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Types of Payment Gateways: Advantages and Disadvantages

June 30, 2020

Payment gateways are an essential component of eCommerce websites, without that payment transactions will not happen. Read on to find more about types of online payment gateways and its advantages and disadvantages.

Payment Gateways: A Brief

The payment gateway is a software application that acts as a conduit between an eCommerce website and the issuing bank that authorizes or denies payment transactions. Without a payment gateway, you cannot process the payment further to receive the money. Transactions on online platforms are done as card not present situation, and the merchant will have to rely on the data provided by the customer. The payment gateways offer security via encryption, authorization request and fulfillment of the transaction. The eCommerce service providers offer three different ways to integrate a payment gateway to your website.

Redirects: A Convenient Choice

The redirect method is an easy and quick solution to integrate a payment gateway to your website. Here, the customer is redirected to a payment page from your website. The major advantage is its simplicity. It’s a plug-and-play method and the merchants need not worry about PCI DSS compliance hassles. Your website will not need any enhancements and thus it saves the cost. A small business can use the convenience and safety offered by the payment gateway providers. However, this method means a two-step payment experience for your customer. Incidents of abandoned carts may happen as the customer leaves the page to complete a transaction. The merchant will have less control over the process. A different webpage may not offer the same experience that you want your customers to have.

Direct Post Method: Check-out Onsite and Payment Offsite 

In the direct post method, the form which collects the customer’s financial information is served from your web server, but, then the data is forwarded to a secure online payment gateway and the actual transaction is done in the offsite. Here, the customer data is not handled on your website. The front-end check-out is from your webpage, where the transaction is done in the back end. The advantage is that you can maintain the branding of your website to an extent. Your website need not be PCI compliant. However, the merchant will not full control over the customer experience. 

Onsite Payments: Server Integration Method

The server integration method or SIM provides the option to handle payments on your website, even though the actual transaction is done by an eCommerce service provider. All the forms are displayed on your website. The payment gateway provider handles all the steps like data collection, submission and the response to the customer. But the customer never leaves the page or made aware of this change. With this, you can maintain the look and style of customer experience to your expectations.   However, you need to invest in web designing and compliance requirements. This method is used by medium to large scale businesses with a trustworthy brand.