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Types of Payment Gateway

Features & updates - 1 March, 2024

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A payment gateway acts as a secure bridge between customers, businesses, and their banks in online transactions. It encrypts sensitive financial information when a customer purchases online and transmits it to their bank for approval. Once approved, the gateway securely transfers funds to the merchant’s bank account, streamlining the online payment process. Payment gateways are essential for ensuring safe and smooth online transactions.

What is a Payment Gateway?

In today's digital age, a payment gateway is a secure bridge between you and your customers during online transactions. Imagine it as a trusted intermediary that facilitates online payments.

4 Different Types of Payment Gateways

In the digital payment world, gateways are vital in facilitating secure and efficient online transactions. However, choosing the right one for your business can be challenging with various options available. Here’s a breakdown of the four main types of payment gateways to help you make an informed decision:

Hosted Payment Gateway:

A hosted payment gateway streamlines online transactions by securely handling payments off your website.

How hosted payment gateway works:

Customer Checkout: Upon checkout, your customer clicks a “pay now” button.
Gateway Redirect: They’re redirected to a secure payment page hosted by the gateway provider.
Payment Processing: Customers enter their payment information directly on the gateway’s page.
Authorization and Confirmation: The gateway securely transmits the information for approval and sends confirmation back to you and the customer.
Order Completion: Once authorized, the customer is redirected to your website to finalize the order.

When to use a Hosted payment gateway:

When you prioritize ease of setup and minimal technical expertise.
When you want a familiar checkout experience for customers using established payment providers.
When you need to accept international payments with automatic currency conversion.

Weighing the Pros and Cons:

Pros:

Security: Payment data never touches your website, reducing your PCI compliance burden.
Convenience: Faster setup and easier maintenance compared to self-hosted solutions.
Reputation: Leverage the trust associated with established payment gateways.

Cons:

Customization: Less control over the checkout experience compared to self-hosted options.
Fees: Gateway providers may charge transaction fees.
Redirection: Customers leave your website during checkout, potentially impacting brand continuity.

Overall, hosted payment gateways offer a secure and convenient solution for businesses seeking a simple online payment setup.

API-Hosted Payment Gateway:

An API (Application Programming Interface) Payment Gateway is a secure bridge between your online store and the financial world.

How API-Hosted payment gateway works:

Customer Checkout: A customer completes their purchase on your website.
API Communication: Your website’s checkout system interacts with the payment gateway’s API, securely sending the transaction details (amount, customer information).
Payment Processing: The API validates the information, encrypts it, and forwards it to the relevant payment processor (e.g., bank network).
Authorization & Settlement: The processor verifies funds and, if approved, sends an authorization code back to your API. The funds are then transferred from the customer’s account to yours (usually within a few days).

When to Use an API Payment Gateway?

Customization: APIs offer greater control over the checkout experience, allowing you to tailor it to your brand.
Scalability: They can handle high transaction volumes seamlessly, ideal for businesses with significant online sales.
Multiple Payment Options: APIs can integrate various payment methods (credit cards, wallets) for a more convenient customer experience.

Pros & Cons of API Payment Gateways

Pros:

Flexibility & Customization
Scalability for Growth
Streamlined Integration

Cons:

Development Resources Needed: Integrating an API may require technical expertise.
Potential Security Concerns: Proper API implementation is crucial for robust security.
Monthly Fees: API-based gateways often have monthly subscription costs.

Overall, API Payment Gateways offer a robust and adaptable solution for online businesses seeking a secure and customizable payment processing solution.

Self-Hosted Payment Gateway:

A self-hosted payment gateway lets you collect customer payment information directly on your website. Unlike hosted gateways, which redirect customers to a separate payment page, self-hosted solutions integrate seamlessly into your checkout process.

How does a self-hosted payment gateway work?

Customer Enters Payment Details: Customers enter their payment information (credit card details, etc.) on your website.
Secure Transmission: The information is securely encrypted on your end.
Gateway Authorization: The encrypted data is sent to the payment gateway for authorization.
Transaction Processed: The gateway verifies the information and funds with the issuing bank.
Payment Confirmation: You receive confirmation or rejection from the gateway.
Order Fulfillment: Upon successful payment, you can proceed with order fulfillment.

