Payments engines are the backbone of modern financial environments, facilitating the transfer of funds for both customers’ purchases and business-to-business (B2B) transactions. With the volume of global cashless payments set to rise from about 1 trillion to almost 1.9 trillion transactions between 2020 and 2025, the demand for reliable payments engines will only increase.

This guide will explain how a payments engine works, its benefits and challenges, and how to integrate a payments engine with existing financial systems.

What’s in this article?

• What are payments engines and how do they work?
  
• Benefits of payments engines
  
• Challenges with adding a payments engine to existing financial systems
  
• How to choose the right payments engine
  
• Preparing for integration
  
• What the integration process looks like
  
• Post-integration best practices
  

What are payments engines and how do they work?

Payments engines are software systems designed to process financial transactions. They are central mechanisms through which businesses handle payments, whether they’re receiving or disbursing funds. Here’s what they do and how they operate:

• Transaction processing: Payments engines can handle a variety of transactions, from straightforward purchases to complex, multi-party financial operations. They initiate, authorise, and complete payments. This includes steps such as verifying payment information, checking funds availability, and monitoring compliance with security standards. They support a range of payment methods (e.g., credit cards, bank transfers, digital wallets) and adapt to different payment technologies.

• Integration capabilities: Payments engines can integrate with other financial and business systems, including everything from accounting software to customer relationship management (CRM) systems.

• Security and compliance: Security is a top priority for payments engines. They incorporate advanced encryption and compliance protocols to protect sensitive data and transaction details against fraud and breaches.

Benefits of payments engines

Payments engines offer businesses a range of benefits that can improve internal processes, customer experience, and security measures.

• Speed and accuracy: Payments engines automate the transaction process, which reduces manual effort and mitigates errors. Businesses can achieve quicker transactions and lower operational costs.

• Security: Payments engines have strong, built-in security features that protect sensitive information and transactions against fraud. These features can help businesses maintain customer trust and adhere to regulatory standards.

• Customer satisfaction: Payments engines provide quick, reliable payment processing and support multiple payment options. This can help improve the overall customer experience.

• Scale: Payments engines can manage greater transaction volumes as a business grows without setbacks in performance or security.

• Cross-border transactions: Payments engines can process multiple currencies and uphold compliance with different international regulations. This simplifies cross-border transactions for businesses aiming to reach international markets.

• Integration: Payments engines can integrate with other business systems such as enterprise resource planning (ERP), CRM, and accounting software. This keeps data consistent across platforms, improves financial oversight, and supports better decision-making.

• Costs: By automating the payment process and reducing reliance on manual processes and traditional banking infrastructure, payments engines can help businesses cut costs. In using payments engines, businesses might reduce overhead and lower transaction fees more than with traditional methods.

Challenges with adding a payments engine to existing financial systems

Here are some challenges associated with integrating a payments engine into existing financial systems.

• Compatibility: Achieving compatibility between a business’s existing infrastructure and the new payments engine might require custom coding, extensive testing, or even upgrades to its current systems, which can be time-consuming and costly.

• Data migration: Moving sensitive financial data from your legacy systems to the new engine risks data loss, corruption, or breaches. This process requires meticulous planning, extensive testing, and a thorough backup strategy to mitigate risks.

• Security: Payment processing involves handling sensitive customer information, and integrating a new engine can introduce potential vulnerabilities. Businesses must conduct thorough security assessments, implement strong encryption protocols, and adhere to industry compliance standards.

• Compliance: When integrating a new engine, businesses must ensure compliance with all relevant regulations. This can involve complex legal and technical considerations.

• Operational disruptions: During the integration process, businesses might face temporary disruptions to their day-to-day operations. These include downtime, glitches, or delays in payment processing – which can frustrate customers and impact revenue.

• Costs: Integrating a payments engine requires financial investment in the software itself; potential hardware upgrades; and the expertise of developers, security professionals, and project managers.

How to choose the right payments engine

Each payments engine has its own set of features, capabilities, and costs. When choosing which is right for your business, you’ll need to assess both your specific business needs and all of the available options. Here’s a step-by-step guide.

Assess your business needs

Assess the strengths and weaknesses of your existing financial infrastructure before making any changes. First, identify the challenges of your current payment system, which might include the following:

• Slow processing times: Slow transaction times can cause cart abandonment and customer dissatisfaction.

• High transaction fees: Exorbitant payment provider fees can reduce your profits and make your business less competitive.

