In this article, Interpillar reviews three main types of payment gateways. Learn the pros and cons of all of them to make sure the gateway you choose will suit your business the best.
What Are Payment Gateways?
Payment gateways are essential online systems that facilitate the processing of payments over the Internet. Organizations like Interpillar Limited integrate them to handle online transactions for products, services, and donations on websites or other digital platforms.
The key aim of a payment gateway is to secure payment data during transmission and prevent unauthorized access. When a payment request is made, the online system communicates with the customer’s bank to finalize the transaction. If the card has sufficient funds and the transaction is approved, the customer and the merchant are notified of the successful payment.
It is important to note that businesses using external payment gateways are not responsible for storing sensitive financial information. Therefore, integrating a payment gateway is crucial for secure financial transactions applications.
3 Types of Payment Gateways
The strategy you adopt for integrating payment options into your application depends on the type of payment gateway you’ve chosen. Therefore, before delving into the process of integrating the payment system, we must acquaint ourselves with these different types.
Hosted Gateways
A service known as a hosted payment gateway allows your online store to accept payments over the Internet through credit cards or other electronic payment methods. Its operation is based on redirecting the customer to an external page to enter payment information and then returning them to your website.
How do hosted payment gateways work?
As a customer triggers a payment, the hosted payment gateway securely processes the transaction on its servers, managing the payment details. Afterwards, it returns the transaction status to the business’s website or app.
Pros
- Security. Payment data is processed on the provider’s side, reducing the risk of sensitive information leakage.
- Ease of setup. Typically integrates easily and quickly with your website without requiring deep technical knowledge.
- Standardization. Many hosted gateways already adhere to security standards and have compliance certificates, providing additional trust for your business.
Cons
- Loss of control. When the customer is redirected to the gateway’s payment page, your site temporarily loses control over the user experience.
- Potential delays. Depending on the speed of the external gateway and network conditions, delays in completing payments may occur.
- Additional costs. Some hosted gateways may charge fees or a usage fee, increasing costs for your business.
API-Hosted Payment Gateway
API-hosted payment gateway is a service that allows your website or application to accept online payments using an API (Application Programming Interface). It’s super customizable, fitting seamlessly into different systems, even mobile. Merchants have full control over the design and security, with options like SSL certification for data protection.
How do API-hosted payment gateways work?
When a customer initiates a payment, the API-hosted payment gateway securely transmits payment data to the payment processor. Then, it returns the transaction status to the website or app to confirm the transaction.
Pros
- Ease of integration. API-hosted payment gateway typically provides documentation and ready-made libraries, making integrating your website or application easier.
- Security. All payment data is processed on the provider’s side, reducing the risk of confidential information leakage.
- No need for PCI DSS compliance. Since payment data is not stored on your server, you avoid the need to comply with the Payment Card Industry Data Security Standard (PCI DSS).
- Support for various payment methods. An API-hosted payment gateway can support various payment methods, including credit cards, electronic transfers, etc.
Cons
- Limited customization options. Since payment processing occurs on the provider’s side, your ability to customize the appearance and functionality of the payment page may be limited.
- Dependency on a third-party provider. If the payment service provider experiences issues with its server or API, your payment service may temporarily be unavailable.
- Higher costs. Some API-hosted payment gateways, such as standalone payment gateways, may be more expensive than other payment processing methods.
- Less flexibility. You are limited by the functionality and capabilities offered by the API-hosted payment gateway provider and may not always be able to fully implement your own requirements.
Self-Hosted Payment Gateway
A self-hosted payment gateway allows businesses to maintain complete control over their payment processes securely and effectively. This approach enables merchants to handle payment transactions directly within their infrastructure, ensuring a tailored, secure, and accountable payment experience.
Businesses can customize the entire checkout process to meet their needs, including branding and user experience preferences, by opting for a self-hosted payment gateway. Under this setup, ownership and custody of payment information, such as credit card details or digital wallet data, remain firmly within the merchant’s domain. This reduces reliance on third-party providers and bolsters data ownership and security measures.
How do self-hosted payment gateways work?
With the start of a customer’s payment, the self-hosted payment gateway carries out the transaction within the business’s environment. It collects payment details and then transmits them to the payment processor.
Pros
- Data control. You have full control over your customers’ data and payments since all data is processed on your own server.
- Enhanced security. This method can be more secure as payment data is not transmitted through third-party servers.
- Flexibility. You can customize the payment system according to your needs and add various functional features.
- Branding. You can completely control the appearance and interaction with the payment page, allowing you to implement your own branding.
Cons
- Setup complexity. Configuring a self-hosted payment gateway can be complex and may require additional knowledge of programming and security.
- Security responsibility. You are responsible for ensuring high security for payment processing, which may require additional efforts and resources.
- Support costs. You need to be able to maintain and update your payment gateway on your own server, which can lead to additional expenses.
- Certification requirement. Certification from payment organizations may be required for payment processing, which can be time and resource-intensive.
Final Note
At Interpillar Limited, we believe that payment gateways are crucial for the functioning of the digital economy. They are the backbone, facilitating smooth transactions and ensuring seamless financial interactions.
However, the landscape of payment gateways is diverse, with various options available to merchants. Therefore, merchants must comprehensively evaluate each gateway’s features, functionalities, and compatibility with their business needs. Taking into account this Interpillar review will help you to make an informed decision when selecting the most appropriate gateway for your website and application.
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