Payments stack – the basics: What it is and how to build the right one for your business


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  1. Introduction
  2. What is a payments stack?
  3. Why is a payments stack so important for businesses?
  4. Key components of a payments stack
  5. How to build the right payments stack
  6. Stripe’s unified payments stack approach

The rise of fintech, mobile wallets and alternative payment methods means that a carefully designed payments stack is essential for companies looking to streamline their payment operations, secure customer data and extend their market reach. Whether you're a multinational corporation or a small local enterprise, the payments stack can have a profound impact on your bottom line, operational efficiency and market competitiveness.

We'll cover the essential components of a payments stack, including insights on how to assemble an efficient, secure and scalable system for managing customer transactions.

What's in this article?

  • What is a payments stack?
  • Why is a payments stack so important for businesses?
  • Key components of a payments stack
  • How to build the right payments stack
  • Stripe's unified payments stack approach

What is a payments stack?

A payments stack refers to the comprehensive framework that a business uses to manage its transactions and payment processes. It includes all of the technological components and services used to accept, process and distribute payments, and encompasses everything from the customer interface to back-end processing and financial reconciliation. This framework is critical for businesses that want to maintain a competitive advantage in today's digital economy, which demands intuitive, flexible and reliable payments.

A "payments stack" is akin to technology or software "stacks", which refer to the layers of components or services that are built on top of each other to deliver a certain functionality. Similarly, the payments stack consists of different layers, with each providing a specific function in the overall payment process.

Why is a payments stack so important for businesses?

In the same way that a tech stack (the set of technologies powering a business) can have significant implications on a business's ability to innovate and adapt, a payment stack can shape a company's ability to handle transactions, and thus its financial operations. A payments stack can affect operational efficiency, revenue, customer experience, scalability, global reach and security, among other things. Here's how a payments stack affects different areas of a business:

  • Customer experience
    Today's customers demand fast, secure and seamless payment experiences. A well-designed payments stack can provide smooth transactions and cater to the customer's preference for multiple payment methods, including credit cards, digital wallets, cryptocurrencies and even local payment systems.

  • Revenue optimisation
    A payments stack plays a vital role in maximising revenue. By reducing friction in the payment process, it can enhance conversion rates and decrease basket abandonment. A high-performing payments stack can also support up-sell and cross-sell by enabling flexible pricing, subscription models and dynamic checkout experiences.

  • Operational efficiency
    The right payments stack can streamline financial operations by automating various processes (thereby minimising manual intervention), reducing error rates, improving the speed and accuracy of financial reconciliation, and reducing overhead costs.

  • Security and compliance
    In the age of frequent data breaches and cyber threats, a secure payments stack is crucial. A well-structured payments stack can ensure data protection, meet PCI-DSS compliance and reduce the risk of fraud, taking the burden off businesses and providing customers with peace of mind.

  • Scalability and global reach
    As a business expands, a scalable payments stack offers an efficient way to handle growth in transaction volume. Moreover, if a company plans to go global, the payments stack must be able to process international transactions, handle multiple currencies and comply with all applicable local regulations and payment methods.

  • Innovation and agility
    A flexible and adaptable payments stack allows a business to innovate and quickly respond to changing market conditions or customer demands. It enables companies to integrate with emerging technologies and new payment methods, and adapt to regulatory changes swiftly.

The payments stack is not only a tactical component for businesses, it's also a strategic asset that contributes significantly to a company's operational efficiency, customer satisfaction, revenue growth and competitive advantage. Because the stakes are so high, businesses must give their payments stack careful thought, aligning it with their current requirements as well as with their future growth plans.

Key components of a payments stack

Each business's payment stack will look different, depending on the unique needs and goals of the business. Some businesses may rely on a simple, single-provider solution, while others may use a complex, multi-provider solution with custom-built components. Regardless of the specific configuration, the objective is the same: to create a seamless, efficient and secure payment experience.

A comprehensive payments stack is comprised of several key components, with each serving a crucial role in the payment process:

  • Payment gateway
    The payment gateway is the first component that comes into play when a customer initiates a transaction. It is responsible for authorising the payment method, and whether it's a credit card, debit card or digital wallet. The payment gateway acts as a secure conduit, transmitting sensitive data securely between the customer, the merchant and the payment processor.

  • Payment processor
    The payment processor communicates with the customer's bank or card issuer to confirm if the customer has sufficient funds or credit available for the transaction. Once the customer's bank has confirmed the funds, the payment processor approves the transaction. The payment processor also handles the transfer of funds from the customer's bank account to the merchant's main business bank account.

  • Merchant account
    A merchant account is a specific type of bank account that holds funds from card transactions before they are transferred to the business's primary bank account. Businesses must have a merchant account to accept payments made with debit or credit card.

  • Payment service provider (PSP)
    A PSP provides businesses with a single solution for accepting a wide range of payment methods. This includes card payments, bank transfers and alternative payment methods. A PSP may also offer additional services, such as fraud protection and compliance support.

  • Risk and compliance solutions
    Risk and compliance solutions help businesses manage payment risks and ensure compliance with relevant regulations. Risk solutions include fraud detection software, anti-money laundering (AML) systems and solutions for adhering to PCI-DSS.

  • Acquiring bank
    The acquiring bank is the financial institution that accepts and processes card payments on behalf of the merchant. Once a payment has been authorised and processed, the acquiring bank deposits the funds into the merchant account.

