The great payment infrastructure debate: build vs. buy

Picture this: you are running a large e-commerce business, handling thousands to millions of transactions daily. The pressure is on to ensure that every financial transaction is processed quickly, securely, and without a hitch. On top, you need to ensure that you offer all the preferred payment methods for your customers in every country you operate and that your checkout experience is seamless. But what if the payment infrastructure you rely on is holding you back? What if your current payment infrastructure needs lots of manual work or can no longer support the pace of your business growth? Would you build one from scratch or buy an established solution?

If you decide to build, how much capital do you need to create your own payment processor, and what features would you need to develop?
If you decide to buy, how do you ensure that it meets the customization needs of your rapidly growing business, and how much budget do you need to allocate?

Back in 2018 and before starting Payrails, we were facing a similar decision to either build or buy an existing solution. We took a step back and evaluated our needs in-depth to be able to make this decision. One of the first steps was to outline the requirements for a solution that addresses all the pain points we have gathered from stakeholders in over 70 countries. The broad geographic coverage brought a significant challenge: integrating dozens of payment solutions. We also realized that in order to be able to achieve our business needs, we will need to be working with more than 100 partners to solve various use cases such as collecting money, doing KYC/KYB, offering stored value products, and enabling local payouts. Last but not least, we also needed a unified reporting layer to help us monitor payment acceptance performance and maintain a smooth global reconciliation process.

After carefully examining our requirements for a payment infrastructure that can fulfill our needs, we realized that technical integration was only a part of the problem. The more significant challenges were efficiently handling different types of financial transactions containing different fund types, splitting transactions between different parties with end-to-end reconciliation, automating operational workflows, and more. 

This boiled down to managing a wide range of payment use cases, such as:

• Enabling local acquiring across all countries to avoid FX fees and achieve higher authorization rates
• Retrying failed payments to increase conversion rates
• Building on-us processing logic through multiple acquirers using smart routing functionalities for reducing the cost of accepting card payments
• Collecting cash from riders globally through third-party locations while keeping track of each order
• Splitting tip payments and storing them separately to make refunds easier
• Giving riders real-time access to their earnings and different available payout options
• Providing immediate refunds to customers with robust tracking to avoid double refunding
• Allowing most loyal users to pay later, tracking these transactions, and matching them with accounting records

Build or Buy Payment Infrastructure: Uncovering the Winning Strategy

We gathered as a team, alongside a few other experts in the field of payments, to carefully consider and decide on the best approach for achieving our goals either by building or acquiring global payment infrastructure that we needed. The following are some of the core questions that were discussed during the process:

Build:

1. What is needed to build to unlock value, and how long would it take?
2. What is the required team, and how easy is hiring these profiles?
3. What are the one-off and recurring costs to build and maintain the product? This includes OPEX and CAPEX.
4. What are the necessary capabilities to support, and how much time is needed for each?
5. How fast can we complete new PSP integrations?
6. What are the risks of building a new product from the ground up?

Buy:

1. Are there any providers that could fully or partially support bringing these solutions to market?
2. What are the one-off and running costs of these providers?
3. Are the partners willing and able to provide customizations based on our needs? How long would that take?
4. What are the risks of using 3rd party solutions? 

Compare:

1. How do all the options compare in terms of effort, costs, risks, and any other considerations relevant to the business?
2. Is there a positive ROI of building in-house when compared to other options? Are there any strategic considerations for building in-house? 

After careful consideration with the management team, we determined that instead of choosing between building or buying our payment infrastructure, we would pursue a hybrid "build and buy" strategy. We chose to develop the core components in-house while extending our efforts through partnerships. This approach gave us the best of both worlds, as we maintained control and ownership over the core while also gaining access to outside expertise and products, which helped to accelerate time-to-market with high ROI. This strategy allowed us to quickly and flexibly deploy the platform at scale across many countries. 

It is important to note that the answer is not always black and white. The ultimate decision should always be considered in the context of each business by carefully considering every aspect. The world of payment infrastructure is constantly evolving, with new challenges and opportunities arising at every turn. Whether it's ensuring high acceptance rates, maintaining the security of transactions, or finding ways to reduce costs.  This rapid evolution of the payment landscape leaves merchants with the question of whether to build or buy a payment infrastructure in order to keep up with their changing needs. 

How Payrails can help‍

At Payrails, we have built a robust operating system that appreciates the needs of merchants when it comes to building custom payment flows and integrating robust payment solutions in a unified way to solve end-to-end payment use cases. Building payment solutions from the ground up is a hard and long journey. We empower our merchants to leverage our technology with a greater level of control and flexibility to connect to internal or external applications easily. If you are currently evaluating your payment infrastructure needs, get in touch with us. We are happy to share our experience and help you evaluate the pros and cons of different options in order to find an optimal way forward capturing your specific needs.

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