In our previous articles, we focused on how to develop a payment gateway, including a thorough description of each component, and its impact on the overall efficiency and functionality. This time, we will take a look at another participant in the process of conducting financial transactions, and provide you with our insights on how to build a payment processing app.

According to the forecast by Markets and Markets, the Payment Processing Solution Market is projected to grow from $103.2 billion in 2023 to $160 billion in 2028, with prominent companies PayPal, Fiserv, Global Payments, and Square continuing their growth. If you are considering entering this market and looking to develop a payment processor, this article powered by our fintech development expertise will guide you along the way. 

How to Build a Payment Processor App

Before getting started with payment processor development, let’s briefly clarify the concept of a payment processor as such. A payment processor or payment processing app is an umbrella term used to describe the solutions including but not limited to mobile mobile payment apps, POS systems, P2P payment apps, Apple Pay, Google Pay, direct debit, crypto wallets, and cross-border payment solutions. All these applications have payment processing technology at their heart. So, in this article, we will focus on this core element, and dive deep into the world of online payment processing.

Find out how to build a payment processing company from the ground up!

Understand the Payment Processing Essence Before You Start

At the start of the payment process, a credit card holder uses a payment gateway to enter their credit card data. The payment gateway first collects and authenticates this data, i.e. determines whether the transaction is bona fide. If the validation result is positive, the payment gateway encrypts the credit card and transactional data and sends it to a payment processor for further processing.

The payment processor picks up the data and conveys it to the cardholder’s card-issuing bank for it to authorize the transaction. The cardholder’s bank checks the transaction amount against the balance in the cardholder’s bank account with them, and either authorizes or declines the transaction.

If the validation result is positive, the payment processor relays the transactional details from the cardholder’s bank to the merchant’s acquiring bank for the latter to settle the transaction. A corresponding push notification about the transaction result is sent to the merchant.

How does payment processing work

Therefore, a payment gateway only provides a secure intake of the credit card and transactional data, while the payment processor handles the rest of the transaction. This explains the technical complexity of building a payment processing system. Still, we have such experience within the framework of one of our major projects. 

The team from SPD Technology built a direct-to-merchant, all-in-one omnicommerce Poynt Processing payment solution in 5 months, completing tight deadlines related to the start of the business season. This solution supports processing credit card data, as well as other methods, like recurring payments. In the first 10 months following the launch of Poynt Processing, the number of active merchants exceeded 200, and relatively soon the number increased to thousands.

The solution kept rapidly gaining in popularity and started drawing a great deal of interest on the part of major market players. In February of 2021, the Poynt project was acquired by GoDaddy (NYSE: GDDY), a $14B company for $320 million.

Now, let’s proceed with discovering how to build a payment processing app step-by-step.

Take a Look Into Payment Processing App Back-End Components

Payment processing system architecture is complex and includes various back-end components working together to facilitate secure and efficient transactions. Here’s an overview of each component.

Payment processing app back-end components

Cloud Infrastructure

This is the network of servers, storage, and computing resources that are hosted and managed by third-party providers. It allows payment processing systems to scale easily, provide high availability, and reduce infrastructure management overhead. Cloud infrastructure enables the payment system for processing to handle varying workloads, improve reliability, and enhance performance. It also allows for the seamless integration of other components and services.

Why is cloud infrastructure a better solution for payment processing systems compared to having servers on-premise? There are a few significant advantages of having your servers in the cloud:

  • Scalability. Cloud services allow payment processing systems to scale resources up or down based on demand. This scalability is particularly important for handling varying transaction loads, especially during peak times such as holidays or promotional events.
  • Cost optimization. Cloud services typically operate on a pay-as-you-go model, allowing organizations to pay for the resources they use, and ensuring cost flexibility.
  • Business continuity. Your payment system will remain operational even in the event of hardware failures or other issues, since cloud providers offer geographically distributed data centers, providing high availability and redundancy.
  • Data security. Ensuring data security in Fintech has always been of the utmost importance, and reputable cloud providers invest heavily in security measures, including encryption, access controls, and regular audits. They often have dedicated security teams to monitor and respond to potential threats.

