The financial industry landscape is changing dramatically, driven by shifting consumer behavior, an increased focus on customer experience and a higher reliance on technology-driven solutions. Banks, FinTech, insurance, financial services, e-retail, etc. every industry wants to thrive in this environment, improve their financial solution and deliver seamless digital payment services, be it UPI, BNPL, crypto-based payments, credit/debit card transactions, and so on, customers today expect a secure and easy payment experience. However, many companies struggle to deliver such seamless digital payment experiences due to high dependence on legacy-based operations and manual processes. With the rise of these disruptions, OutSystems high-performance low-code platform is coming up to be the right choice to assist enterprises in digitizing their payment solutions rapidly and streamlining finance operations while improving the customer experience in banking.
In this blog, we will learn about the fundamentals of the payment process, digital payments trends, and how OutSystems is helping solve disruptions in digital payments along with the OutSystems payment gateway integration process.
The fundamentals of payment process
Before diving into the details of OutSystems-enabled digital payment solutions, here are a few basic terminologies you must know about.
Terminology 1: Payment and payment methods
Payments mean the exchange of value for the benefit of any products or services. Payments can be made through cash, cheque, credit card, debit card, or online digital payment solutions. Earlier, barter systems were used to make payments, but today’s monetary system allows payments to be made via a nation’s established currency (and exchange of currencies in case of international or cross-border purchases). In today’s digital ecosystem, users make payments by leveraging online tools/mediums like the internet, tech stack, or digital platforms. The payment methods are:
- Large value payment system: These are used to settle large sums of money inter-bank or inter-country.
- Retail payment system: The transfer of funds from customers to merchants in exchange of goods or services. Retail payment system is classified into four major categories (shown in the diagram below)
Terminology 2: Payment ecosystem
When a customer initiates a transaction with a business, there are five parties involved:
- Merchant: Offers a product or service the customer is willing to pay.
- Customer: Chooses to transact with your business.
- Issuing Bank: Issues payment cards to the customers on behalf of card networks. They are responsible for the financial backing of any transaction undertaken through that card.
- Card Networks: Facilitates payment card transactions.
- Acquiring Bank: The host bank for the merchant’s bank account. It collects the funds from the issuing bank.
Terminology 3: Payment process
The payment process more-or-less includes the following 7 steps:
- The customer purchases a product or service and makes the payment
- The merchant submits a transaction
- The payment gateway securely sends the transaction to the processor
- The processor verifies and approves the transaction
- The customer’s bank sends money to the processor
- The processor sends money to the merchant’s bank and the status of the transaction- either approved or denied- to the gateway
- The merchant receives the message of approval or denial along with the money if it was approved
Difference between a payment gateway & payment processor
After the terminologies, we need to understand the difference between payment gateway and processor (often used interchangeably by users, however, they are two different terms). Refer to the below table:
| Payment Processor | Payment Gateway |
|---|---|
| A payment processor is a service responsible for keeping the communication between merchants and banks and managing the transfer of funds, so you get paid. | A payment gateway is a transaction processing tool that captures, stores, and transmits your card information from customers to acquirers. |
| Intermediary between business, customer’s banks and merchants banks. | Intermediary between a business and customer. |
| Can be used alone. | Must be used with payment processor. |
| Used for in person transactions. | Used for eCommerce or card not present transactions. |
The different types of payment gateways
Refer to the below table:
| Hosted Payment Gateway | Self-hosted payment gateway | API-hosted payment gateways |
|---|---|---|
| Direct users away from the checkout page in your website. They are redirected to the Payment Service Provider (PSP) site. | The payment information inside the merchants website is gathered from the user. | Users input their credit or debit card details directly on the merchants page. |
| It provides a secure, easy and customized tool. | It provides great customer service to users | It Provides a secure , easy and customized tool . |
Digital payment integrations in OutSystems
The following are two types of payment integrations in OutSystems:
- Payment gateway connectors: Several payment gateway connectors are readily available on the OutSystems Forge. This repository comes with reusable, open-code modules, connectors, UI components, and other solutions to speed up app delivery time. It also includes basic configurations and documentation that can be used to integrate these connectors.
- API: The payment gateway integrations like API or non-hosted payment gateways can be integrated using the REST API in OutSystems.
The payment gateway will provide the full documentation for consuming the API and configurations needed.
Process for digital payment integration in OutSystems
- Finalize the payment gateway and the integration approach you want to use.
- Create applications to support the core services and also the data model required.
- Define the data model. These data models may differ and depend on your selected payment gateway. But, the common entities can be the core entities, log entities.
How to connect API payment gateway integrations in OutSystems?
The following steps will help you integrate API-based payment gateway integrations via REST API in OutSystems:
- Create applications and modules required for API Integration as Integration service.
- Create a data model for business case and API integration.
- Consume the required API’s. Refer to the API documentation for details.
- Add Server/Service action to use these APIs.
- Now, the server/service actions that are created can be exposed in our applications to be used.
- Follow best practices and security practices while consuming and using these APIs in application.
