Online Payment Gateway Integration From A to Z

User-friendly and secure online payments are crucial for businesses of all sizes. Whether you’re running a small eCommerce store or managing a medium-sized enterprise, integrating a reliable payment gateway is key to ensuring a seamless checkout experience for your customers.

However, while setting up a payment gateway might seem like a simple task, it requires careful consideration of factors like security, compliance, user experience, and scalability. The process of integrating a payment gateway involves more than just plugging in an API. With the growing prevalence of digital fraud, integrating robust security features like tokenization and encryption is not only essential for protecting sensitive data but also for maintaining customer trust. Moreover, user experience, compatibility with different platforms, and support for international operations are all crucial components of a payment gateway integration process.

Choosing the right gateway provider, hiring the most suitable development partner, and planning the integration process to account for even the most unlikely scenarios are just a few of the things we’ll focus on in this article, so here is all you need to know to integrate a payment gateway successfully.

What Is a Payment Gateway?

A payment gateway is a software service that enables businesses to process payments, typically online, by securely transferring payment information back and forth between the customer, the merchant, and the bank or payment processor. It acts as the intermediary that validates and authorizes transactions, ensuring that sensitive payment details such as credit card information and private customer data are encrypted and securely transmitted.

Depending on the payment gateway provider, the solution can come with a wide range of functionality, but the most commonly used features include:

• Encryption, which is used to encrypt customer payment information at different stages of the checkout process to prevent data leakage.
• Authorization, which helps the merchant verify the availability of funds in the customer’s bank account and the legitimacy of the transaction.
• Settlement, which is used to transfer the funds to the merchant’s bank account after the transaction is authorized.
• Fraud prevention, which is used to detect and prevent fraud with the help of various techniques, such as address verification, tokenization, and 3D Secure.

Types of Payment Gateways

The variety of third-party payment solutions has been growing for years, and the available gateway services differ not only in name, but also in type. The gateway type will determine the functionality the payment solution has, its uses, and the business needs it’s created to serve. It’s important to choose the optimal payment gateway type to create a perfect alignment between the project and the payment service. Here are the types of gateways you can find today:

• Hosted payment gateways. With this type, customers are redirected to the gateway provider’s platform to complete the payment process. PayPal is a popular example of hosted gateways.
• Self-hosted payment gateways. Unlike a hosted gateway, a self-hosted solution collects the customer’s information on the merchant’s website before processing it through the gateway. Stripe is a common example of this gateway type.
• API payment gateways. This type of payment gateway is used to process the entire transaction on the merchant’s website without redirecting the customer anywhere with the help of an API. Braintree is a payment method operating via an API.

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Payment Gateway vs. Payment System vs. Payment Processor

Payment gateway, payment system, and payment processor are three payment process-related terms that are often used interchangeably but, in reality, represent different elements of the digital payment ecosystem. Here is what each term stands for and relates to the modern payment landscape.

Payment Gateway

A payment gateway is a technology that enables the transfer of payment information between the customer and the merchant during an online transaction. It serves as the digital equivalent of a point-of-sale terminal for online payments. A gateway supports encryption and other technologies for securing transactions, but at the end of the day, a payment gateway is a front-end solution. Popular examples of gateway solutions include PayPal, Stripe, and Authorize.Net.

Payment Processor

A payment processor is a service responsible for handling the transaction from the payment gateway and ensuring that funds move from the customer’s bank or card issuer to the merchant’s bank. Payment processors route transactions between different entities and facilitate authorization to ensure a seamless payment process. A payment processor is primarily a back-end solution. The best-known examples of payment processors include First Data, Worldpay, and Fiserv.

Payment System

A payment system refers to the overall infrastructure and procedures that enable financial transactions to take place, covering the entire ecosystem of financial institutions, payment gateways, processors, card networks, and regulatory frameworks. It’s an overarching structure under which both payment processors and gateways operate. A payment system may include various forms of payments like card payments, digital wallets, or bank transfers. Common examples of payment systems include SWIFT, ACH, and SEPA.

