In this guide, we’ll explain what a payment gateway is, provide an overview of their benefits, and discuss the key factors to consider when choosing the best payment gateway option for your business.
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. The easiest way to think of it is as a digital version of a point of sale terminal in a shop. Popular examples of payment gateways in the UK include PayPal, Stripe and Worldpay.
How does a payment gateway work?
Payment gateway technology acts as the intermediary between online merchants and financial institutions, enabling the secure transmission of payment data during online transactions. It ensures that sensitive card details are encrypted and transmitted securely, protecting both buyers and sellers from potential fraud.
Online payment gateways are just one of the many payment processing solutions that are essential to streamline e-commerce transactions, support customer retention and promote business growth. Once the transaction has been validated, the payment gateway transfers the information to a payment processor, which securely passes the information from the customer’s bank to the merchant’s bank to facilitate payment.
Different types of online payment gateway
There are various different types of gateways for online payment, each of which has different applications. Let’s look at them in more detail below.
Hosted payment gateway
A hosted website payment gateway is the simplest way to integrate online payment processing into your website. This option allows you to fully outsource the payment gateway to a trusted third party, so there’s no need to host and maintain it yourself. When making a purchase, customers are redirected to a third-party payment service provider, where they can securely enter their payment details. Examples of hosted payment gateways include PayPal and Stripe.
Self-hosted payment gateway
A self-hosted online payment gateway helps you to provide a more streamlined customer experience, as the entire transaction takes place on your website. This allows you to take advantage of the payment gateway technology and associated trust signals of a known provider without the customer having to leave your website. It also means that you can minimise the burden of security and administration related to online payment processing. Examples of self-hosted payment gateways include Shopify and WooCommerce.
API-hosted payment gateway
An API-hosted e-commerce payment gateway gives you complete control over the customisation of your checkout experience. Using an application programming interface (API) allows you to create a bespoke payment processing solution that meets your specific business requirements and matches your website design. However, as the merchant, you’re fully responsible for the security of your API-hosted payment gateway, So you’ll need to make sure that your payment process is PCI DSS compliant.
Local bank integration
Local bank integration is a gateway for online payment that redirects the customer to their bank’s website, where they securely enter their payment details. Once the payment has been approved, they’re then returned to the merchant’s website and notified that the transaction was successful. While this type of payment gateway integration is simple to set up and is trusted by customers, it doesn’t offer many different features, and often can’t support returns or recurring payments.
Benefits of using an online payment gateway
Whichever type you choose, payment gateway integration offers many different benefits to your business.
Enhanced security
Payment gateways use advanced encryption and security protocols to protect sensitive customer information, reducing the risk of fraud and data breaches. This includes features such as tokenization and 3D Secure authentication to further enhance transaction security.
Increased conversion rates
By providing a seamless and efficient checkout process, e-commerce payment gateways help to reduce cart abandonment and increase the likelihood of completing a purchase. They also support multiple payment methods, catering to customer preferences and improving the overall shopping experience.
Simplified online 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.
Compliance with industry standards
Payment gateways in the UK must adhere to strict payment-related security standards such as PCI DSS, as well as data protection regulations like the GDPR. Choosing trusted third-party payment gateway technology enables you to benefit from stringent security measures while minimising the burden of compliance, helping businesses avoid penalties.
Key features to consider when choosing a payment gateway
When comparing payment processing solutions for your business, it’s important to make sure that the payment gateway you choose aligns with the needs of your business, and the preferences of your customers. Here are some of the key features to consider when comparing e-commerce payment gateways.
Integration options
Payment gateway integration options allow you to connect other essential tools such as your e-commerce platform and accounting software, helping to streamline administrative tasks within your organisation. For smooth implementation, make sure that your chosen payment gateway is able to integrate with your existing systems.
Supported payment methods
Choose an online payment gateway that supports a wide range of payment methods, including credit and debit cards, digital wallets and bank transfers. This will allow you to better cater to customer preferences, increasing conversions and reducing cart abandonment.
