Procedure for obtaining Payment Gateway License for Starting a Payment Gateway Services
According to the PSS Act, the willing entity needs to make an application to the central bank of the respected country for obtaining the license. For details, read the steps described below:
Step 1: Filing an application to the central bank of your respected country
As per Section 5 (1) of the PSS Act, the entity must file an application to the Chief General Manager of the Department of PSS at the Central Office of the central bank of your respective country.
Step 2: central bank will check the credentials
According to Section 6 of the PSS Act, the central bank of your respected country possesses the power to hold inquiries as it could be necessary for satisfying itself regarding the authenticity of the details submitted by the applicant company. Furthermore, it’s essential for checking the credentials of the involved entities.
Step 3: Central bank will verify for certain conditions
Before issuing the authorization, the central bank shall take into account the following conditions:
- The need for proposal payment system or the services proposed to be carried by it;
- The medium through which the transfer will take place in the proposed payment system;
- Terms and conditions regarding the proposed payment system including any security procedure;
- Technical standards set for the payment system or the structure of the payment system;
- The financial status of the management and the integrity of the entity;
- Terms and conditions governing the relationship among the customers and the payment providers;
- The method for netting payment instructions that affect the obligations of payment under the payment system;
- Timeframe for authorization;
- Credit and monetary policies
Step 4: Issuance of Authorization for commencing Payment Gateway Service
If the central bank finds that the applicant satisfies all the requirements as laid down in Section 7 (1) of the concerned Act, it will issue the Authorization Certificate in Form B. Afterward; the applicant can commence and carry on the payment gateway service.
Step 5: Processing of application
According to Section 4 of the PSS Act, the central bank needs to process the application of authorization as soon as possible. Furthermore, the maximum time limit for processing is six months from the date on which the applicant has filed the application for authorization.
What is a Payment Gateway License and How Payment Gateway Works?
Payment Gateways: intermediate between the banks and the websites facilitating the communication of Transaction information. They conceive information from the payer bank and takes the information to the receiving banks and note their feedback, i.e whether the transaction is approved or declined.
The security of the funds transacted is an integral component of the payment gateways. Sensitive information such as Debit/Credit Card Numbers, internet banking ids, and passwords, etc. need to be protected from any fraud and misrepresentations. It is for this reason that the card associations have created various rules and regulations governing security standards to be followed by anyone getting access to card information such as payment gateways. These rules and standards are called the Payment Card Industry Data Security Standard.
Registration of Payment Gateway Business in India? Where to Apply for Payment Gateway License?
The first step to be followed for starting a payment gateway business in countries is to register your business in the country. The business can take the form of sole-proprietorship, partnership or the company. The business of payment gateways is best suited if formed as private limited company countries.
The Basic Requirements for the Registration of a Payment Aggregator
- Minimum of two members and two directors
- Capital Requirement-Net worth of Rs. 15 crore, which needs to be increased to Rs. 25 crores within 3 years of its operation.
- Address proof of the business.
- Business plan for 5 years
- Company’s PAN and a current account in the name of the company.
- System flow and Code testing report by Software certifying agency
- Registration is subject to central bank Discretion
Secondly, since Service is the main area of operation of the Payment Gateways, therefore, the registration under service tax is mandatory. For this, the business has to acquire the Service Tax Registration Number.
The most important part associated with the payment gateway business in India is the PCI DSS Compliance.
The full form of (PCI DSS) is The Payment Card Industry Data Security Standard. It was launched on September 7, 2006, and contains a widely accepted set of rules and regulations intended to optimize the security of credit, debit, and cash card transactions and protect cardholders against any fraud. The basic purpose of their launch was to manage the ongoing evolution of the Payment Card Industry (PCI) security standards with the focus to improve payment account security throughout in processing the transactions. Payment Gateway license is most difficult and there is certain software-related compliance involved apart from regulatory compliance.
How do Payment Gateways work?
The various tasks conducted by the Payment Gateways once the customer places the order from an online store, are as follow:
First of all, the browser, which the customer uses for the transaction, encrypts the data to be sent to the vendors’ server. The transaction data is then sent to the payment processor by the payment gateway.
