In our last article, we warned SaaS companies, ISVs, and ISOs about the dangers of trying to build their own payments gateway. We even teased a real-world horror story about a group that flushed millions down the drain because they were in way over their heads.
This is that story.
Every so often, we see ambitious groups and software companies decide they’re going to “cut out the middleman” and build their own payments gateway. On paper, it looks like a smart move: eliminate that pesky vendor, create some intellectual property, and add long-term enterprise value.
But sometimes… it ends in disaster. Like the group we’ll never forget that poured $3 million and years of development into building a custom gateway, only to throw it all away in the end.
Here’s how it went down — and why you don’t want to make the same mistakes.
A group of non-technical founders hired a dev team to build their gateway. These were solid tech folks, but they had zero payments experience. The motivation?
On paper, not the worst goals. In practice? A slow-motion train wreck.
Years into the project, we were called in to review why things were off track. We looked at the codebase, dev team utilization, design patterns, security posture, and market readiness. What we found was… yikes.
No clear requirements.
The team was making it up as they went. Because none of them had ever built a payments gateway, they didn’t know what they were building. It was like hiring a contractor who’s built nice houses to suddenly put up a skyscraper — every decision created new problems they didn’t anticipate.
Wrong features, wrong focus.
Their stated target market was complex ISVs. But the platform wasn’t even mature enough to handle basic virtual terminal merchants. The dev team, lacking real payments context, wasted cycles on flashy “decorator” features instead of building the engineering foundation needed for scale.
Zero fraud and risk controls.
Fraud? Chargebacks? Friendly fraud? They acted like every merchant would be a model citizen. The system lacked even basic risk controls, leaving the door wide open for bad actors. It was an open invitation for trouble.
The ultimate facepalm: gateway-to-a-gateway.
The platform they built didn’t even talk directly to processors. Instead, it connected to another gateway. So after millions spent, all they really built was a limited skin on top of a competitor. And that gateway? It lacked network tokenization, account updater, or even automated merchant boarding. Translation: they would have to provision every new merchant by hand.
At the end of the day, this project didn’t fail because the developers weren’t smart, or because the founders weren’t ambitious. It failed because they underestimated just how different building a payments gateway is from building normal software. Payments isn’t just another SaaS app — it’s infrastructure. It has to be bulletproof, compliant, secure, and scalable from day one. That’s not something you “figure out as you go.”
Here’s what really went wrong:
They built for the wrong reasons.
The motivation was never about solving a customer pain point — it was about cutting out a vendor and creating an asset that looked good on a balance sheet. That’s backwards. Great products are built around customer needs, not executive frustration. Instead of focusing on why the market needed a new gateway, they focused on why they wanted to own one. That misalignment doomed the project before it started.
They had the wrong people leading it.
Yes, the developers were competent. But none of them had built a payments gateway before — which meant they were learning the domain in real time. That’s like asking an experienced web developer to design a nuclear reactor control system. Smart people, wrong expertise. Without seasoned payments veterans guiding architecture, compliance, and risk decisions, the team was effectively wandering in the dark.
They never defined requirements.
A payments gateway isn’t a product you can design on a whiteboard in week one and “iterate” into existence. There are strict certifications, security standards, and industry-mandated features you must build in from the ground up. Because the team didn’t start with a clear requirements document or roadmap, every new discovery forced them to tear something apart and rebuild it. Progress was slow, expensive, and demoralizing.
They misunderstood their target customer.
They wanted to serve complex ISVs — which demand advanced capabilities like split payments, flexible integrations, robust reporting, and automated merchant onboarding. But their system wasn’t even mature enough to support the basics of a virtual terminal. Developers wasted precious time polishing features nobody cared about instead of building a stable foundation that could support actual customers.
They ignored fraud and risk.
Fraud controls, velocity checks, KYC/AML, chargeback management — these aren’t nice-to-haves, they’re table stakes. But this system launched with nothing. In payments, that’s not just a gap, it’s a gaping hole. Without fraud and risk controls, the gateway would have been a dream come true for criminals — and a nightmare for the group underwriting the losses.
They made a fatal architectural mistake.
The biggest blunder? Building a “gateway to another gateway.” Instead of connecting directly to processors and card networks, they built their system on top of someone else’s. That instantly crippled their value proposition. They couldn’t offer modern features like network tokenization or automated account updater, and worst of all, they had no programmatic way to board merchants. Every single merchant would have to be provisioned manually. That’s not a scalable payments business — that’s busy work with lipstick on it.
Combine all of that, and you get a project that was over-budget, behind schedule, under-delivering, and fundamentally flawed at its core. The group didn’t just fail to hit their goals — they actually ended up in a worse position than when they started. Millions of dollars gone. Years wasted. And nothing to show for it except hard lessons learned the most expensive way possible.
If you’re going to build your own payments gateway, ask yourself:
If you dont't have good answers to these questions, do yourself a favor and be unlike Nike: JUST DON’T DO IT.
Or, if you really believe it’s the right move, call us. We’ve built gateways from scratch multiple times, and we know the pitfalls, the compliance hurdles, the architecture requirements, and the market realities.