A payment gateway is a digital service that enables businesses to accept and process payments made through credit cards and other methods via websites or mobile apps.
Acting as a secure intermediary between the bank and the retailer, it facilitates smooth transactions both online and in physical stores.
In simpler terms, payment gateways are technology platforms that online businesses use to handle and verify financial transactions.
eCommerce is a $6 trillion market projected to grow to $8 trillion by 2027, with over one-third of the global population shopping online.
Accordingly, reliable payment gateways will continue to be essential to this sector.
We’ll also discuss how to choose a payment gateway that meets your company’s and consumers’ specific demands.
Types of Payment Gateways
Mainly there are 4 types of payment gateways, which are as below.
Hosted payment gateway
A completely hosted solution is probably the most appropriate option if you don’t want to handle the hassles of setting up and maintaining your website’s payment gateway.
With a hosted payment gateway, customers are diverted off your checkout page and clients are sent from your website to the platform of the payment provider in order to finish the transaction.
They are taken back to your website when the payment has been processed.
This kind of gateway is well-liked since it reduces the merchant’s duties by managing the complete payment process—including security and compliance—externally.
It is provided by third-party services.
Key Features of Hosted Payment Gateways:
- Redirection: Customers leave your website to complete the payment on the gateway’s platform.
- Security: The payment provider manages sensitive payment information, reducing your site’s liability.
- Ease of Integration: Typically, easy to set up with minimal development effort.
- Customization: Limited customization options for the payment page.
Advantages:
- Simplifies security and compliance since the gateway provider handles these aspects.
- Reduces the risk of storing sensitive payment data on your servers.
Disadvantages:
- The redirection can disrupt the user experience and may lead to cart abandonment.
- Limited ability to customize the checkout experience to match your brand.
Examples of hosted payment gateways include PayPal, Stripe Checkout, and Square.
Self-hosted payment gateway
These gateways record transaction data on the business’s website. Businesses have complete control over the checkout process and the consumer experience.
Because companies host this sort of gateway, they must handle payment data securely and adhere to data security requirements such as the Payment Card Industry Data Security Standard (PCI DSS).
Businesses that pick this option often desire a completely tailored payment experience and are capable of handling the associated security requirements.
Read about: Top Payment Gateways In 2025. All You Need To Know.
Key Features of Self-Hosted Payment Gateways:
- On-site Payment: Customers remain on the merchant’s website throughout the payment process.
- Customization: Full control over the checkout process, allowing for a more branded and seamless user experience.
- Data Handling: Merchants handle and transmit sensitive payment information to the gateway.
Advantages:
- Enhanced user experience since customers do not leave the site during the transaction.
- Greater flexibility in designing the checkout process to match the brand’s look and feel.
Disadvantages:
- Higher responsibility for securing customer payment data and complying with Payment Card Industry Data Security Standards (PCI DSS).
- More complex integration, often requiring technical expertise.
Examples of self-hosted payment gateways include WooCommerce Payments, Shopify Payments, and Magento’s built-in payment options.
API-hosted payment gateway
Payment systems that employ APIs to provide merchants complete control over the payment process are known as API-hosted payment gateways.
This kind of gateway avoids sending customers to a third-party platform by processing payment transactions directly on the merchant’s website or app.
The gateway’s API is used by merchants to easily connect and process payments.
For a merchant that want to have total control over the appearance of their website, it is ideal.
An API-hosted gateway may be linked with a range of configurations, including mobile devices, and provides a completely configurable checkout experience.
If you decide to use this kind of payment gateway, keep in mind that the merchant is in charge of security.
That means you need to pay extra for SSL certification and ensure that the payment process is PCI DSS compliant.
Read about: Online Payment Security: Best Practices to Keep Your Transactions Safe
Key Features of API-hosted Payment Gateways:
- Direct Integration: The merchant’s website or app uses API calls to handle payments directly.
- Customization: The payment procedure may be highly customized to match the merchant’s branding.
- Smooth Experience: Throughout the transaction, customers stay on the merchant’s platform.
