Whether you’re just starting out or looking to scale your operations, understanding the types of payment gateway available and how they work can help you to choose the right solution for your business. In this guide, we’ll explore what a payment gateway is, why your business needs one, and the features you should consider when selecting the best fit.
Everything you need to know about payment gateways
Discover how payment gateways work, why they matter for your business, and how to choose and integrate the right solution securely and efficiently. Use the links below to jump to each section.
How does a payment gateway work?
Choosing a secure payment gateway for your business
Online payment gateway integration
What is a payment gateway?
A payment gateway is a digital tool that validates customer card details before securely transmitting them to the cardholder’s bank to process the payment. Think of an online payment gateway as a digital version of a point of sale terminal in a shop. It checks that the transaction is genuine and that the funds are available, enabling the merchant to get paid securely.
Examples of popular online payment gateways in the UK include PayPal, Stripe and Worldpay. These providers offer different types of payment gateway and features that suit businesses of different sizes and industries, so even small businesses and sole traders can branch out into e-commerce.
A secure payment gateway is designed to do more than just move money. It plays a crucial role in protecting customer data, minimising fraud risk, and ensuring that businesses comply with financial regulations. While its primary function is to facilitate digital transactions, online payment gateway solutions offer a variety of benefits for businesses and their customers, which we’ll explore in more detail later in this article.
Hosted payment gateway
A hosted payment gateway redirects customers to a secure third-party page where they can complete their transaction before being returned to your website. Common examples include PayPal, Stripe and Worldpay. Since the provider handles most of the technical and regulatory complexities, it reduces the burden on internal teams and makes it easy to start accepting online payments quickly and securely.
Hosted payment gateways are particularly suitable for small and medium-sized businesses that want a straightforward, low-maintenance solution. However, they often have higher transaction processing costs, and can take longer for payments to clear.
Self-hosted payment gateway
With a self-hosted payment gateway, your business collects customer payment details directly on your website before sending that information to the gateway provider for processing. This allows you to control the look and feel of the checkout process, creating a seamless user experience.
Self-hosted payment gateways strike a balance between customisation and ease of use. This makes them a good fit for growing businesses that want more control over the checkout journey but may not have the resources to manage everything in-house. While you won’t need to build your own infrastructure, you will still need to ensure your systems are secure and meet data protection standards such as PCI DSS (Payment Card Industry Data Security Standard).
API-hosted payment gateway
API-hosted (or integrated) payment gateways give businesses the ability to embed payment processing directly into their website or app, using an application programming interface (API). This means that the customer can complete the entire transaction without being redirected.
These online payment gateways are best suited to larger businesses or those with in-house development teams, as they require technical expertise to implement and maintain. They also come with increased responsibility for data security and PCI compliance. However, the benefits are significant, offering full control over the user journey, faster checkout times, and a professional, on-brand experience tailored to your customers’ needs.
How does a payment gateway work?
Online payment gateway solutions act as the intermediary between merchants and financial institutions, enabling the secure transmission of payment data during online transactions. When a customer checks out on your website and enters their payment details, the gateway encrypts their data and performs a series of security checks to make sure the transaction is valid, protecting both buyers and sellers from potential fraud.
Once verified, the online payment gateway passes the transaction details to a payment processor, which confirms with the customer’s bank that there are sufficient funds and approves the payment. The processor then relays the confirmation back to the payment gateway, which completes the transaction by notifying both the customer and the merchant.
This whole process typically takes just a few seconds. Robust online payment gateway integration is vital for businesses operating online to protect against fraud, support compliance with security regulations, and facilitate smooth, straightforward transactions.
Choosing a secure payment gateway for your business
Choosing the right provider isn’t just about technical features; it’s about protecting your customers, your brand reputation, and your revenue. Security is one of the most important factors when selecting an online payment gateway. By safeguarding sensitive customer data and supporting compliance with industry regulations, the right solution helps businesses to maintain trust at every stage of the transaction.
A secure online payment gateway should meet PCI DSS requirements, which outline how payment data must be handled and stored. Look for a payment gateway that uses tokenization to replace card details with unique identifiers, reducing the risk of data theft. 3D Secure 2.0 adds an extra layer of authentication, while tools like IP blocking, geolocation monitoring and real-time fraud scoring can help to identify and prevent suspicious activity.
When comparing different types of payment gateway, focus on security as a priority but be careful not to get swayed by providers offering all the bells and whistles. Instead, choose one that offers the payment methods and technical capabilities that you actually need. Online payment gateway solutions with built-in scalability are a great solution as they allow you to add and remove functionality as your business needs and customer expectations change.
Online payment gateway integration
Getting started with online payment gateway integration is simpler than many businesses expect. Most providers offer flexible connection methods that suit a wide range of platforms and technical capabilities, from off-the-shelf plugins to fully custom API integrations.
