What You Need to Know About Ecommerce Payment Gateways


If you’re reading this, you’ve likely come to the realization your ecommerce store is going to need to use a payment gateway to manage the money your customers transfer when they make purchases. At their essence, payment gateways enable an online store to request secure payments from customers. There are basically two different types, classic and modern. Within these classifications, gateways can be either integrated into your site or hosted separately. To help you decide between them, here’s what you need to know about ecommerce payment gateways.

What Payment Gateways Do

Let’s say your cloud ecommerce software is set up to sell basketballs. After reviewing your offerings, a shopper settles upon a particular one and decides to make a purchase. When they click the “Purchase” button on your site, your payment gateway comes into play. It will accept and verify the billing information the customer provides, confirm funds are available to complete the transaction and approve the customer’s purchase request—assuming all of the parameters are met satisfactorily.

Classic Payment Gateways

The classic payment gateway requires you to have a merchant account and is typically less costly to operate. Best suited to businesses with numerous daily transactions, they come with lower transaction fees than their modern counterparts—but they take more time to set up. If you’re thinking of going this route, approval times for merchant accounts generally run four to six weeks. If you’re establishing your ecommerce site and want a classic payment gateway, it’s time to get the application process going.

Modern Payment Gateways

Modern payment gateways don’t require merchant accounts. Further, getting them to run with your store is a very simple process. However, in exchange for these conveniences, you’ll pay higher transaction fees. In nearly all cases you’ll also force your customers to go outside of your site to conduct payments. If you’ve ever made an online purchase and used PayPal, ApplePay or a similar service, you’ve seen an example of this. While most ecommerce customers are familiar with the process, those who don’t have an account with a modern payment gateway might abandon the purchase.

Hosted vs. Integrated Gateways

PayPal is a familiar example of a hosted payment gateway. Operating entirely independent of your site, hosted payment gateways require your customers to access their platforms to conduct payments. The advantage of this for you is the hosted gateway provider is responsible for maintaining its own Payment Card Industry Data Security Standards (PCI DSS) compliance, freeing you from security concerns in this regard. However, if your customers are not familiar with the provider with whom you decide to do business, they might balk at providing their financial data to an unknown entity.

Integrated gateways keep your customer on your site throughout the transaction, which shifts PCI compliance to you, but avoids introducing doubt in your customer’s mind. The catch here is your gateway choice must be compatible your platform choice. If it isn’t, you’ll need to consult a coding expert to get them to work together. Simply put, while integrated gateways keep the payment process on your site, they can be troublesome to set up and you’ll be responsible for storing customer financial data, which means you’ll have to ensure your site is PCI compliant.

This covers the basics of what you need to know about ecommerce payment gateways. Ultimately what’s best for you will depend upon a number of factors; these include the volume of sales you anticipate, your technical expertise and your tolerance for transaction fees, A critical aspect of establishing your ecommerce business, the solution you choose will have a significant impact on the way you do business.