According to Precedence Research, Infrastructure as a Service (IaaS) Market size was valued at $65.95 billion in 2023, with top players being Amazon Web Services, Inc., EMC Corporation, Google Inc., IBM Corporation, and Microsoft Corporation. There are enough viable options of high-end cloud providers for your solution!

Payment Gateway Integration

Your system should be able to effectively integrate with gateways. Processors and gateways often provide APIs that allow seamless communication between the two. Those APIs define a set of rules and protocols that enable different software applications to interact with each other. More specifically, APIs enable the exchange of transaction data between the merchant’s platform, the payment processor, and the payment gateway.

Need a deeper look into how to approach payment gateway integration? Find the step-by-step instructions in our detailed guide!

Additionally, some processors on the market offer Software Development Kits (SDK) that include pre-built libraries and tools to simplify the integration process. SDKs provide a set of pre-coded functions and modules that developers can use to implement payment functionality more quickly.

To build custom APIs and SKDs, you need to hire a dedicated development team with a deep understanding of the Fintech industry, domain expertise, and proven experience with completed projects.

Clearing and Settlement System

Clearing involves the process of matching and reconciling transactions between buyers and sellers, while settlement involves the actual transfer of funds. The clearing and settlement system ensures that transactions are accurately processed and funds are transferred between the relevant parties. The clearing and settlement system plays a vital role in ensuring that financial transactions are settled accurately and on time.

Here are the main steps that need to be taken to develop these sub-systems:

  1. Clearly define the requirements of the clearing and settlement system, including the current regulations and compliance standards in the financial industry.
  2. Design the overall architecture and determine how the system will interact with other components such as gateways, databases, and external financial institutions.
  3. Develop mechanisms to capture and store transaction data, including details such as transaction amount, timestamp, involved parties, and any relevant metadata.
  4. Build functionality for reconciling accounts to ensure that transactions match across different ledgers. Implement automated reconciliation processes to identify and resolve discrepancies efficiently.
  5. Develop processes for settling funds between different parties involved in a transaction.
  6. Define settlement periods and cycles. 
  7. Implement robust risk management solutions and fraud prevention mechanisms.
  8. Develop reporting features that provide insights into the clearing and settlement process. 
  9. Implement robust security measures to protect sensitive financial data. Utilize encryption, secure APIs, and follow best practices for securing financial transactions.
  10. Ensure that the clearing and settlement system complies with relevant financial regulations and industry standards.
  11. Conduct thorough testing in a controlled environment to ensure the reliability and accuracy of the system. Perform unit testing, integration testing, and end-to-end testing.
  12. Plan for ongoing maintenance and updates, follow the changes in the standards and compliance. Regularly review and enhance the system to address any emerging issues, improve efficiency, and incorporate new features.

Struggle to understand payment processing compliance specifics? Our experts prepared a comprehensible guide into this matter!

Database Management System (DBMS)

The next important component on your way to build a payment processor is a Database Management System (DBMS). It is responsible for storing, organizing, and managing the data related to transactions, customer information, and other relevant details. It provides a structured and secure way to handle data.

The DBMS is crucial for maintaining a reliable and consistent database, ensuring data integrity, and supporting efficient retrieval of information. It helps in managing customer accounts, transaction history, and other data associated with payment processing.

Security Infrastructure

Security is paramount in the development of any Fintech project. From implementing KYC standards in Finance to measures such as encryption, tokenization, firewalls, and other security protocols to protect sensitive data and prevent unauthorized access or fraud are all security infrastructure elements to consider. 

