New e-commerce merchants, bloggers and hobbyists who would like to start selling physical or digital goods online will need to find a solution for accepting payments on their website that meets their and their customers’ needs. If you are ready to start accepting online payments, it’s important to understand the different kinds of payment gateways that exist and how to integrate a secure payment gateway on your website once you’ve chosen the right payment processing partner.
Small Business Solution: Hosted Payment Gateways
For individuals, startups and very small businesses, the simplest way to accept online payments is to integrate a hosted payment gateway into your existing website. Hosted payment gateways are typically owned by payment service providers (also known as aggregate merchant account providers) like PayPal, Square and Stripe. These payment service providers all offer PCI-DSS compliance and fraud protection features to keep you and your customers safe.
Hosted Payment Gateways: Merchant Perspective
For merchants, a hosted payment gateway is the simplest solution for processing online payments. All you need to do is open an account with the payment service provider, add the payment service provider’s button to your blog, website or e-commerce store and start accepting payments. The provider will take care of PCI compliance and keep card data off your website so that you never have to worry about being hacked or sued for a data breach.
Hosted Payment Gateways: Customer Perspective
For customers, a hosted payment gateway is the least preferred solution because it takes them away from your checkout page to a third-party website, interrupting the flow of the purchase process. In some cases, the customer might be asked to enter log-in details before proceeding, further complicating the process and increasing the likelihood of cart abandonment. According to 2022 statistics from the Baymard Institute, 17% of U.S. customers surveyed abandoned their shopping cart because the checkout process was too long or too complicated.
If you only process payments infrequently and don’t have a lot of technical know-how, a hosted solution will allow you to start making money with your online store almost immediately and without any upfront costs. For customers, the solution is not ideal. However, most customers will still complete the payment process despite being redirected and having to sign in.
How to Integrate a Hosted Payment Gateway
If you decide to go with a hosted solution, the first step for payment gateway integration is to secure your website with an SSL certificate (secure socket layer certificate). This encrypts the flow of data to and from your site to protect purchase details from hackers.
Then, you will be ready to integrate the payment gateway of your choice using the instructions provided by the payment service provider. The integration method for each payment gateway provider is slightly different but is usually fairly quick and easy to do.
Small and Large Business Solution: Non-Hosted Payment Gateways
In contrast to hosted payment gateways, a non-hosted or integrated payment gateway is a third-party payment solution that processes credit card transactions without taking users off your site. These include direct payment gateways as well as third-party payment gateways supplied by a merchant service provider.
Integrated payment gateways typically come with a checkout page that you can customise with your own branding. This, in turn, helps to increase customers’ confidence and a sense of affiliation with your brand. Integrated payment gateways can typically be customised with options such as allowing customers to log in or check out as a guest, adding an address verification service (AVS) for added security, applying coupon codes and allowing customers to earn and redeem loyalty points.
Non-hosted payment gateway providers typically provide all of the PCI compliance and security features of hosted gateways as well as merchant services if you choose a merchant service provider for your integrated payment gateway. However, you will still need to ensure PCI compliance for customer data that’s stored on your site.
Integrated Payment Gateway: Merchant Perspective
For merchants, an integrated payment gateway comes with the advantages of:
- Stronger branding
- More features (including recurring payments and loyalty points)
- A lower rate of cart abandonment
Potential disadvantages include:
- You might need to pay monthly fees.
- Some programming knowledge may be required to customise the checkout page.
- Some aggregate providers have limited customisation and payment options.
- You may need to open a merchant account to qualify for some integrated gateways.
For serious merchants, the advantages of an integrated payment gateway far outweigh any potential disadvantages. Monthly fees usually mean a lower per-transaction rate, the provider can help you with integration and having a dedicated merchant account protects you against problems like having your account frozen. When comparing your options, be sure to take the full package into account and look for the best fit for your needs.
Integrated Payment Gateway: Customer Perspective
For customers, an integrated payment gateway is generally easier and more pleasant to use than a hosted gateway and the buying process isn’t interrupted by any redirects. Customers also have the advantages of applying coupon codes and earning loyalty points toward a later discount or voucher. Furthermore, trust badges provided by the non-hosted gateway provider increase confidence that the checkout is secure.
