businesses have access to the latest features, security enhancements, and compliance updates, keeping them ahead of market trends.

Takeaway: comparing Build or Buy a payment infrastructure

Build or Buy a payment infrastructure

Conclusion

Understanding the components and significance of a payment infrastructure platform is vital for any business. Building a platform offers control and customization but involves high costs, long development times, and ongoing maintenance. Conversely, buying a platform provides cost efficiency, quick deployment, minimal maintenance, scalability, and continuous innovation. Businesses must carefully evaluate these factors to choose the best approach for their needs.

About NORBr

NORBr provides an attractive ‘Buy’ solution, reducing the extensive costs, time, and complexity of building payment infrastructure from scratch. Our ready-to-use platform enables rapid deployment and scaling, offering significant competitive advantages in a fast-evolving market. This reduces errors and frees up resources for strategic initiatives. According to Finextra, automation is crucial for modernizing payment systems and improving efficiency.