Howti Gateway: A Closed-Loop Instant Payment System for In-Store Retail Transactions

Dinesh Appavoo • 2026

Abstract

Traditional in-store payment processing through card networks faces significant challenges including high interchange fees (2-4%), settlement delays of 1-2 days, complex integration processes, and security vulnerabilities. This paper presents Howti Gateway, a novel payment system architecture that combines a specialized point-of-sale terminal device with a mobile banking application to enable instant settlements within a closed-loop payment ecosystem. The system reduces interchange fees to 1.6-1.9%, eliminates settlement delays through real-time fund transfers between accounts maintained within the same banking partner, and implements enhanced security through two-factor authentication. We describe the system architecture, payment protocol, economic advantages, and discuss future extensions including integration with FedNow for open-loop instant payments. Our analysis demonstrates that closed-loop payment systems can significantly reduce transaction costs while improving settlement speed and security for retail merchants and consumers.