When to Consider Self-Hosted:

Customization: You prioritize a unique checkout experience that aligns with your brand.
Control: You desire complete control over the payment flow and customer data.
High Volume: You process many transactions, and a seamless checkout is crucial.

Pros and Cons:

Pros:

Faster Checkout: No redirection keeps customers engaged on your site.
Branding Control: Maintain a consistent brand experience throughout checkout.
Data Access: You can access customer payment information (subject to compliance).

Cons:

Security Burden: You are responsible for PCI-DSS compliance to ensure secure data storage.
Development Resources: Integration with the gateway requires technical expertise.
Limited Payment Options: Integrating various payment methods might be complex.

Self-hosted gateways offer a customizable and streamlined checkout experience but require more technical resources and security considerations.

Local Bank Integration Gateway:

A Local Bank Integration Gateway simplifies online payment processing for your business by connecting directly with local banks.

How does the local bank integration gateway work?

Customer Checkout: During checkout, your customer is redirected to the gateway’s secure interface (often their bank’s website).
Payment Details: The customer enters their bank login credentials and authorizes the payment.
Transaction Processing: The gateway securely communicates with the customer’s bank to verify funds and complete the transaction.
Payment Confirmation: The customer is redirected to your website, and you are notified of the successful payment.

When to Use a Local Bank Integration Gateway:

Starting: This is a good option for new businesses or those with a simple payment structure.
Region-Specific Needs: This gateway provides familiarity and trust if you cater to a local customer base with preferred local bank methods.

Pros & Cons of Self-Hosted Payment Gateways:

Pros:

Customization: Greater control over the look and feel of the payment process.

Cons:

Complexity: Requires significant technical expertise for setup and maintenance.
Security: You are solely responsible for ensuring PCI compliance and data security.
Limited Features: Often needs features like recurring billing or international payments offered by established gateways.

Difference between these 4 Payment Gateway

Feature	Hosted Payment Gateway	API-Hosted Payment Gateway	Self-Hosted Payment Gateway	Local Bank Integration Gateway
Focus	Customer redirected to gateway’s page to complete payment.	Customers stay on your website throughout checkout.	Customers stay on your website throughout checkout (potentially more control over look and feel).	Customer redirected to bank’s website to complete payment.
Integration	Easiest to set up, minimal technical knowledge required.	Requires some technical knowledge to integrate API.	Requires significant technical expertise and resources.	Simple setup, often offered by your local bank.
Security	Payment gateway handles security (PCI compliance).	Shared responsibility - you need to ensure PCI compliance.	Full responsibility for security (PCI compliance).	Bank handles security.
Customization	Limited control over checkout look and feel.	More control over checkout experience.	Full control over checkout experience and branding.	Limited customization options.

How to Choose the Right Payment Gateway

Selecting the ideal payment gateway is essential for streamlining your online transactions. Here are some key factors to consider:

Supported Payment Methods: Ensure the gateway accepts customers’ preferred payment methods, like credit cards, debit cards, and digital wallets.
Cost Structure: Consider transaction fees, monthly fees, and additional charges to find a gateway that aligns with your budget.
Security: Robust security measures are critical for protecting sensitive financial data. Look for PCI compliance and fraud prevention features.
Ease of Integration: A seamless integration with your existing platform ensures a smooth checkout experience for your customers. Customer Support: Reliable customer support is crucial for resolving any issues.

Easebuzz: Simplifying Your Payment Processing

Easebuzz simplifies your payment gateway selection process by offering the following:

Easy Integration: Integrate effortlessly with popular platforms to streamline your checkout process.
Competitive Fees: Enjoy transparent pricing with competitive transaction fees.
Advanced Security: Benefit from robust security features that safeguard your transactions.
Multiple Payment Options: Accept primary payment methods, including credit cards, debit cards, and wallets.
Dedicated Support: Get your support with Easebuzz’s dedicated customer service team.

Considering these factors and Easebuzz’s comprehensive solutions, you can choose the payment gateway that empowers your business growth.

Conclusion:

Payment gateways are like safe bridges for buying things online. They ensure that paying for stuff online is secure and easy for both the seller and the buyer. They do this by keeping your money information safe and making it easy to pay. Any online business needs to have a payment gateway. There are different payment gateways, so pick the one that works best for your online business.