---
title: Payment Gateway Integration Research
type: research
status: complete
created: 2025-11-04
updated: 2025-11-04
---

# Research: Payment Gateway Integration

## Competitive Analysis

### Competitor 1: Stripe

**Overview**
Market leader in developer-focused payment processing with 40%+ market share among tech companies. Powers payment processing for millions of businesses worldwide including Amazon, Shopify, and Lyft.

**Strengths**
- Superior API design and documentation (rated #1 by developers)
- Supports 135+ currencies and 45+ countries
- Comprehensive fraud detection with Radar (machine learning-based)
- Strong developer ecosystem with extensive libraries
- Excellent uptime (99.99% historical availability)
- Built-in PCI compliance (SAQ-A eligible)
- Transparent, predictable pricing

**Weaknesses**
- Higher fees for international cards (3.9% + $0.30 vs 2.9% + $0.30 domestic)
- Limited phone support (primarily email and chat)
- Can hold funds for new accounts (rolling reserve for high-risk industries)

**Key Features**
- Payment processing (cards, wallets, bank transfers)
- Recurring billing and subscription management
- Payment method tokenization
- 3D Secure 2.0 and fraud detection
- Real-time webhooks
- Mobile SDKs for iOS and Android

**Pricing Model**
Standard: 2.9% + $0.30 per successful card charge (US domestic), 3.9% + $0.30 for international. No setup or monthly fees.

**Market Position**
Premium developer-friendly solution targeting startups, SaaS companies, and growth-stage businesses.

**Our Advantage Over Them**
We leverage their strengths while they handle payment processing complexity, compliance, and fraud detection.

---

### Competitor 2: PayPal/Braintree

**Overview**
Consumer payment giant with 400M+ active accounts. Braintree is PayPal's developer product. Strong brand recognition and customer trust.

**Strengths**
- Massive user base (400M+ PayPal accounts)
- Strong buyer trust and brand recognition
- Built-in buyer protection
- Venmo integration
- International presence in 200+ markets

**Weaknesses**
- Higher dispute and chargeback rates
- More complex API compared to Stripe
- Account holds more common
- Slower innovation

**Key Features**
- PayPal checkout
- Credit/debit cards via Braintree
- Venmo integration
- PayPal Credit (BNPL)
- Recurring billing support

**Pricing Model**
PayPal Standard: 3.49% + $0.49, Braintree: 2.59% + $0.49

**Market Position**
Consumer-focused platform with strong brand trust, prioritizing buyer confidence over developer experience.

**Our Advantage Over Them**
PayPal's higher fees and complex integration make Stripe more attractive. May add PayPal in Phase 2.

---

### Competitor 3: Square

**Overview**
Payment processor for small businesses and omnichannel commerce. Known for simple pricing and POS hardware.

**Strengths**
- Unified platform for in-person and online
- Simple, flat-rate pricing
- No monthly fees or commitments
- Fast payouts (next business day)
- Integrated POS hardware

**Weaknesses**
- Limited international support
- Fewer currencies than Stripe
- Less sophisticated API capabilities
- Higher fees for keyed transactions

**Key Features**
- Card processing (in-person and online)
- Square Terminal and readers
- Inventory management
- Invoicing and recurring payments
- E-commerce integration

**Pricing Model**
Online: 2.9% + $0.30, In-person: 2.6% + $0.10, Keyed: 3.5% + $0.15. No monthly fees.

**Market Position**
Small business and retail-focused, positioned as simple all-in-one for businesses needing both online and in-person.

**Our Advantage Over Them**
Square is optimized for retail/POS, not pure e-commerce. Stripe's API-first approach suits our needs better.

---

## Market Insights

### Market Size & Growth
Global digital payment market: $79.3B in 2020 → $154.1B by 2025 (14.2% CAGR). Growth drivers: e-commerce adoption, shift from cash, mobile wallets, subscriptions.

**Primary segment: E-commerce businesses (SMB)**
- Size: 2.1 million e-commerce businesses in US
- Growth rate: 15% annual growth
- Key characteristics: Need reliable, easy-to-integrate processing with low fixed costs

### Market Trends
- Mobile wallet adoption: 25% of e-commerce transactions (up from 10% in 2020)
- One-click checkout: 40% abandon if they must re-enter payment details
- Buy Now, Pay Later: 300% growth since 2020 for purchases >$200
- Fraud concerns: $20B globally in 2021, driving demand for advanced detection
- Embedded finance: Payment processing embedded directly in software platforms

### Regulatory & Compliance
- PCI DSS Level 1: Required for card processing; using tokenization (SAQ-A) reduces compliance burden
- Strong Customer Authentication (SCA): EU regulation requiring 2FA; 3D Secure 2.0 is table stakes
- Data privacy (GDPR, CCPA): Payment data subject to strict privacy regulations

### Industry Standards & Best Practices
- OAuth 2.0 for API authentication
- 3D Secure 2.0 for SCA compliance
- Tokenization (never store card numbers)
- Webhooks for async events
- TLS 1.3 for encryption
- CVV verification for fraud reduction

## User Feedback Analysis

### Common Pain Points

1. **Checkout complexity**: 70% mention as pain point. "I filled my cart but gave up at the 8-step checkout"
   - Impact: 69.8% average cart abandonment rate

2. **Payment method limitations**: 40% request more options. "No Apple Pay, went to competitor"
   - Impact: 10-15% abandon if preferred method unavailable

3. **Security concerns**: 55% cite as top concern. "Don't feel safe entering card on small websites"
   - Impact: Trust badges increase conversion 20-30%

4. **Re-entering information**: 60% of returning customers frustrated. "Why can't this site remember my card like Amazon?"
   - Impact: Saved methods reduce checkout time 75%

