Payment gateway, is a type of business that involves a lot of technology, legality and back expertise that many of us don't possess. And it's fair, the business itself is niche is meant for those with the technical and legal proficiency to handle to it. So, to answer your question - No, I can't. But that doesn't mean you can't.

The process of starting a payment gateway as a business is not an easy one. But, no endeavour worth trying out is. So, through this blog, we are going to tell you everything from the process of payment way to the registration required to run the business.

Let's begin.

How does a payment gateway function?

One can explain the function of payment gateway with a simple one-liner:

Establishing a secure connection to enable electronic monetary transaction.

But, when you break down this line, you'll be faced with many more questions.


What does it mean by establishing a secure connection?

Between which entities is it establishing the connection?

How is the monetary transaction taking place?

Let's now answer these questions:

What does it mean by establishing a secure connection

A payment gateway is not just a gate that allows financial transaction to go through. When the transaction is initiated, it forms a tunnel. It's a tunnel that only takes the electronic signals and hides the important and confidential user information. No one - not the buyer, not the seller, not me or you, can see anything other than a stream of gibberish - in technical terms, encrypted data. It ensures that the transactions goes smoothly without anyone swooping in and seeing the data.

Which are the entities on either side of the connection?

On one side of the payment gateway, is the payer, and on the other, the seller.

How does the monetary transaction takes place?

Payment gateway process takes place in three stages:


E stage: Also known as the Encryption Stage. It starts just when the user enters the details. The payment gateway encrypts data and codifies it so that no one other than the intended can decrypt it.

A Stage: direct-payment-gateway Also known as the Authorization Stage. Here, the details of the user are forwarded to their (user's) bank. They are the intended recipient of the details and are the ones that decrypt the details. Upon decryption, they assess whether correctness of the details.

F Stage: It's the finalization stage. If the bank's assessment says that the data that the user has entered is correct, the payment is transferred to the one it was meant for.

Requirement to start a payment gateway for India

To start a payment gateway intended for usage in India, one has to obtain the Payment gateway license. The authority responsible for granting this authorization is the Reserve Bank of India. But, it only does so after you have everything covered - from the right process, right PSARA gateway registration cost to the right documents.

Following are the pre-requisites to apply for payment gateway license:


You should have financial stability required to start a payment gateway. And the requirement is quite high. At least, your net worth should be INR 15 Crore

You should have a robust business plan. That plan should be sufficient to increase your net worth by 10 Crore to INR 25 Crore.

The payment gateway technology that you've created should have the approval of PCI DSS - Payment Card Industry Data Security Standard.

Process to get your hands on the payment gateway license

To get your hands on the payment gateway license, you must:

1. First get the documents ready:

a. Certificate of Incorporation of your payment gateway company

b. PCI DSS certificate issued to you

c. Memorandum of Association

d. ID proofs of the directors and shareholders

e. A duly signed by the CA Net worth Certificate

f. Business plan to enhance your business's net worth

g. Source code of the payment gateway

h. Payment gateway charges in India that you've implemented

i. Back end access to the payment gateway system.

2. File the online application for payment gateway registration

3. Let the RBI go through each and every document and your application.

4. Follow up with the Reserve bank in case of any issues.



5. If there are no issues, you'll be granted the license

Conclusion

While the writer of this blog can't afford to run a payment gateway, you definitely can. Make sure that your finances are good enough to deal with the requirements, that includes the payment gateway registration fees. And check each and every aspect of your technology before giving the application to RBI.








Vicky Gupta is a business consultant specializing in nuanced business registrations. His current domains are payment gateway license and Bee Certification. Through his blogs, he has been able to aid a lot of start-up business owners.