When you develop a payment app, the most important security elements you need to get familiar with include:

  • Strong encryption protocols, for example TLS.
  • Tokenization for online credit card processing.
  • Strict access controls.
  • Secure API practices.
  • Firewalls and Intrusion Detection Systems (IDS).
  • Regular security audits and penetration testing.
  • Multi-Factor Authentication (MFA).
  • Implement checksums and hash functions to verify the integrity of data.
  • Advanced analytics, Machine Learning, and Artificial Intelligence for monitoring of transaction patterns and detecting anomalies indicative of fraud.
  • Regularly updated incident response plan.
  • Data Encryption for databases.
  • Regular software updates and patch management.
  • Full compliance with industry standards for security.
  • Regular employee training.
  • Physical security measures include restricted access to data centers, surveillance, and secure storage of physical hardware.

API Layer

The API layer provides a set of interfaces that allow different components of the payment processing system to communicate and exchange data, and enable seamless integration with external services, as well as applications.

Andrii Semitkin: Delivery Director at SDP Technology

Andrii Semitkin

Delivery Director at SDP Technology

“Previously, we mentioned that APIs are required for integrating gateways, however, the API layer facilitates interoperability between other components too, allowing third-party services, mobile apps, or other systems to connect to the payment processing system.” – Semitkin

So, having a well-designed API layer, ensures flexibility, scalability, and the ability to adapt to changing business requirements.

Analyze Payment Processing App Features

With back-end components out of the way, let’s talk about the most important features your payment app needs to have, in order to keep up with existing solutions.

Payment processing app features

User Authentication

At the very least, your solution needs to have basic user registration and login functionality. If we talk about more advanced features, having Multi-Factor Authentication, Single Sign-On (SSO), or even Biometric Authentication will be a great idea to ensure the highest level of security even at the stage of login. 

Transaction Processing

Being at the heart of your payment processing app MVP,  it will be good enough to have a simple, but yet secure and effective payment initiation and processing system. If you desire more advanced functionality, consider adding:

  • Advanced Transaction Routing that involves intelligent and dynamic routing of payment transactions based on various criteria. This can include factors such as cost optimization, payment method preferences, currency conversion rates, and the performance of payment processors.
  • Real-Time Payment Tracking enables users to monitor the status and progress of a payment transaction in real-time, from initiation to completion.
  • Support for Diverse Payment Methods that involves enabling a payment processing system to accept payments, such as credit card payments, debit cards, digital wallets, bank money transfers, and alternative payment methods.

Payment Gateway Integration

You need to implement at least basic functionality for seamless integration with multiple payment gateways. Having the support of international transactions from the start will be a big plus.


Most commonly, tokenization is used for credit card processing, protecting sensitive financial data. However, tokenization can also be leveraged for other purposes, like token vault management, providing an additional layer of security.

User Account Management

For MVP, it is essential to have user profile creation functionality with basic account settings. However, for a full-fledged product, enhanced account management with user roles, permissions, and customizable profiles is an industry standard for this type of solution.

Transaction History

In addition to implementing basic transaction history for users, it will be nice to have automated transaction reporting, customizable analytics, and advanced search capabilities.

Notification Service

Basic transaction notifications are expected in a payment processor, but you can improve on convenience by allowing users, merchants, and administrators to configure and receive real-time notifications based on their preferences.

Reporting and Analytics

Standard transaction reports provide insights into transaction volumes, success rates, and revenue including daily, weekly, and monthly summaries with pre-defined parameters. If we talk about the more advanced approach to reporting, allow users to create personalized dashboards by selecting and arranging Key Performance Indicators (KPIs) and metrics, as well as implement advanced analytics tools for trend analysis, forecasting, and performance tracking.

Another welcome addition to reporting and analytics functionality will be robust Fraud Detection and Anomaly Detection mechanisms. To implement them, you need a development team with solid Machine Learning and Artificial Intelligence expertise. With their help, you will be able to build real-time Fraud Detection software  that can identify unusual patterns, such as unexpected transaction amounts or irregular transaction timings.

Customer Support Tools

Standard customer support features for issue resolution include support channels like forms, FAQs, email, or contacting the manager via phone. You can enhance customer support capabilities by integrating customer support tools directly into the payment processor platform, including a ticketing system for tracking and managing customer issues, as well as live chat for real-time assistance.