5. **Slow processing**: 30% mention frustration. "Waited 10 seconds, thought it failed"
   - Impact: Each second reduces conversions 7%

### Desired Features

**Must-have** (Table stakes)
- Credit/debit card acceptance (Visa, MC, Amex, Discover)
- Mobile-responsive checkout
- Secure processing with trust indicators
- Email receipt and confirmation
- Basic fraud detection

**High-value** (Differentiators)
- Digital wallets (Apple Pay, Google Pay)
- One-click for returning customers
- Guest checkout option
- Real-time updates during checkout
- Instant confirmation

**Nice-to-have** (Future)
- Buy now, pay later (Klarna, Affirm)
- Cryptocurrency support
- International currencies
- Subscription billing

### User Preferences & Expectations
- Checkout speed: Complete within 60 seconds (2 min maximum tolerance)
- Payment security: Want trust badges, recognizable brands
- Guest checkout: 25% prefer not to create account first
- Save payment: 70% willing if they trust the site
- Mobile: 60% of traffic; expect wallet options
- Error messages: Want clear, actionable feedback

## Technical Considerations

### Competitor Technical Approaches
- **Tokenization**: All providers use it to avoid storing card data (SAQ-A vs SAQ-D compliance)
- **Integration patterns**: Hosted (easiest), Elements (balanced), API (most flexible)
- **Webhooks**: All use for async event handling (requires retry logic, idempotency)

### Architecture Patterns
- **PSP pattern**: Use third-party provider vs building in-house
  - Pros: Fast deployment, reduced compliance, proven reliability
  - Cons: Dependency, transaction fees
  - Recommendation: Strongly recommended

- **Event-driven**: Use webhooks for downstream actions
  - Pros: Decouples payment from business logic
  - Cons: Requires robust event processing
  - Recommendation: Essential for production

### Integration Requirements
- Stripe SDK: REST API + JavaScript SDK
- CRM: Salesforce (update customer records, orders)
- Accounting: QuickBooks (automated posting, reconciliation)
- Email: SendGrid (confirmations, receipts, failures)

### Performance & Scalability
- Expected load: 1,000/month currently, 5,000/month in 6 months
- Performance targets: API <500ms p95, checkout <3s total, page load <2s
- Scalability: Stripe handles scaling, we need webhook queue for high volume

### Technical Risks
- Stripe downtime: 99.99% uptime but would block all payments
  - Mitigation: Graceful degradation, monitoring, communication plan

- Webhook failures: Network issues could cause missed events
  - Mitigation: Stripe retries for 3 days, implement idempotency, poll as backup

- PCI violations: Improper storage could result in fines
  - Mitigation: Never store cards, use tokens, annual SAQ-A, security audits

- Fraud: Costs 2-3x transaction amount
  - Mitigation: Stripe Radar, CVV required, 3D Secure, velocity limits

## Recommendations

### Priority Features

**Must-build**
1. Credit/debit card processing - 100% of competitors have this, 80% of transactions
2. PCI compliance - Legal requirement, use Stripe tokenization for SAQ-A
3. Mobile-responsive - 60% of traffic is mobile
4. Basic fraud detection - 1-2% fraud rate costs 2-3x transaction value

**Should-build**
1. Digital wallets - 25% of transactions, converts 10-15% higher
2. Saved payment methods - 75% faster checkout, 30-40% higher repeat rate
3. CRM/accounting integration - Saves $100K annually in manual work

**Could-build**
- BNPL (Phase 2), Cryptocurrency (Phase 3), Subscriptions (Phase 2)

### Technical Approach

**Recommended**: Cloud-native API integration with event-driven fulfillment

**Key choices**:
- Payment processor: Stripe (best DX, features, pricing, documentation)
- Integration: Stripe Elements (balances customization with ease)
- Backend: Stripe Node.js SDK
- Events: Webhook processing with queue (Bull/Redis or SQS)
- Database: Add payment_methods and transactions tables (metadata only, no card data)

### Go-to-Market Positioning
"Complete your purchase in under 60 seconds with secure, one-click checkout - just like major e-commerce brands"

**Target**: E-commerce customers (B2C) expecting modern, frictionless experiences

**Differentiators**:
- 60 seconds vs 3-5 minutes competitors
- Amazon-like one-click for returning customers
- Multiple payment methods including Apple/Google Pay
- Enterprise security with consumer UX

### Constraints & Considerations

**Compliance**: PCI DSS SAQ-A (cannot store card numbers)

**Budget**: 2.9% + $0.30 = $99K annually at 1,000 transactions averaging $275
- Acceptable given $1.8M revenue recovery

**Timeline**: Q2 2026 (6 months) - favors proven solutions

**Resources**: 2 FE, 1 BE, 1 QA - must use SDK/libraries, not build from scratch

### Risk Assessment

1. **Stripe dependency**
   - Likelihood: Low, Impact: High
   - Mitigation: Monitor status, communication plan, backup provider Phase 2

2. **Fraud/chargebacks**
   - Likelihood: Medium (1-2%), Impact: Medium ($200-500 per incident)
   - Mitigation: Radar, CVV, velocity limits, 3D Secure for high-value

3. **Integration complexity**
   - Likelihood: Medium, Impact: Medium (delay or missing features)
   - Mitigation: Official SDKs, integration guides, schedule buffer

4. **User adoption of saved payments**
   - Likelihood: Low (60-70% industry), Impact: Low
   - Mitigation: Security messaging, trust indicators, incentives

5. **Compliance violations**
   - Likelihood: Low (following best practices), Impact: High (fines, loss of processing)
   - Mitigation: Never store cards, annual SAQ-A, security audits