A payment gateway is generally understood to be a software accessible interface provided to various types of merchants that facilitate card or other forms of electronic payments. Developers can use this top 5 integrations with a payment gateway guide to learn more about how to better understand the variations of payment gateways.
Hosted payment gateways
When developers code to a hosted payment gateway, the gateway provider hosts a checkout page on their own servers, and web applications direct visitors to this "hosted" page when the process payment comes up in an shopping cart. Payment integrations using a hosted payment gateway are easy to integrate and are generally responsive and mobile optimized.
Pros: PCI scope is more easily reduced by relying on the gateway provider to secure the payment page and handle sensitive information.
Many ISVs use an HTML iframe option, where the cardholders may not even know that they're visiting an entirely separate secure page where the card data is entered. The process is a secure and seamless user experience.
Cons: While many solutions try to make this process seamless, consumers sometimes recognize they are being directed to a diﬀerent site for the part of the page that manages the completion of the checkout process. If that is a clunky user experience, even though it is secure, it can increase cart abandonment due to concerns over security.
Review our Hosted Payments Overview documentation for information on processing via the Hosted Payments solution on the Express payment platform.
API accessible gateways
That's why many merchants that want more control over the checkout experience choose to host their own checkout pages. There are plenty of options to use a third-party shopping cart, rely on application ISVs, or use consultants or in-house developers to build their own applications. Here, the merchant’s website or app interacts with the gateway provider for payment transactions (Authorizations, Captures, Refunds etc.) using an SDK, XML or JSON API interface.
Direct gateways oﬀered by payment processors
Major payment processors often provide their own gateways to simplify connections to their core payment platforms. Payment processors may provide additional features supporting card present, point-of-sale functionality as well as card-not-present functionality. Payment processors may also oﬀer the same interfaces described above including hosted payment functionality, SDKs, and REST APIs.
Pros: The advantage of dealing directly with a processor is that they may oﬀer better pricing (because there are fewer intermediaries involved in the transaction), they can be faster and more reliable because there are fewer “hops”. These gateways typically have better success rates in authorizing payments because the processor has full access to all the capabilities of their core payment systems. Plus direct gateways can structure transactions to maximize chances of success while also lowering interchange fees.
Cons: Unless the payment processor gateway has experienced payment industry staff members to assist ISVs through the integration process, even relatively simple gateways oﬀered by major processors can be more difficult to code to because they usually expose a richer feature set requiring a greater knowledge of payments.
And then there are solutions where merchants can load their product into a white-label solution. Platform-centered gateways provide an infrastructure allowing merchants to oﬀer goods and services directly from a full-service payment platform. Solutions in this category allow merchants to maintain their own store on the platform itself and present a branded storefront.
Pros: Platforms of this type can solve a variety of issues for merchants including avoiding costly development or integration eﬀorts and handling issues like internationalization, multi-currency support and a broader set of payment methods popular in diﬀerent locales. These platform-centered gateways may connect to other gateways, and this may or may not be selectable by the merchant.
Gateway aggregator solutions present simplified programming interfaces to developers and ISVs and also provide “back-end integrations” supporting a variety of other payment gateways. Here, the gateway aggregator acts as a “switch” allowing developers to code applications to a single API and support a wide variety of other gateways when it is time to go to market.
Pros: ISVs can oﬀer a merchant their choice of gateway while reducing their own coding, integration, testing and maintenance cycles.
Cons: A potential downside of this model is that integrations tend to be more general in feature-set, leaving more advanced features of some gateways unavailable. Plus, every transaction goes through an additional step, where this additional business cuts into overall profits taken out of each transaction.
Click here to download our Payment Gateway Whitepaper and discover if your payment gateway is right for your growing business needs.