Cross-Border Digital Payments

While for an MVP-level solution, limited or no support for handling transactions across international borders is suitable, for a growing business it will be a good idea to be ready for cross-border payments.

Advanced capabilities for managing complex aspects of cross-border transactions include implementing tools for managing currency conversion rates dynamically and providing tools for transparent handling of cross-border transaction fees.

Audit and Logging

The purpose of logging is to capture system events for troubleshooting purposes, so there definitely should be functionality for recording essential system events, errors, and transactions, including timestamps and basic details. Comprehensive audit logs, user activity tracking, and compliance auditing can be a great addition to expand basic audit and logging functionality and provide you with more user information to improve your processor. 

Consider Front-End Development Best Practices

Whether you are considering blockchain payment processor development, a small business credit card processing solution, or a digital wallet, the following best practices will come in handy to cover your Front-End part of the solution.

Create a Clear Yet Secured User Authentication Form

Important things to consider while developing a user authentication form is implementing secure password policies and offering password strength indicators. You need to set policies for password complexity, length, and expiration, including setting measures to prevent the reuse of old passwords. It will be nice to add visual cues such as color changes, progress bars, or icons to indicate password strength and provide feedback in real-time as users type their passwords.

Avoid generic error messages, especially the ones that reveal sensitive information. Instead, specify whether the username or password is incorrect and implement account lockout mechanisms after a certain number of failed attempts.

Think of Payment Initiation Form Details

Follow the idea of a clean and intuitive design for entering payment details, which includes grouping related fields together logically, such as card details and billing address, and using intuitive labels and providing tooltips for any unfamiliar terms. 

Make sure to apply input masks to format card numbers, expiration dates, and other relevant fields automatically, as well as validate and format inputs as users type to prevent errors. It will be great to have validation on the client side to display immediate feedback on errors, such as wrong fields and invalid formats. 

Develop a Clear Transaction Confirmation Dialog Window

It is crucial to display transaction details in an easily scannable format for the user and clearly show the payee, amount, and any associated fees. Add in a two-step confirmation process, using a modal or confirmation dialog for the first step, and display a summary with a “Confirm” button for the final confirmation step. Don’t forget to offer a concise history of recent transactions on the confirmation screen, and use responsive design to ensure a consistent experience across devices.

Enable Transaction History and Receipts

Offer the users search functionality with filters for date range and transaction type, including group transactions by date or category for easy navigation. Use pagination or infinite scrolling based on user preferences, and load older transactions seamlessly as the user scrolls.

Ensure text contrast and readability for users with visual impairments, provide alternative text for images, and use semantic HTML for screen readers.

Use Data Visualization for a User Account Dashboard

One of the most important things here is to display account balances prominently at the top of the dashboard, as well as using clear typography and styling to make the information easily readable. You should keep in mind responsive design here as well, and prioritize essential information to fit smaller screens.

The user account dashboard is a great place to implement some visualizations for greater engagement, for example, charts or graphs with interactive elements for visualizing spending patterns and account activity.

Design an Easily Navigable Help Center Interface

Make sure to have a dedicated section for FAQs with well-organized categories, which includes a search bar with autocomplete functionality. To provide an intuitive help interface, design an easily navigable help interface with a user-friendly layout and consider offering contextual help that adapts to the user’s current context within the application. 


Hopefully, this article becomes a starting point in your journey of how to build a payment processing system. Creating such a system is a complex process, which requires not only deep domain knowledge, an expert team, and willingness to complete all required certifications and regulations, but also a desire to become a market leader and introduce an unprecedented solution to the industry. We, at SPD Technology, would be glad to support you and offer complete dedicated software development team services to build a robust payment processing app! 


  • How to create a mobile payment app or a web app with payment processing?

    Your development team should follow a certain process, that includes:

    • Defining requirements
    • Choosing technology stack
    • Implementing security practices and adhering to industry standards
    • Coding solution’s back-end and front-end parts
    • Testing
    • Complying with relevant regulations
    • Maintaining and monitoring.