Integrated payment gateways are best for serious businesses with enough turnover to justify a small monthly fee. As long as you maintain PCI compliance on your end, your customers will be assured of a safe and pleasant buying experience.
How to Integrate a Non-Hosted Payment Gateway
In contrast to hosted gateways, non-hosted payment solutions usually require a development team to integrate and customise to your specifications unless you are using a shopping platform with a ready-to-go plugin. European-based merchant services provider Unicorn Payment, for example, has ready-to-go API modules for integrating its payment gateway into all of the major shopping carts and develops alternative modules when needed.
Very Large Business Solution: In-House Custom Payment Gateway
A custom payment gateway is the Rolls Royce solution for very large businesses that handle over a million transactions each year. Instead of using a payment processor or merchant services provider, this option involves creating your own in-house payment gateway with the precise features you need.
Custom Payment Gateway: Merchant Perspective
For merchants, creating your own payment system comes with several advantages:
- You will save money over time on monthly fees and transaction fees.
- You can add any features and payment methods you like.
- You will increase confidence and trust in your brand.
- You can accept payments on behalf of other merchants as a payment solution provider.
The disadvantages of taking payment processing in-house include:
- You will have to handle payment information on your servers and maintain PCI compliance.
- You will need to have a development team available at all times to solve problems and fix bugs.
- You will need a large amount of money upfront (€140,000-700,000) to set up your custom payment gateway.
Custom Payment Gateway: Customer’s Perspective
For customers, a custom payment gateway provides an excellent experience—as long as it’s securely encrypted and technical support is always available. To provide the best customer experience, consider adding multiple payment methods and a country selector for checkout customisation.
Best Payment Methods to Include
E-wallet solutions that offer mobile payments like Apple Pay, Google Pay, Amazon Pay and Samsung Pay are popular and a good idea to include in addition to PayPal and debit and credit cards. Some customers prefer to pay by electronic funds transfer (EFT), cheque, or direct debit. Analysing your customer base will help you decide which payment options to add.
Custom payment gateways are nice to have but aren’t practical for most businesses. If your business is registered but handles fewer than one million transactions each year, an integrated payment gateway is usually the best choice.
How to Create and Integrate a Custom Payment Gateway
To create your own payment gateway, you will need to research and negotiate with each acquiring bank and credit card company separately to secure the lowest rates. You will then need a development team to build and integrate the payment gateway to make sure that it offers all of your desired payment methods and payment features such as recurring billing and loyalty points.
The Right Solution for Your E-Commerce Website
With so many different payment gateways from which to choose, it can be tricky to know where to start (and stop). Consider these questions to determine the secure payment solutions that would best serve your customers and business:
- Are you a registered business?
- Integrated and custom payment gateways are only available to registered businesses. Unregistered freelancers will need a hosted gateway.
- Where is your business registered?
- Some payment gateway providers only operate in certain countries and regions. Make sure the provider works with businesses in your country.
- What is your monthly transaction volume?
- Businesses with a low monthly transaction volume may find a hosted solution more cost-efficient. Businesses with a high monthly transaction volume can save money with a non-hosted gateway connected to a merchant account.
- What is your smallest and largest ticket size?
- The payment processor must permit your minimum and maximum purchase amounts.
- Which payment gateway services are compatible with your e-commerce platform?
- Any payment gateway provider you consider must be compatible with your e-commerce platform.
- Which currencies do you need to support?
- PayPal supports 25 currencies, Square supports 130 currencies and Unicorn Payment supports 164 currencies. Maximise your global reach with a payment gateway that supports the currencies you need.
- Which payment methods do your customers use?
- Make sure to offer the payment methods your customers prefer, including e-wallets, mobile payments, credit and debit card and EFT.
- Which additional features do you require?
- Businesses that need special features like recurring billing and loyalty points would be better off with an integrated or custom solution.
- Do you have a development team that can take care of integration?
- If your business doesn’t have its own development team, make sure your chosen payment solution is easy to integrate (such as a hosted solution) or choose a provider that provides a ready-to-go API module.
Integration is Just the Beginning…
Online payment gateway integration is an exciting step for any e-commerce business owner. Then, after building your website and preparing your product offerings, you can finally open your doors for business!
Remember that the most important aspects of payment gateway integration are that your gateway must be secure, easy for customers to use and offer all of the features you need. Get those factors right and you should be well on the way to e-commerce success.