Benefits include:
- Total control over the user interface, guaranteeing a seamless and branded checkout procedure.
- Extremely adaptable to the particular requirements of the company.
- Able to facilitate intricate payment processes and system connections.
Cons:
- Needs a high level of technical know-how for upkeep and integration.
- The merchant is in charge of making sure that payment information is secure and that laws like PCI DSS are followed.
Examples of API-hosted payment gateways include Braintree, Stripe, and Authorize.Net.
Local bank integration gateway
This form of payment gateway links directly to the bank’s payment system.
This is especially important for firms that want to reach clients in a certain region or nation where the local bank is a well-known and trusted company.
The efficiency of local bank integration is heavily dependent on a bank’s technology and the degree of assistance it can offer for online transactions.
Key Features of Local Bank Integration Gateways:
- Direct Bank Connection: Payments are processed directly through the local bank’s infrastructure.
- Regional Focus: Tailored for businesses operating in specific geographic areas.
- Bank Support: The local bank provides support and services for the integration.
Advantages:
- Potentially lower transaction fees compared to third-party gateways.
- Better support for local payment methods and currencies.
- Can strengthen customer trust by associating with a familiar local bank.
Disadvantages:
- Limited scalability for international expansion, as the integration is typically tied to one bank or region.
- Integration can be complex and time-consuming, requiring close collaboration with the bank.
- May lack some advanced features offered by global payment gateways.
In order to satisfy the demands and preferences of their local clients, companies frequently employ local bank integration gateways to provide customized payment options.
Read about: Best Multicurrency Account: What Is It And How It Works?
Payment Gateway Integration
Integrating a payment gateway into a website involves a few, often easy steps.
Here are some basic step-by-step instructions, however, the precise process may vary depending on the platform your website is built on and the payment gateway you are using:
Step 1: Select a gateway for payments
The first step in integrating a payment gateway into your website is to choose the one that best suits your needs. You can choose from a wide range of possibilities.
When choosing a payment gateway provider, you should take into account transaction pricing, accepted payment methods, security procedures, and compatibility with your e-commerce platform.
Step: 2 Set up a merchant account
You might or might not need to register for a merchant account, depending on the payment gateway.
Certain payment gateway providers, like Stripe, offer full payment support with an easy setup by integrating merchant account capabilities with the payment gateway.
Read about: Best Merchant services providers: A Complete Guide.
Step: 3 Obtain API Keys
After you’ve set up your payment gateway account, you’ll normally need to receive API keys. API keys are unique identifiers that connect an online business’s website or application to the payment gateway’s services.
They are part of the system that ensures secure communication between the business’s platform and the payment gateway.
These keys will allow your website to communicate with the gateway server.
Step 4: Integrate the payment gateway into your website
Depending on the payment gateway and website platform, this phase differs significantly.
Some e-commerce platforms, like WooCommerce and Shopify, offer extensions and plugins to facilitate integration
Otherwise, to integrate the gateway, you might have to manually add code to your website.
Stripe’s APIs are extremely developer-friendly and simple to implement.
Step: 5 Test the payment gateway
Before going live, check the payment gateway. Most gateways include a “sandbox” or testing environment in which you may make test purchases to confirm that everything is functioning properly.
Step: 6 Go Live
You can go live when you’ve tested the payment gateway and confirmed that everything works as intended. Customers should now be able to purchase and pay on your website.
Remember to protect your consumers’ data during this procedure. If you work with credit card data, always utilize safe, encrypted communications and follow the Payment Card Industry Data Security Standard (PCI DSS) regulations.
Conclusion:
To conclude, payment gateways are still essential to the expanding e-commerce sector in 2025 because they let companies handle transactions safely and effectively.
Knowing the special features and advantages of each option—hosted, self-hosted, API-hosted, or local bank integration gateway—is essential to fulfilling the demands of your company and raising client satisfaction.
Building confidence and increasing sales in the cutthroat online marketplace requires a smooth and safe payment process, which can be achieved by choosing the appropriate gateway.
Read about: All About Overseas Payments (2025); Comprehensive Guide
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