  • Fraud management systems
    Fraud management systems use advanced algorithms and machine learning to identify and prevent fraudulent transactions. They analyse patterns and trends to predict fraudulent activity.

  • Checkout interface
    The checkout interface is the front-end component where customers enter their payment information. A good checkout interface should be user-friendly, secure and capable of supporting a wide variety of payment methods.

  • Billing and invoicing software
    Billing and invoicing software is essential for managing and recording transactions, generating invoices and providing customers with transaction details.

  • Reconciliation and reporting tools
    Reconciliation and reporting tools assist businesses in matching payment transactions with bank statements, identifying any discrepancies and generating financial reports.

In many cases, a payment processor may offer these components in bundled or integrated solutions. For businesses, the key is to ensure that the stack as a whole provides reliable, secure and efficient payment processing.

How to build the right payments stack

When a business starts building its payment stack, it must consider both tactical and strategic factors. Tactically, the business must ensure that the stack can handle its current needs, such as processing the types of payments that the company receives and interfacing effectively with the business's other systems. Strategically, the business has to think about its future needs. As the business scales, will the payments stack be able to handle increased volume? As the business expands into new regions, will the payments stack be able to handle new currencies and payment methods? These are just a few of the questions that businesses should ask.

Building the right payments stack is a multi-step process that involves careful consideration of your business's current and future needs, including:

  • Understanding your business needs
    Start by outlining your business's unique requirements. Identify the types of payments that you need to accept (e.g. credit cards, debit cards and digital wallets), the regions or countries in which you operate (as this affects the payment methods that you may need to offer), the expected volume of transactions and any specific industry regulations that you need to comply with.

  • Evaluating your customer preferences
    Analyse the payment preferences of your target audience. Consider factors such as the most common devices that customers use to make payments (e.g. mobile, desktop etc.), their preferred payment methods and their expectations for payment security.

  • Assessing your technical capabilities
    Look at the technical resources that are available to your business. Do you have in-house experts who can integrate and maintain complex payment systems, or will you need a solution that's easy to set up and manage? You will also need to consider your ability to manage data security and compliance.

  • Choosing your payment partners
    Based on the above factors, research potential payment service providers. Look at their reputation, the range of payment methods that they support, their pricing structure, the quality of their customer support and their ability to handle your expected transaction volume. Ensure that they comply with all the necessary regulations and standards, such as PCI- DSS.

  • Integrating your chosen solutions
    Once you've chosen your providers, the next step is integration. This could involve setting up your payment gateway with your website or app, integrating the payment processor with your existing systems, setting up a merchant account with your acquiring bank and implementing any additional tools, such as fraud management systems.

  • Testing your payments stack
    Before going live, test your payments stack thoroughly to ensure that all components are working together. Look for any potential issues with transaction processing, data security and user experience.

  • Monitoring and optimising your payments stack
    Once your payments stack is live, continue to monitor its performance. This includes keeping an eye on transaction success rates, speed of transaction processing, and incidents of fraud or other security issues. Use this information to optimise your payments stack continuously and improve customer experience.

Building a payments stack is an ongoing process, not a one-off task. As your business grows and evolves, so too will your payment needs. Revisit your payments stack regularly to ensure that it's still serving your business effectively.

Stripe's unified payments stack approach

Stripe offers a comprehensive, unified and integrated payments stack approach, which simplifies the way in which businesses handle online and in-person transactions. Instead of needing to piece together multiple services from different providers, businesses can rely on Stripe to provide a single, unified platform that can handle everything from payment processing to fraud detection and financial reporting.

Stripe's payments stack includes different components, such as a payment gateway, payment processor, merchant account, subscription management and advanced fraud protection. These components integrate fluidly, making it easier for businesses to manage their payment processes without worrying about technical integrations and compatibility issues.

Here's how Stripe's approach benefits businesses:

  • Simplicity and ease of use
    With Stripe, businesses don't need to navigate multiple platforms or deal with complex integrations. They can manage everything from one place, with a simple, intuitive interface. This can save time and reduce the potential for errors.

  • Scalability
    Stripe is built to handle businesses of all sizes, from small start-ups to large enterprises. As a business grows, Stripe can scale with it easily, handling ever-increasing transaction volumes. This allows businesses to focus on growth, rather than worrying about their payment infrastructure keeping up.

  • Global reach
    Stripe supports hundreds of different payment methods and over 135 currencies, enabling businesses to go global. Stripe takes care of currency conversion and local payment methods, making it easier to expand into new markets.

  • Security and compliance
    Stripe adheres to the highest standards of security and compliance. It provides features such as fraud detection and prevention, and is PCI-DSS compliant, which takes the burden of data security off businesses.

  • Continuous innovation
    Stripe is known for its continuous innovation and regular feature updates. This means that businesses using Stripe can take advantage of new payment technologies and methods as they emerge.

  • Improved customer experience
    With Stripe's unified integration, businesses can provide their customers with a frictionless payment experience, improving customer satisfaction and potentially boosting conversion rates.

  • Data-driven insights
    Stripe provides detailed reporting and analytics, offering businesses valuable insights into their sales and customer behaviour, which can in turn inform strategic decisions and help businesses optimise their payment processes.

Learn more about assembling the right suite of solutions to fit your business's needs here.

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