4 Different Types of Payment Gateways

Hosted Payment Gateway

A hosted payment gateway works by directing customers to a third-party payment service provider (PSP) page to complete transactions. This external checkout system manages all transaction related tasks, such as data collection and security. Small businesses often prefer hosted payment gateways for their ease of use and security features.

The robust security measures of a hosted payment gateway are a benefit. With the PSP handling payment information, merchants can trust the gateway to maintain PCI DSS compliance and provide strong fraud protection. This reduces the security responsibilities on the merchant's end, allowing them to focus on business aspects.

In addition to security hosted payment gateways are appreciated for their setup and integration process. These gateways are designed with user-friendliness in mind. Typically don't require extensive technical knowledge. Merchants can swiftly establish the payment process using designed templates from the PSP.

Nevertheless, redirecting customers to a site may disrupt the checkout flow and increase the risk of cart abandonment. Some hosted gateways offer customised pages to uphold brand identity and enhance the checkout experience. Despite these challenges, small businesses find hosted payment gateways appealing due to their convenience and secure features.

Self-Hosted (On-Site) Payment Gateway

Merchants can use self-hosted payment gateways to gather payment information on their websites. This data is then sent to a third party for approval. By keeping the checkout process within their sites, merchants can create a smooth and unified experience for customers.

A major advantage of self-hosted payment gateways is controlling the checkout process. Merchants can personalise the payment page according to their brand and optimise it for conversion rates. This customisation can result in a cohesive and professional checkout process, potentially reducing abandoned carts and boosting conversions.

However, having this level of control also means taking on responsibilities. Merchants using self-hosted gateways must adhere to PCI DSS standards and implement security measures like SSL encryption to safeguard payment information. This requires expertise in technology and resources for integration, upkeep and issue resolution.

Despite the demands involved, businesses prioritising a seamless checkout experience and brand consistency can greatly benefit from self-hosted payment gateways.

When to Use a Self-Hosted Payment Gateway

Self-hosted payment gateways are a fit for businesses handling large transaction volumes, where the costs of ensuring security and compliance are balanced by the sales volume. If your business deals with a high transaction volume, opting for a self-hosted gateway can be cost-efficient.

Another aspect to consider is the need for customisation. If your business requires customisation of the checkout process to improve user experience and maintain brand coherence, a self-managed payment gateway is a suitable option. This type of gateway lets you personalise the checkout process according to your needs.

Expertise is vital when setting up a self-hosted payment gateway. Businesses possessing the proficiency to handle security, compliance, and integration complexities will derive significant benefits from this type of gateway. If your team has the skills and resources, a self-hosted gateway can offer a highly adaptable and secure payment solution.

Another advantage of self-hosted payment gateways is control over customer data. Full control over customer data can be advantageous for marketing initiatives and managing customer relationships effectively.

API-Hosted Payment Gateway

An API-hosted payment gateway seamlessly integrates payment processing directly into a merchant's website, offering a customised and smooth checkout experience. This type of gateway gives businesses control over the payment process and customer interaction, making it a preferred option for companies with dedicated development teams.

A key benefit of using an API-hosted payment gateway is its adaptability and integration capabilities. These gateways can be easily integrated with platforms and tailored to match the website's design and functionality. This level of customisation enables businesses to create a checkout experience that aligns with their specific requirements.

However, having control also means taking on the responsibility of ensuring security and compliance with PCI DSS regulations. Merchants utilising API-hosted gateways need to implement security measures to safeguard payment data. This requires technical expertise and resources for integration, maintenance, and troubleshooting.

Additionally, API-hosted payment gateways offer scalability, making them well-suited for expanding businesses. As your business grows and transaction volumes rise, an API-hosted gateway can effectively manage the increased workload. This scalability guarantees that your payment system can expand alongside your business growth, delivering an efficient solution.

How does an API-hosted payment gateway differ from a Self-Hosted (On-Site) Payment Gateway?

While API-hosted and self-hosted payment gateways offer significant control over the checkout process, there are key differences between the two. API-hosted gateways give flexibility when it comes to integrating with various platforms and customising the payment experience. This flexibility allows businesses to design a tailored checkout process that fits their requirements.

Regarding security responsibilities, both types of gateways need the merchant to manage security and compliance. However, API-hosted gateways might provide security features through the API, which adds a layer of protection for payment data.

These gateways vary in terms of implementation. API-hosted gateways generally require advanced technical integration compared to self-hosted ones. This complexity can pose a challenge for businesses without development resources.

API-hosted gateways typically offer extensive customisation options. These gateways enable levels of customisation, allowing businesses to create a distinctive and seamless checkout experience. Such customisation can enhance user experience and boost conversion rates.

Lastly, API-hosted gateways are often more scalable, making them suitable for businesses anticipating growth. As a business expands, an API-hosted gateway can effectively manage increasing transaction volumes, providing a scalable payment solution.

Popular API-Hosted Payment Gateway Providers

Several top companies provide API-hosted payment gateways that are well-known for their excellent features and dependability. Stripe and PayPal stand out as leading providers in this field, offering a variety of features tailored to meet business requirements.

Stripe is highly regarded for its developer approach, which offers comprehensive documentation and assistance for seamless integration with different platforms and programming languages. It boasts features like currency support, recurring billing options, and advanced fraud prevention mechanisms, making it a versatile choice suitable for businesses of all sizes.

PayPal is another choice known for its user-friendly interface and widespread acceptance. It offers transaction fees and an array of features, including international transaction support and robust security measures. With its customer support services and extensive resources, PayPal proves to be a dependable option for businesses seeking an inclusive payment solution.