Why Do You Need an Online Payment Gateway and Where Can It Be Used?

For an eCommerce business or another company dealing with online sales, having a payment processing system in place is the most logical decision. At the same time, payment gateway integration is not just about facilitating payment transactions — this software solution has other sizable benefits that need to be taken into account. Here is what you get with payment gateway services:

• Security. Payment gateways encrypt sensitive information (like card details), ensuring secure transmission between the customer, merchant, and payment processor. This helps protect businesses from fraud and ensures compliance with regulations like PCI DSS (Payment Card Industry Data Security Standard).
• Speed and convenience. Payment gateways streamline the payment process, allowing customers to pay instantly with various methods like credit cards, digital wallets, and even cryptocurrencies. This reduces the number of steps needed for checkout, leading to fewer cart abandonments and a better customer experience.
• Diverse payment methods. With a payment gateway, businesses can offer customers a wide range of payment methods, including credit and debit cards, digital wallets, including Apple Pay and Google Pay, and even local payment solutions like Klarna or iDEAL. This improves customer satisfaction by offering substantial flexibility.
• Fraud prevention. Modern gateways come with fraud detection tools like address verification systems (AVS), CVV checks, and even AI-driven fraud prevention. This reduces the risk of chargebacks and unauthorized transactions, benefitting both the merchant and the customers.
• Global reach. Many gateways support multiple currencies and international transactions, which allows businesses to expand their customer base globally without having to worry about currency conversions, compliance regulations, or local payment systems.

The variety of possible uses of a third-party payment gateway is virtually unlimited and includes all kinds of websites, web apps, mobile apps, and other solutions that include transactions as part of their operations. However, these are the types of products where you will most commonly find payment processing infrastructure in general and payment gateways in particular:

• eCommerce platforms. Online stores are probably the most common type of business requiring an online payment processing solution, which helps customers quickly and securely pay for goods and services.
• Mobile apps. Many gateway providers offer specialized  mobile payment options. In-app purchases increase the chances of the customer completing the transaction, as does using Google Pay or Apple Pay without having to enter their payment data manually.
• Digital marketplaces. Marketplaces like eBay, Amazon, and Etsy use online payment platforms to offer their customers a secure way to complete transactions and an opportunity to choose from different payment options.
• Booking services. The travel and hospitality industry widely uses gateway services to enable swift and seamless booking of airline tickets, hotels, restaurant tables, car rentals, and more.
• Subscription services. SaaS companies, streaming services, and other subscription-based businesses need a solution that would handle one-time transactions and recurring payments, and a payment gateway ensures just that.
• Freelancing platforms. For freelance and gig economy platforms, a reliable, secure, streamlined payment process is key for ensuring the trust of both customers and workers.

Custom Payment Gateway vs. Integrated Gateway Solution

Businesses looking for an efficient payment solution typically face the choice between developing their own payment gateway or using integration services to incorporate an off-the-shelf solution from a popular service provider into their workflow. Here is a detailed comparison of the two options to help you pick the right one for your business.

Custom Payment Gateway

Advantages

• Full control. You have complete oversight over the payment process, user experience, and security protocols. This flexibility allows businesses to create highly customized solutions tailored to specific needs.
• Branding. The entire payment process can be branded and aligned with your company’s look and feel, leading to a seamless customer experience and increased brand recognition.
• Customization. You can add the desirable features, such as multiple payment options, detailed reporting, or industry-specific tools that third-party providers might not offer.

Disadvantages

• High cost of development. Building a payment gateway from scratch is expensive. The process requires a team of developers, compliance with payment security standards, and ongoing maintenance after the principal development part is over.
• Ongoing maintenance. Unlike third-party payment gateways that come with their own customer support, with custom gateways, maintenance and support become solely your responsibility. It means you’ll need to retain a part of the development team to fix and improve the solution on a long-term basis.
• Time-consuming task. Developing a secure payment system takes a lot of time, which may delay the release for eCommerce businesses where every day counts.
• Complex compliance requirements. You must ensure that your gateway complies with various regulations, which can be complex and risky when working with an inexperienced development team, whereas failure to comply could lead to penalties, legal trouble, and reputation losses.
• Security risks. You will need to invest heavily in security infrastructure to protect against fraud, breaches, and cyberattacks. This requires a hefty additional budget, as well as specialists who are routinely dealing with guarding sensitive data.