• Limited payment options: A limited range of payment methods could cost you sales.

• Frequent errors and glitches: Recurring technical issues or payment failures can disrupt your operations and erode customer trust.

• Lack of data insight: Without detailed analytics, it’s difficult to identify trends, refine your pricing, or personalise offers.

Once you’ve identified your challenges, define your goals. Those might include the following:

• Expansion into new markets: A payments engine that supports multiple currencies and localised payment methods can provide new opportunities for international expansion.

• Better customer experience: A payments engine with features such as one-click checkout and guest checkout can create a smoother, more convenient payment process.

• Reduced costs: A payments engine with automated tasks and competitive pricing can help you save money.

• Increased security: A payments engine with strong security features can protect your business and your customers’ information from fraud and data breaches.

• More data insight: A payments engine with advanced analytics can provide valuable insight to inform your business decisions.

Next, look at your transaction history to understand your payment needs, assessing factors such as the following:

• Transaction volumes: How many transactions do you process daily, weekly, or monthly? Choose an engine that can handle your current and anticipated transaction load.

• Average transaction value: What is the average amount spent per transaction? This can influence the pricing structure you choose.

• Preferred payment methods: Which payment methods do your customers use most frequently?

• Chargeback rates: Do you have a high rate of chargebacks or disputes? This could indicate a need for better fraud prevention.

Evaluate payments engine options

Once you’ve identified your goals and required features, here’s how to evaluate available options.

Available features

• Payment methods: Consider an engine that supports the payment methods your target audience prefers (e.g., credit cards, digital wallets, bank transfers).

• Recurring billing: If you have subscription services or regular payments, find an engine with recurring billing functionality to automate the process.

• Fraud prevention: Seek advanced fraud detection tools such as machine learning algorithms and address verification systems.

• Customisation: Find options that let you customise the checkout experience to match your brand and give your customers personalised payment options.

Scale

• Transaction volume: Find an engine that can handle your current transaction volume and has the capacity to scale as your business expands.

• Peak traffic: Consider an engine that can handle sudden peaks in traffic during sales or promotional events.

• Multi-currency support: If you plan to expand internationally or have customers in different countries, seek multi-currency support.

Integration

• API availability: Consider an engine with comprehensive application programming interfaces (APIs) that enable easy integration with your existing systems and platforms.

• Technical support: Find a vendor with strong technical support and resources to assist with the integration process.

• Integration time frame: Assess the estimated integration time and how this might impact your project timeline and budget.

Security

• PCI DSS compliance: Ensure your engine adheres to the Payment Card Industry Data Security Standard (PCI DSS).

• Data encryption: Determine whether your engine uses strong encryption methods to protect sensitive customer information.

• Fraud monitoring: Verify that your engine has strong fraud detection and prevention mechanisms.

Pricing

• Transaction fees: Determine whether fees are per-transaction, a percentage of the transaction amount, or a combination of both.

• Monthly fees: Research any monthly subscription or maintenance fees.

• Setup fees: Assess any initial setup fees.

• Hidden fees: Consider any hidden fees or charges that could add up over time.

Customer support

• Technical support: Seek a vendor with 24/7 technical support.

• Documentation: Find an engine with comprehensive documentation and integration guides.

• Training: Check if the vendor has training sessions or webinars to help you get the most out of the engine.

Preparing for integration

Here’s how to prepare your business to integrate a payments engine.

Project planning

• Objectives: Clearly outline what you aim to achieve with the integration (e.g., faster transactions, better security).

• Milestones: Segment the project into manageable phases with specific milestones and deadlines.

• Resources: Identify the resources required for the integration, including personnel, budget, and technology. Confirm you have the necessary support from key stakeholders and departments.

• Risks: Identify potential risks and develop contingency plans to mitigate them. Prepare for possible technical issues, data migration challenges, and temporary disruptions to operations.

Team assembly

• Project manager: Appoint a project manager to oversee the integration, coordinate between teams, and keep the project on track.

• IT specialists: Appoint IT professionals who can handle the technical aspects of the integration such as software development, system configuration, and network security.

• Finance and accounting: Engage finance and accounting personnel to align the new payments engine’s integration with your financial reporting and reconciliation processes.

• Operations and customer service: Involve operations and customer service teams to address any impact on day-to-day activities and customer interactions.

• Legal and compliance: Involve legal and compliance experts to navigate regulatory requirements and industry standards.

System backup

• Data backup: Perform a complete backup of your current financial data, including transaction histories, customer information, and accounting records.