Local Bank Integration Gateway

Local bank integration payment gateways establish connections with local banks to handle payments, often guiding customers to the bank's platform for completing transactions. This gateway type is well suited for businesses targeting geographical areas as it aligns with local payment preferences and contributes to building customer confidence.

One key advantage of local bank integration gateways is their capacity to cater to regional enterprises. Through links with local banks, these gateways deliver a familiar and trusted payment process for customers, fostering trust and enhancing the overall checkout journey.

Nevertheless, bank integration gateways have limitations regarding international transactions. These gateways may not accommodate currencies or cross-border payments, restricting their utility for global enterprises. If your business operates on a scale, exploring alternative payment gateway solutions may be necessary.

The complexity of integrating bank integration gateways can vary based on the respective banks infrastructure. While some banks offer integration procedures, others may demand greater technical know-how and resources.

Local bank integration gateways are particularly suitable for medium-sized and small enterprises concentrating on localised markets. Their ease of use and lower transaction costs can benefit businesses operating within a specific region.

How do fees compare between different types of payment gateways

Lowest transaction fees

When comparing transaction fees among payment gateways, it's crucial to take into account both the initial setup expenses and the ongoing fees per transaction. Hosted gateways typically have lower initial costs but higher per-transaction charges. On the other hand, self-hosted and API-hosted gateways may present lower transaction fees but entail higher setup and upkeep expenses.

Various factors can impact transaction charges, such as high transaction volumes, specific payment methods and negotiated rates. For instance, businesses with transaction volumes can discuss reduced fees with their payment gateway provider. Moreover, payment methods like bank transfers could result in costs compared to credit card payments.

Nevertheless, it is essential to consider the compromises linked to fees. Lower charges may involve trade-offs in terms of functionalities, assistance, and security. For instance, a gateway offering reduced transaction costs might have features or less robust customer support services.

Hidden Costs

Hidden expenses can impact the total cost of using a payment gateway. Some common hidden costs to watch out for include charges related to chargebacks, currency conversions, and extra security measures. These additional expenses can accumulate quickly, leading to a higher cost of utilising a payment gateway.

To uncover hidden costs, it's crucial to examine the contracts and terms of service thoroughly. Be on the lookout for any fees that may not be immediately obvious, such as those tied to chargebacks or currency conversion. It's also important to consider how these hidden costs could affect your pricing model.

One approach to reducing costs is to engage and negotiate with your payment gateway provider regarding the terms of your agreement. Through negotiation, you can lower or eliminate fees. Opting for gateways that offer pricing structures can also help avoid unexpected charges.

Cross-border transactions

Cross-border transactions incur higher fees due to currency conversion and additional processing costs. These fees can differ greatly depending on the service providers. They should be taken into account when handling international payments. For instance, some providers may impose a fixed fee for converting currencies. In contrast, others may levy a percentage of the transaction amount.

Moreover, complying with regulations can increase the expenses associated with border transactions. Adhering to rules like GDPR or PSD2 might demand more resources and incur additional costs. It's crucial to factor in these compliance expenses when dealing with international payments.

Certain service providers specialise in handling transactions and offer lower fees and enhanced support for cross-border payments. By selecting providers that offer terms for international dealings, businesses can reduce currency conversion charges and trim down the overall expenses linked to cross-border payments.

Monthly fees

Monthly fees for payment gateways can differ widely. Some gateways have fees and fees per transaction, while others provide no-fee options for merchants with lower sales. When selecting a payment gateway, it's crucial to weigh the balance between fees and transaction volumes.

For businesses that process a number of transactions, monthly fees could be more economical since they might offer lower per-transaction costs. By paying a fee, businesses can enjoy reduced transaction fees and extra perks like enhanced reporting and protection against fraud.

Certain gateways have pricing models that vary based on transaction volume, which impacts the charges. Furthermore, consider the worth of features included in the fee, like advanced reporting, fraud protection, and customer assistance.

Businesses with fluctuating sales should opt for gateways with adaptable monthly fee structures. This approach helps prevent paying for services during slow periods and maintains cost-effectiveness throughout the year.

Can you integrate multiple payment gateways on one website

Yes, you can integrate multiple payment gateways on a single website. It can bring numerous advantages, such as boosting transaction success rates, ensuring backups and offering customers a variety of payment choices. By incorporating gateways, businesses can deliver a more adaptable and dependable payment process.

Nevertheless, incorporating gateways requires thorough planning and technical know-how. It's crucial to guarantee that the gateways are smoothly integrated and function without any issues. This might involve implementing management systems and conducting regular checks to confirm the proper functioning of all gateways.

The inclusion of gateways can also enhance user satisfaction by presenting preferred payment methods and decreasing the chances of transaction failures. By offering a selection of payment options, businesses can address customer preferences and enhance overall contentment.

Managing gateways entails reconciling transactions across different platforms, which can be intricate and time-consuming. Having a payment management system in place is vital to streamlining the reconciliation procedure and maintaining precise transaction records.

Effective strategies for integrating several payment gateways encompass utilising a payment management system consistently monitoring gateway performance and upholding uniform branding and user experience across all payment avenues.

Summary

Selecting the right payment gateway for your business is a crucial decision that can significantly influence your overall success in eCommerce. Hosted payment gateways offer simplicity and security, while self-hosted gateways provide control and the ability to customise. API-hosted gateways provide flexibility and scalability, whereas local bank integration gateways are tailored to businesses.

When comparing fees, it's important to consider both the setup costs and the ongoing per-transaction fees. Look for any costs and how cross-border transactions can impact your overall pricing structure. Monthly fees can vary significantly, so it's essential to evaluate how fees relate to transaction volumes.

Integrating payment gateways onto a single website can bring several advantages but necessitates thorough planning and technical know-how.