Many e-commerce businesses use plug-ins for platforms like Magento, Shopify and WooCommerce, which allow for quick setup without in-depth development knowledge. These hosted payment gateway plugins provide seamless checkout experiences and data security while minimising the technical burden on your in-house team.
For businesses needing more control, APIs offer a deeper level of customisation. This allows you to tailor payment forms, transaction flows and security features to your website or app. Software Development Kits (SDKs) can further streamline the integration process, making it easier for developers to embed payment capabilities directly into your digital platforms. This is particularly useful for mobile applications, offering a streamlined checkout experience without the need to redirect customers to a third-party payment gateway.
Benefits of using an online payment gateway
Online payment gateways are a necessity for most modern businesses, particularly for e-commerce operations and any organisation accepting digital payments. Whichever type of payment gateway you choose, there are many benefits beyond simply facilitating online transactions.
1. Enhanced security
Payment gateways use advanced encryption and security protocols to protect sensitive customer information, reducing the risk of fraud and data breaches. In the UK, online payment gateways are required to adhere to strict payment-related security standards such as PCI DSS, as well as data protection regulations like the GDPR. This includes features such as tokenization and 3D Secure authentication to further enhance transaction security for your business and its customers.
2. Faster payment processing
Payment gateways automate and streamline the payment process, making it easier for businesses to manage transactions, and for customers to complete their purchases. They also offer integration with accounting and inventory systems, simplifying financial management and operational workflows.
3. Reduced cart abandonment
By providing a seamless and efficient checkout process, online payment gateway solutions help to reduce cart abandonment and increase the likelihood of the user completing a purchase. They also make it easy to offer multiple payment methods, so you can cater to customer preferences and prevent them from shopping with a competitor if you don’t support their chosen payment method.
4. Increased customer satisfaction
An online payment gateway that offers a smooth, reliable purchasing experience backed by security and privacy protocols helps to increase customer trust and satisfaction. This not only encourages them to complete the initial transaction but also makes it more likely that they will return to you in the future. By encouraging repeat business, you can increase the return on investment of each individual customer, boosting your long-term profitability.
Choose a secure online payment gateway for your business
Implementing a secure, scalable payment gateway is essential for modern businesses looking to thrive in the competitive digital marketplace. By streamlining online payment processing for both your customers and your business, the right solution helps to increase sales, reduce administrative costs and enhance overall customer satisfaction, all of which leads to more profits for your business.
Access PaySuite offers all the tools your business needs to succeed online, including secure yet flexible online payment gateways. We’ll support you every step of the way, giving you access to seamless online payment gateway integration and comprehensive fraud protection, all with the capacity to scale with your growing business. With transparent, competitive pricing tailored to businesses of all sizes, discovering the right payment gateway plan for your needs is simpler than you might think.
Get in touch now to learn more about our online payment gateway solutions.
FAQs: Understanding payment gateways
What is a secure online payment gateway?
A secure online payment gateway is a digital tool that authorises and encrypts card payments between your website and the customer’s bank. It ensures that transactions are protected using encryption, tokenization and fraud prevention tools. Choosing a secure payment gateway helps to protect customer data and reduces the risk of chargebacks or fraud.
What’s the difference between a payment gateway and a payment processor?
While both are essential payment processing solutions, there are important differences between a payment gateway and a payment processor. A payment processor is a service that securely transmits a customer’s payment information from their bank to the merchant’s bank. A payment gateway is a digital tool that performs verification and fraud checks before transmitting a customer’s payment information to the payment processor.
What are the different types of payment gateway?
The main types of payment gateway include hosted payment gateways, self-hosted gateways, and API-hosted gateways. Each offers different levels of control, flexibility and compliance responsibility. Many businesses opt for online payment gateway solutions that combine ease of integration with strong security features.
How does a hosted payment gateway work?
A hosted payment gateway redirects customers to a third-party checkout page to complete their payment. Examples in the UK include PayPal, Stripe and Worldpay. This simplifies PCI compliance for the business, as the payment gateway provider handles the transaction directly. It’s a popular choice for businesses looking for quick online payment gateway integration without managing sensitive card data themselves.
How do payment gateways handle security and fraud prevention?
A modern secure payment gateway uses detection and prevention tools like tokenization, two-factor authentication, 3D Secure authentication and real-time transaction monitoring to minimise the risk of fraudulent activity.
What are typical payment gateway fees?
When comparing online payment gateway solutions between providers, it’s important to remember that you won’t just be paying a single, one-off amount. As well as monthly fees, which typically range between £19 and £50, you’ll also be charged per-transaction fees, which are usually around 2.5% of the transaction value. Some providers charge a one-time setup fee, although this has become much less common, and you might choose to pay extra for additional features and services, which will increase the overall cost of your payment gateway.
Can I use multiple payment gateways for my business?
Using multiple online payment gateway integrations can be beneficial for your business, as it allows you to offer a wider range of payment options to customers. However, it’s worth considering whether the benefits of implementing multiple payment gateways outweigh the additional costs and maintenance required.