My twin and I often found it difficult to deal with online payments especially micro transactions of 1 USD and less, as often 60 percent of that small amount burns up in fees. After several years of consideration we decided to startup our own online payment processor like PayPal. However the business model will be somewhat different maybe entirely new even.

There are a lot of legal issues to consider when starting a payment processor, it is often not simple as starting a normal business after all. We also think we will not be able to run it without an office and some employees with background in financial and business sectors.

Even more we are currently in India, so that further limits the launch of any internet enabled services as most official body here are often very clueless when it comes to computers or IT services in general. The scope of this processor is online P2P payments. However these accounts have to be funded by credit card or direct deposit in local branches.

As it seems we are not planning to start it big but rather small and manageable but slowly expand outside India. We major in BSIT SE so our business knowledge is pretty much limited. Let us know if you have any ideas in starting such an ecommerce solution. The things to consider in the legal front, paper work, and bank relations?

A payment gateway is a software program integrated to a merchant's website to transmit transaction data to the Credit Card / Net Banking / Cash Card / Mobile Payment acquirer for authorization and settlement. Merchants gain the ability to perform real-time Credit Card authorizations from a web site over the Internet. Customers can pay for purchases across the Internet through Credit Cards within seconds, after the gateway obtains authorization from the Credit Card institutions. If you have not yet developed a shopping cart for your website or you do not want to spend your precious resources on designing one, then this interface is just right for you.

I think you are overpaying PayPal, they do offer a micropayments option, details at https://www.paypal.com/IntegrationCenter/ic_micropayments.html

Actually, I think I'm asking whether there are any other legal steps for this business than just register it up and launch the service website. I think I could work out a deal with my bank to set me up with a visa aggregated accounts to accept payments on others behalf. The point is, I’m not a business savvy and I need tips on who to approach, where to go, and what to do to get things started.

I did not ask what a payment processor is, I already know that. :)

Paypal micropayments are great. But I'm looking to start such a business. The market is pretty saturated. However, there are several limitations in all of the major payment processors, and I wish my payment processor to cover those that the current industry leaders left out.

Several countries, features that the people asked but no one listened. I'm focusing on quite a niche, and we have actually a rock solid service being designed and developed ground up. However, still clueless on how to actually get started - just normally like any business, or is there more to this than we're aware.

Noir--there are many what we refer to here in the States as 'offshore processors' who may be able to provide you with just what you need, depending on business type, volume, and other factors.  If you'd like to email me at amspcs@juno.com I'd be happy to share details.