Integrated Third-Party Gateway Solution

Advantages

• Lower upfront cost. The need for development services is significantly smaller with off-the-shelf solutions, and there is no infrastructure to maintain, which saves significant costs. Most third-party solutions charge on a per-transaction basis or through subscriptions, making spending transparent.
• Quick setup. These gateways can be integrated in a matter of days, enabling businesses to start accepting payments quickly, whereas developing a payment solution from scratch can take months, not including the time it takes to assemble a strong development team.
• Regulatory compliance. Third-party providers handle compliance with security standards, including PCI DSS and local regulations. This reduces the strain on companies that no longer need to conduct extensive checks, as those are taken care of by the payment gateway provider.
• Security. Established payment gateways invest heavily in encryption, tokenization, and fraud detection, providing small businesses with high levels of security without needing to manage it themselves.
• Scalability. As your business grows, third-party providers can handle increased transaction volumes with ease without you having to invest in additional development capabilities or infrastructure.

Disadvantages

• Fees. A fee of 2-3% per transaction doesn’t seem like a lot on its own, but transaction fees can accumulate, especially for high-volume businesses with hundreds of thousands of weekly transactions.
• Less oversight. You have limited control over the user experience and features provided by the gateway — you either use what you get or look for another provider. Moreover, the gateway’s branding might appear in the checkout process, disrupting the seamless brand experience you are trying to create.
• Limited customization. Third-party providers offer standard features, sometimes with a possibility of small tweaks, but extensive customization is often not available or requires additional fees that may not always make financial sense.

Bottom Line

Selecting a payment solution is an important step in establishing an online business. But, at the end of the day, which option should you go for — a gateway developer from scratch or a prebuilt gateway incorporated into your checkout process? For small and medium businesses, the answer is clear: a gateway integration may have some minor limitations, but there are significant benefits that far outweigh those limitations. The cost-effectiveness, ease of use, implementation speed, and regulatory compliance being taken care of make gateway integration implementation the most sensible choice.

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Choosing the Right Payment Gateway: All the Things to Consider

Paypal and Stripe may be two of the best-known payment solutions out there, but you don’t necessarily have to limit yourself to those two. Choosing a payment gateway to use is as important as any other component of launching an eCommerce business. Here are the most crucial factors to take into account when making that important decision:

• Pricing structure. Most gateway providers have charges per transaction plus a fixed fee for every purchase — for example, it can be 3% + $0.50. However, you should pay attention not only to the base transaction fee, but also to the additional charges — monthly or yearly fees, setup fees, currency conversion fees, and so on.
• Integration complexity. The best payment gateway is the one that easily and seamlessly integrates with your eCommerce platform. Some providers offer easy integration opportunities in the form of plugins. Other gateway solutions require some amount of development for smooth integration.
• User experience. Customers are not going to tolerate a payment process that includes multiple payment pages or is not user-friendly in any other way, which increases cart abandonment rates and hurts your business instead of helping it grow.
• Payment method support. Here, you need to look for a robust payment method selection, so that customers can easily find and use their favored payment option. At the very least, your chosen payment solution needs to support credit/debit card transactions, as well as digital wallets and bank transfers.
• Security and compliance. Modern payment gateways are required to comply with PCI DSS standards to secure payment data. Moreover, additional fraud detection and prevention mechanisms, including 3D Secure, CVV verification, and address verification systems, are also nice to have.
• Customer support. No matter how experienced you are when it comes to online payments, look for a provider that offers round-the-clock customer support via multiple channels — email, phone, live chat, etc. Plus, onboarding, user guides, and developer support can also come in handy at different stages of the integration process.
• Scalability. You want a payment solution that can grow alongside your business, supporting an increasing number of transactions without a lengthy preparation process. Also, look into the pricing options for enterprise-level customers, as they may be different from what SMBs have to pay.
• Settlement period. The settlement period refers to the amount of time it takes to receive funds after they have been paid by the customer. Some providers offer same-day settlements, while others require merchants to wait for 2-3 business days before they can access the funds.
• International capabilities. If you are looking to expand your business globally, look for a gateway provider that offers opportunities for international operations. Most importantly, this includes multi-currency support and compliance with applicable international regulations.

