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4 Types of Payment Gateway- a complete guide!

Customer— is the King, and they love smooth administered experience in terms of the buying process.

An e-commerce service that’s used for authorized and secure credit card or debit payments for online businesses and physical stores is known as a payment gateway.

Nowadays, for quick transactions, many businesses have eliminated traditional payment methods (such as direct bank transfer) and switched on to payment gateways because they permit instant payment, easy credibility for merchants, security, and various other benefits.

Let’s look at the pros and cons of each payment gateway type to help you decide which one turns out best for your business.

Advantages of Payment Gateways-

A digital platform has made every transaction quick and authentic. Online payments have improved the overall performance of business transactions. Here are the benefits of a payment gateway:

  • Easy Checkout Process: The quick and seamless checkout experience is an absolute necessity according to a client’s perspective. A payment gateway authorizes these features and makes online shopping as simple as possible.
  • Impulsive purchase: It is observed that more than 40% of customers drop their purchase if the checkout or payment method is complex. Yet, as indicated by a review, it is observed that impulse purchase is responsible for 40% of all online purchases. Thus if provided with a swift payment option, it undoubtedly will make an increase in sales.
  • Payment gateways also:
  • Consolidates with shopping cart.
  • Provides quick payment processing.
  • Allows multiple payment options.
  • Saves from fraud.
  • Provides repetitive billing
  • Security: Payment Gateways are often provided with security standards like PCI DSS, etc. enabling secure business transactions.

Types of payment gateway

Hosted payment gateways

Hosted payment gateways direct a user away from your site’s checkout page. After clicking on the link the user is redirected to the Payment Service Provider (PSP) page. Here, the customer fills in his or her necessary payment details, and after a successful transaction, is redirected back to your website to complete the checkout process. For instance, the famous Hosted payment gateway is PayPal.

hosted payment gateway

Pros:

  • Secure – PCI compliant transactions and additionally offer customer fraud protection.
  • Easy – many users are familiar with this payment gateway, and they find it easy to set up.
  • It can be customizable.

Cons:

  • The payment gateway is external. Therefore, merchants are unable to control the whole user experience.

Self-hosted payment gateways

With this type of gateway, within the merchant’s website, payment details are collected from the customer. After filling in the necessary details, the collected data is sent to the payment gateway’s URL. Few gateways make it mandate to provide payment data in a specific format, whereas others require a secret key or hash key.

For example, QuickBooks Commerce’s B2B Payments and Shopify Payments are self-hosted payment gateways, and both are assisted by Stripe.

Pros:

  • Satisfactory customer experience – the complete transaction is executed on one platform.
  • Easy customized flow – the merchant has command over the payment process.

Cons:

  • No technical support system- Self-hosted gateways do not provide any technical support.

One can’t rely on a team if the system fails. You would have to resolve the problem on your own terms or take the help of a professional which could be expensive. However, QuickBooks Commerce’s B2B Payments do give you technical support.

API hosted payment gateways

This type of payment gateway, allows customers to enter their credit or debit card details directly on the merchant’s checkout page and payments are successfully executed using an API (Application Programming Interface) or HTTPS queries. It also asks you whether it should save your details for the next transaction on the vendor’s website.

Pros:

  • Customizable – provides complete control over the customer experience and UI of the payment process.
  • Easy Integration – transactions can be done using mobile devices, tablets, etc.

Cons:

  • Security – for PCI DSS compliance merchants are responsible. They have to purchase SSL certification.

Local bank integration

Payment Integration

With the Local bank integration gateway, the customer is redirected to the bank’s website for the payment process. Where the user has to enter their payment details and contact details.

The customer is redirected back to the merchant website, after the successful transaction. A payment notification data is sent upon redirection.

Pros:

  • Fast and simple setup – convenient for small businesses that require a simple one-time payment structure.

Cons:

  • Absence of advanced features – generally doesn’t support returns or recurring payments. Thus, not ideal for wholesalers.

The payment gateway you incorporate should be subject to your business model. You should choose an ideal payment gateway with the type of features you want, and the amount of control over your customers’ payment experience.

A self-hosted payment gateway provides the most integrated experience for online businesses and wholesalers especially, because it permits the customer to complete the transaction from a single page, and at the same time the merchant has control over the customer experience. Likewise, with QuickBooks Commerce’s B2B Payments, you can enjoy the harmony that all customer information is safeguarded.

To know more about such aspects of payment gateway log on to zap inventory and understand it better.

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