There are several types of payment gateways on the market today, including direct payment gateways and platform-based solutions. However, the four popular types of payment gateways are:
Hosted payment gateways conduct the transaction at a location hosted by the payment service provider (PSP). During checkout, customers are directed away from the merchant site to the PSP’s portal and redirected back once the transaction is complete.
This is the safest type of a payment gateway because the PSP manages the PCI DSS compliance. However, merchants lose control over the customer checkout experience.
A non-hosted payment gateway allows merchants to collect payment information on their website and transmit it to the PSP over an encrypted channel. The customer stays on the website the entire time that the PSP completes the transaction remotely.
This method provides a greater degree of control over the purchase experience. However, the merchant is responsible for securing the customer information when it’s transmitted from their website to the PSP.
A self-hosted payment gateway allows merchants to collect on-site payments while the payment processor completes the transaction for the merchant remotely. In this case, the merchant is responsible for collecting, managing, and securing all customer information.
This method provides the most significant control over the customer purchase experience. However, it entails maintaining PCI DSS compliance and storing and securing customer data on-premises.
Therefore, it generally requires a Magento development company to set up and is best suited for large enterprises.
A bank-integrated payment gateway works like a hosted gateway. Customers are directed to the bank’s website to pay for the order during checkout and sent back to the merchant’s website once the transaction is complete.
They’re easy to set up and perfect for small B2B businesses that don’t need recurring payments. However, this method complicates the returns and refund process as they cannot be processed through the gateway.