Recurring payment capabilities
If your business relies on subscriptions or repeat billing, ensure that the payment gateway technology you select can handle recurring payments efficiently. This can help you to increase the lifetime value of each customer and improve cash flow, as well as reducing administrative burden by minimising the need to chase late payments.
Mobile optimisation
With the increasing use of smartphones for online shopping, it’s crucial that your payment processing solutions are optimised for mobile devices to provide a smooth and responsive user experience. A cost-effective way to do this is to opt for a hosted or self-hosted payment gateway, allowing your business to benefit from trusted third-party websites and apps.
Multi-currency support
If your business regularly handles multi-currency transactions, you’ll need to make sure that your chosen payment gateway is able to support this. When comparing providers, the additional payment gateway fees charged for non-sterling payments could be the deciding factor.
Customer support
While basic customer support will be included in the payment gateway cost, many providers offer a tiered approach, allowing your business to tailor the level of support to your needs. Whether you choose to upgrade or not, make sure to check third-party review sites for a better idea of how well each provider takes care of their customers.
Best practices for implementing an online payment gateway
When integrating a payment gateway into your e-commerce site, following best practices is essential for smooth and secure online payment processing, and to ensure compliance with relevant regulations. Here are some key steps to follow when implementing a secure payment gateway.
Customise the payment experience
Tailoring the payment gateway to align with your brand and user experience can enhance customer satisfaction and trust. Make sure your website payment gateway interface is intuitive and consistent with your site’s design, ensuring a seamless transition from browsing to checkout. It’s also a good idea to offer multiple payment options to support customer preferences and encourage more sales.
Optimise for mobile devices
With a growing number of transactions occurring on mobile devices, it’s crucial that your payment gateway technology is fully optimised for mobile. Ensure that your e-commerce payment gateway is responsive and functions smoothly on smartphones and tablets to cater to all customers. This is particularly important if social media channels form a large part of your e-commerce strategy, as visitors to your online store are more likely to be browsing on a mobile device.
Manage payment errors and failures
Effective handling of payment errors and failures is vital for maintaining a positive user experience. Make sure to implement robust error management protocols within your payment processing solution to quickly address issues and minimise disruptions to the checkout process. This helps customers to complete their purchases with confidence and reduces the likelihood of cart abandonment due to technical difficulties.
Regularly test and debug
As well as thoroughly testing your online payment processing solution before putting it live for the first time, ongoing monitoring and debugging are critical to maintaining reliability. Regularly evaluate your payment gateway integration to identify and resolve any issues, ensuring that transactions are processed smoothly and securely.
Frequently asked questions about payment gateways
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 service that performs verification and fraud checks before transmitting a customer’s payment information to the payment processor.
How do payment gateways handle security and fraud prevention?
Secure payment gateways use modern technology including fraud detection and prevention tools, two-factor authentication and real-time transaction monitoring to minimise the risk of fraudulent activity.
What are the typical payment gateway fees?
When considering and comparing payment gateway costs between providers, it’s important to remember that you won’t just be paying a single, one-off fee. As well as monthly payment gateway fees, which typically range between £19 and £50, you’ll also be charged per-transaction fees, usually around 2.5% of the 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 charges.
Can I use multiple payments gateways for my business?
Using multiple 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 payments gateways outweigh the additional costs and maintenance required.
Choose the payment gateway for your business
Implementing a robust payment gateway is essential for modern businesses looking to thrive in a competitive marketplace. By streamlining online payment processing for both your customers and your business, they help to increase sales, reduce administrative costs, and enhance overall customer satisfaction..
Access Paysuite offers a complete range of payment processing solutions, including secure e-commerce payment gateways with all the tools your business needs to grow and thrive. From seamless payment gateway integration to comprehensive fraud protection, we help you to streamline your payment processes, enhance security and drive business success.
Find out more about our online payment gateway solution, or get in touch to discuss your business needs and we’ll be happy to advise you.