A payment gateway is an eCommerce service that’s used to authorize and process credit card and debit payments for online businesses and brick-and-mortar stores.
Manage your cashflow and get paid 3x faster with TradeGecko Payments!
Today, many businesses have moved away from more traditional payment methods (such as direct bank transfer) to payment gateways because they enable instant payment, credibility for merchants, and security, among other benefits.
There are four main types of payment gateways to choose from. Here, we look at the pros and cons of each to help you decide which will work best for your business.
1. Hosted payment gateways
Hosted payment gateways direct your customer away from your site’s checkout page. When the customer clicks the gateway link, they are redirected to the Payment Service Provider (PSP) page. Here, the customer fills in his or her payment details, and after paying, is redirected back to your website to complete the checkout process. The most well-known example of a hosted payment gateway is PayPal.
2. Self-hosted payment gateways
With this type of gateway, payment details are collected from the customer within the merchant’s website. After the details are requested, the collected data is sent to the payment gateway’s URL. Some gateways require the payment data be provided in a specific format, whereas others require a hash key or secret key. TradeGecko Payments and Shopify Payments are examples of self-hosted payment gateways, and both are powered by Stripe.
3. API hosted payment gateways
With API hosted payment gateways, customers enter their credit or debit card information directly on the merchant’s checkout page and payments are processed using an API (Application Programming Interface) or HTTPS queries.
4. Local bank integration
Local bank integration gateways redirect the customer to the payment gateway’s website (the bank’s website) where they enter their payment details and contact details. After making the payment, the customer is redirected back to the merchant website, with payment notification data sent upon redirection.
The payment gateway you choose should be dependent on your business model, the types of features you require, and the amount of control you want over your customers’ payment experience.
For online businesses and wholesalers especially, a self-hosted payment gateway offers the most streamlined experience because it allows the customer to complete the transaction from a single page, and offers the merchant control over the customer experience. And, with TradeGecko Payments, you can also have peace of mind that all customer data is protected.