A payment API allows you to accept payments directly on your website or mobile app. It enables you to securely process credit and debit cards, bank transfers, e-wallets like PayPal, and more. Building your own payment API requires expertise in payments, security, API development, and compliance with regulations like PCI DSS. While it’s possible to build your own, it’s complex. Most businesses use third-party payment gateways like Stripe, PayPal, or Square to handle payments. In this guide, we’ll go over how to create a basic payment API by integrating with a gateway.
Benefits of a Custom Payment API
Here are some benefits of building your own payment API:
- Full control over the payment experience – Customize checkout flows, branding, etc.
- Deeper payment data insights – Access raw data like shopping cart info for analysis
- Cost savings at scale – Lower transaction fees compared to third-party gateways
- Supports multiple payment methods – Add and manage various payment options from one place
- White-label payments – Can resell your payment API to other businesses
For small businesses, going with a third-party provider is often the best choice. As you scale, transitioning to your own payment API allows greater flexibility and control.
Requirements for a Payment API
Here are the key technical and compliance requirements for a payment API:
Server and Hosting
Your API needs to be hosted on a secure and scalable server. Popular options are:
- Dedicated physical server
- Private cloud hosting
- Public cloud – AWS, Azure, GCP
It should be TLS 1.2+ encrypted and behind a web application firewall.
Payments Integration
You’ll need to integrate one or more payment gateways, processors, or acquirers. Popular options:
- Stripe
- Braintree
- Authorize.Net
This handles actually processing credit cards and bank transfers.
API Framework
The API business logic needs to be built in a secure framework like:
- Ruby on Rails
- Node.js
- ASP.NET
- Java Spring
This provides the endpoints for requests and handles responses.
Data Storage
Processed payments and associated data need to be securely stored. Options:
- Relational database – MySQL, PostgreSQL, etc.
- NoSQL database – MongoDB, DynamoDB, etc.
Security and Compliance
The API must adhere to payment card industry standards like:
- PCI DSS – Data security standard for handling cards
- PCI PA DSS – Standards for payment software
- PCI P2PE – For end-to-end encryption
- PCI PIN – For PIN debit transactions
You may require security audits of your full stack.
Documentation
Create detailed technical docs on how developers can integrate your API:
- Onboarding instructions
- API reference – endpoints, requests, responses
- Code samples in multiple languages
- Testing sandbox
- Support channels
Planning and Design
With the requirements in mind, you can start planning your payment API:
User Stories
Define the end-to-end use cases for your API. Some examples:
- As a customer, I need to be able to enter my card details and make a payment
- As a merchant, I need to be able to refund a charge
- As a merchant, I need to see a transaction history for reconciliations
Features
Map the user stories to actual API features and endpoints needed:
- Process payment – /charges
- Single charge refund – /refunds/{chargeId}
- Transaction history – /transactions
Database Schema
Design a database schema to store transaction information like:
- Customer details
- Payment details – amount, currency, gateway reference ID
- Charge status – pending, paid, refunded, disputed
Integration Options
Decide which payment gateways, processors, or banks to support. More options increase complexity but allow more flexibility.
Hosting and Infrastructure
Provision and configure secure hosting for the API and database. Scale to handle expected traffic volumes.
Error Handling
Design how the API handles and returns errors like:
- Invalid requests
- Failed payments
- Rate limits exceeded
- Planned maintenance downtime
API Security
Incorporate security measures like:
- Encryption of sensitive data
- Tokenization of card data
- Authentication with API keys
- Authorization for specific actions
- Rate limiting
- Web application firewall
Compliance and Certification
Ensure controls are in place for standards like PCI DSS at the infrastructure and code levels. Certify and audit as required.
Development
With design completed, you’re ready to start developing the payment API:
Server and Database Setup
- Provision server infrastructure – virtual machines, load balancers, firewalls
- Install and configure web server stack – Nginx, Apache
- Install API framework – Ruby on Rails, Django, Express.js
- Install and configure database servers
- Implement security controls and hardening
Payments Integration
- Sign up for accounts with payment gateways/processors
- Implement their SDKs and APIs in code
- Build wrappers around them for consistent interface
API Routes
- Code routes and controllers for each endpoint
- Implement request validation, authentication, authorization
- Build interfaces to payments integrations and database
- Transform and structure response data
Webhooks and Notifications
- Create webhook handlers for payment events
- Trigger notifications to merchant systems when transactions occur
- Update order statuses
Testing and Debugging
- Setup a sandbox environment for testing
- Create unit, integration, and load tests
- Test edge cases and failure modes
- Fix bugs and improve performance
Documentation
- Write technical docs on API usage and onboarding
- Create interactive reference documentation
- Build sample code snippets
Launch and Monitoring
With development complete, it’s time to launch your payment API:
Error Monitoring
- Set up logging and alerts for API and infrastructure errors
- Monitor uptime with external monitoring tools
- Get alerted for performance issues and outages
Onboarding
- Allow merchants to sign up for API credentials
- Guide them through any integration and certification steps
- Provide sandbox accounts and test cards
Monitoring and Analytics
- Log key metrics like payment volumes, response times, uptime
- Build a dashboard to track usage and adoption
- Analyze data for optimization insights
Customer Support
- Provide email and chat support channels
- Troubleshoot integration and API issues
- Document common problems and solutions
Ongoing Maintenance
- Regularly apply security patches and updates
- Watch for issues reported by monitoring tools
- Expand capacity as needed to handle growth
Conclusion
Building a custom payment API from scratch requires significant development work and deep payments expertise. For most businesses, integrating an existing gateway via their SDK or API is recommended over building your own private solution. However, large enterprises may benefit from the flexibility and control of a custom-built payment API, despite the increased complexity. Careful planning around security, compliance, integrations, and infrastructure is key.