• System backup: Back up all relevant systems and configurations to restore them if any issues arise during integration.

• Testing: Regularly test your backups to ensure they can be restored. This step confirms that your data is secure and can be recovered in an emergency.

Training

• Training materials: Develop comprehensive training materials including user manuals, video tutorials, and quick reference guides customised to different roles within your organisation.

• Training sessions: Conduct training sessions for all relevant employees, focusing on how to use the new payments engine, handle common issues, and understand any changes to workflows.

• Ongoing support: Establish a support system to address employee questions and concerns during and after the integration process. This might include dedicated support personnel, help desks, or online forums.

Communication

• Internal communication: Keep all stakeholders updated on the integration progress, key milestones, and any changes to the timeline. Regular meetings and status reports can help keep everyone on the same page.

• Customer communication: Inform customers about any changes that might affect them such as new payment options and temporary service interruptions. Clear communication can help manage expectations and maintain trust.

What the integration process looks like

Here’s how you integrate your payments engine into your financial systems.

API integration

Connect your website, mobile app, or other software platforms to the engine’s APIs. You can do so either through direct integration, where you write custom code to connect your systems directly to the engine’s APIs, or through integration platforms or plugins offered by the engine. Direct integration has the most flexibility but requires technical expertise, while platforms and plugins simplify the process with prebuilt connectors and tools.

Data migration

Move your existing customer and transaction data to the new engine.

• Data mapping: Match the fields in your existing data with the corresponding fields in the payments engine’s database.

• Data cleansing: Clean and standardise your data for compatibility with the new engine.

• Data transfer: Transfer data either in batches or in real time, depending on the volume and sensitivity of the data.

Configuration

Configure the payments engine to match your specific business rules and preferences.

• Payment methods: Enable your chosen payment methods.

• Currencies: Implement the currencies you want to accept.

• Fraud rules: Define the parameters for fraud detection and prevention.

• Notifications: Configure email or SMS notifications for successful transactions, failed payments, or suspicious activity.

Testing

Before the integration goes live, conduct thorough testing in your sandbox environment.

• Payment flow: Test the entire payment flow from checkout to confirmation for all supported payment methods.

• Error handling: Simulate different error scenarios, such as declined payments or connection failures, to ensure the system handles them seamlessly.

• Security: Conduct security tests to fix any vulnerabilities.

Deployment

Once you’re confident that everything is working smoothly, deploy the integration to your production environment. This should be done during a low-traffic period to mitigate any potential disruptions.

Post-integration best practices

Here are some post-integration best practices to keep your payments engine running smoothly.

Performance monitoring

Keep an eye on the following metrics:

• Transaction success rates: There should be a high percentage of successful transactions. Any substantial drop could indicate technical issues or potential fraud.

• Processing times: Keep track of how long it takes to process transactions. Slowdowns can frustrate customers and impact your revenue.

• Error rates: Monitor for any errors or failures in the payment process. These could be caused by technical glitches, incorrect configurations, or external factors.

• Anomalies: Look for any suspicious patterns or anomalies that could indicate fraudulent activity.

Security audits

Regularly conduct security audits using the following processes:

• Vulnerability scans: Use automated tools to scan your systems for potential security weaknesses.

• Penetration testing: Hire ethical hackers to try to breach your systems and identify any loopholes.

• Code reviews: Regularly review your code for any security flaws or vulnerabilities.

• Employee training: Educate your staff on security best practices and the importance of data protection.

Feedback loops

Gather feedback from both your customers and your internal teams.

• Customer experience: Are your customers satisfied with the new payment process? Are there any issues or areas for improvement?

• Operational efficiency: Are your internal teams finding the new system easy to use? Are there any bottlenecks or inefficiencies?

Continual optimisation

Based on the data and feedback you gather, continually optimise your payments engine’s configuration and settings.

• Fraud detection: Fine-tune your fraud detection rules based on observed patterns and trends.

• Checkout flows: Experiment with different checkout flows to improve conversion rates.

• Personalized offers: Use customer data to personalise payment options and offers.

• Manual processes: Automate manual processes where possible.

Regular updates

New payments technologies, regulations, and security threats emerge regularly. Stay informed and updated with these steps:

• Software updates: Install the latest software updates and patches to keep your engine secure and up-to-date.

• Compliance: Ensure your payments engine complies with all relevant regulations as they evolve.

• New features: Explore new features and integrations from your payments engine provider to improve your payment capabilities.