Disruptions in FinTech and banking industry: How OutSystems helps
Over the past few years, hundreds of FinTech and digital payment solution providers have emerged worldwide, bringing much-needed change. In 2023, the digital payments industry will undergo immense transformation powered by rapid technological advancements and growing consumer demands. Some of them are as follows:
#1. The utter need for digital transformation in digital payment
Despite technological advancements, the FinTech industry is still using legacy systems slowing down digital transformation. Traditional software development is a long and expensive process. It can take months to develop, test, and deploy an application that might be outdated by the launch time. Banks need to spend a lot for such long development cycles. Only companies that can offer faster time-to-market products and services can sustain their business in this digital world. The demand for cashless and contactless payment methods will keep on rising. Thus the banking sector must be ready to adopt new technologies to facilitate more digital transactions. The BFSI industry should focus on users’ behavioral patterns to make sure they are offering customized and tailored solutions to customers.
How OutSystems helps:
- OutSystems enables rapid application development by a fully digital onboarding process of new users in the mobile application.
- Since OutSystems can integrate the apps into any third-party applications that enforce user authentication via text messages, photo ID, automated ID verification with pre-built integration for KYC solutions, and links to verify the email address, it makes the process more customer-centric, efficient, and faster.
- OutSystems made this easy through intelligent workflow capabilities to reduce the application process significantly, increasing customer satisfaction, and reducing the abandonment rate drastically.
- It reduces overall operational and development costs with faster development cycles.
#2. Improving customer relations
In banking and FinTech, customers demand personalized recommendations for services. Most enterprises cannot fulfill their needs because of the large number of users. A large part of customer experience for FinTech firms is how easily the platform or application can be used. The whole idea is to reduce the manual efforts of users and create a seamless experience with the increased efficiency and user-friendly features of the payment platform. The trust and loyalty of its customers doubles. The growth of digital transactions will initiate quick payment options that can be done from anywhere.
How OutSystems helps:
- Through low-code platforms, enterprises can use existing customer data and tailor their services based on each customer.
- OutSystems enables banking and FinTech omnichannel, where customers can complete all transactions through any digital device of their performance.
- OutSystems can create an intelligent customer centric-experience by enabling hyper-personalization capabilities for an omnichannel experience.
- OutSystems high-performance low code offers a 360-degree view of customer data for superior customer engagement.
- OutSystems empowers customers to open digital accounts within minutes.
#3. Reducing risk and fraud in digital payment
Build robust security applications with strong fraud and risk monitoring ability to deal with data theft, money laundering, and security breaches. Although FinTech organizations may have systems that enable businesses flexibility, they might lack proper data governance, putting customer data at risk. And data security should be one of your primary concerns. In addition to ensuring the privacy and security of financial transactions and operations, you should also ensure that customer support data is well protected.
How OutSystems helps:
- OutSystems renders many features that can help online payment companies to monitor risk effectively.
- Through OutSystems, built-in security features protect customers’ details and prevent them from falling prey to fraudulent activity.
- With extensive tracking features in OutSystems, you can quickly identify and resolve technical issues, reducing risk and fraud.
- The OutSystems platform can automate various manual business processes, reducing human errors. They can also create workflow automation processes using drag-and-drop tools.
- Through OutSystems, you can alleviate constraints on legacy software and decrease dependency on IT experts.
#4. Compliance
The FinTech and banking industry adhere to strict regulations, and any developed application must meet the requirements. If a business is not compliant, then it may land into serious troubles like paying fines, which is a tedious task to manage. Since banking and FinTech companies hold huge amounts of funds and extremely sensitive customer information, they are under intense scrutiny by the governing bodies. Maintaining compliance with such strict procedures is a major administrative and operational hurdle for firms of any size and must be tackled precisely. Banking and finance industries are expected to leverage the data collected through new technologies such as artificial intelligence and machine learning. This helps in implementing digital strategies for their swift business operations and efficient solutions.
How OutSystems helps:
- OutSystems low-code capabilities manage operational tasks smoothly and reduce the risks associated.
- OutSystem automates various tedious compliance procedures and frees up organizational resources and time for other business processes.
Leverage the OutSystems platform to integrate your digital payment gateway
FinTech companies must be digitally adaptable, agile, and able to transform data. The OutSystems platform radically simplifies app development and delivery, empowering digital payments to keep up with a rapidly evolving industry landscape. As OutSystems’ trusted partner, Ranosys helps enterprises to expand their capabilities and deliver innovation while staying compliant and mitigating risk at scale.
Vidya Suryawanshi
OutSystems Lead and Architecture Specialist
A certified OutSystems Lead and Architecture Specialist having 10+ years of experience in developing applications. She is a passionate System Analyst hazving multiple OutSystems Certificates with expertise in architecture, code refactoring, performance improvement and integrations. Connect with her on LinkedIn.
Manish Gupta
OutSystems Solution Analyst
An OutSystems Champion, Manish is a 7x OutSystems certified Solution Architect. His expertise lies in handling the complete lifecycle of full stack software development with skills to architect high-impact solutions, envision and design great new products, solve complex problems and manage cross-functional collaborations. In his free time, he likes to organize DevCamps, write about low-code, make tech videos, and solve challenges in community forums. Connect with him on LinkedIn.