Then, the payment processor sends the data to the card association. The Bank issuing the credit card views the transaction at this point and accordingly agrees or denies it.
Filling the Order
The authorization pertaining to the merchant and the customer is forwarded to the processor to the Payment Gateway. Once the response is received, it is transmitted to the website to process the payment. The information is interpreted and the payment is generated. All these take only a few seconds of time.
Create a Business Plan
“Going into business without a business plan is like going on a mountain trek without a map or GPS support – you’ll eventually get lost and starve!”
A good business plan guides you through each stage of starting and managing your business. You’ll use your business plan as a roadmap for how to structure, run, and grow your new business. It’s a way to think through the key elements of your business.
Business plans can help you get funding or bring on new business partners. Investors want to feel confident they’ll see a return on their investment. Your business plan is the tool you’ll use to convince people that working with you or investing in your company is a smart choice.
Contact Equipment Leasing Companies
A leasing company will help you generate business by helping cash-strapped small-business owners finance their credit card processing terminals, equipment, and ATM machines. You can give a customer a choice: Lease a terminal for $40 per month, or purchase it outright for $1,150, or whatever your price is. Most customers will lease it. The leasing company will then send you a check for the purchase price of the terminal, minus their leasing fee.
Research Wholesale Equipment Sources
Obtain a wholesale source of equipment. To make a profit on equipment, or compete successfully with other providers. So, you will need to get a distributor agreement with one or more transaction systems manufacturers. Some prominent companies include VeriFone, Hypercom, and Diebold.
Hire a Sales Team
These people will be responsible for calling on business owners and soliciting their business. Most are paid on commission or on a salary base plus a commission and work as independent contractors. The manager will receive an override on all the business his sales force does. You will have to offer the sales force enough in compensation to keep them working on your behalf. But not so much that your business is no longer profitable.
Hire a Marketing Team
Your sales team can generate business by calling on potential clients and working with them to develop a relationship. A marketing team is also essential for the promotion of your business. An online presence as well as digital, print, and even broadcast advertising.
How do I start a payment processing company ?
The simplest way to break into the payment-processing business is by forming an independent sales organization, or ISO, to solicit merchants to sign on with you and route their credit and debit card payments through your company. The industry is competitive, however, and you will be going head-to-head with rival processors on a regular basis competing for business. You will receive a percentage of credit card volume, a flat fee for each PIN-based credit card transaction, and whatever you can get on the payment processing equipment.
How do payment processing companies works ?
Once the merchant has obtained a merchant account, whenever a customer purchases an item with a credit or debit card, the merchant submits the purchase transaction information to the payment processor used by its acquiring bank via a payment gateway.
What is a Payment Processor?
A payment processor is a company authorized to process credit card transactions between buyers and sellers.
How Does a Payment Gateway Work?
Payment gateways are software and servers that transmit transaction information to acquiring banks and responses from issuing banks. Essentially, payment gateways facilitate communication within banks.
Security is an integral component of all payment gateways; sensitive data such as credit card numbers need to be protected from any fraudulent activities. The card associations have created a set of rules and security standards which must be followed by anyone with access to card information, including gateways. This set of rules and security standards is called the Payment Card Industry Data Security Standard (PCI-DSS or PCI).
Submitting an order is completed using the HTTPS protocol, which securely communicates personal information through the parties involved in the transaction. Payment gateways usually charge those who use them a per-transaction fee.
Many eCommerce merchants use Payment Service Providers to gain access to payment gateways and thus be able to accept payments. The Payment Service Provider will, in this case, make the gateway functionality available for the merchant and its customers.
How Does a Payment Processor Work?
Payment processors enable merchants to receive debit or credit card payments online by providing a connection to an acquiring bank. These processors perform many functions, such as evaluating whether transactions are valid and approved, using anti-fraud measures to assure that a purchase transaction is initiated by the source it claims to be. Processors are held to standards and regulations organized by credit card associations. These standards include rules regarding fraud, chargebacks, and identity theft.
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