Popular Payment Gateways Available Today

Common Mistakes Businesses Make When They Choose a Payment Gateway

When integrating a payment gateway, businesses can often make mistakes that lead to security risks, poor user experiences, or transaction failures. The good news is that the more aware you are of those common mistakes, the better equipped you are against them. Here are some frequently occurring mistakes to avoid:

• Ignoring regulatory compliance. Some businesses overlook or misunderstand the importance of PCI DSS compliance. Even if you’re using a third-party payment gateway, it’s your responsibility to ensure compliance with these security standards. Non-compliance can lead to security vulnerabilities, fines, and loss of trust with customers.
• Not offering multiple payment options. Some businesses limit their payment options to a single method, such as credit cards, without considering alternatives like digital wallets (PayPal, Apple Pay) or local payment methods in global markets. This reduces the customer base and increases cart abandonment, as customers expect flexibility when it comes to payments.
• Skipping the testing stage. Businesses may skip proper testing, leading to integration bugs, failed transactions, or poor user experiences. A buggy payment system can frustrate customers, leading to abandoned carts and loss of revenue.
• Ignoring user experience. This mainly involves overcomplicating the checkout process by requiring too much customer input or redirecting users to third-party payment pages (hosted payment gateways) without clear branding. This, once again, can lead to higher cart abandonment rates as customers find the process inconvenient or untrustworthy.
• Not implementing security features. Overlooking essential security features like tokenization, encryption, 3D Secure, or fraud detection tools is a common mistake among small businesses. This increases the risk of fraud, chargebacks, and data breaches, which can severely damage your reputation and lead to legal and financial consequences.
• Not preparing for global expansion. Businesses sometimes fail to account for international customers, not realizing that currency conversion fees, local payment methods, and regulations (like PSD2 in Europe) can be barriers. Limited reach and higher fees for international transactions can noticeably slow down global expansion.
• Choosing the wrong payment gateway. Some companies choose a payment gateway based purely on price or popularity without evaluating the specific needs of their business, such as cross-border payments, scalability, or customer preferences. This can lead to compatibility issues, limitations in payment methods, or higher transaction fees as the business scales.

Payment Gateway Integration Step-by-Step

Payment gateways are integrated by businesses every day, but not all of those projects end up being successful. With so many gateways and integration options to choose from, making the right decision is not always easy. However, good project planning definitely increases the chances of success, and here is a step-by-step guide on how to integrate a payment gateway into your product.

1. Understand Your Business Needs

The proper way to start an integration project is to fully understand what you need and expect from your payment gateway. The most common factors to consider here are the countries where you want to operate, the currencies that the gateway needs to support, the available payment methods, and the fees, both transaction-based and additional ones.

2. Choose the Integration Partner

At this stage, you need to decide whether you will handle the development process in-house or if you need an external partner to take care of the integration. Unless you already have an in-house development team, assembling one just for a small integration project is not the most financially feasible decision, whereas a carefully chosen development partner will give you the results you need without wasting any time or money.

3. Choose Your Payment Gateway

In addition to the factors outlined in the first step, there are a few additional features that you need to research in different payment gateways before making the final call. This step is a more technical one, which is why it’s best to approach it when you already have a development partner. At this stage, you will need to check the gateway’s compatibility with the target platform, the amount and quality of customer support they provide, the security standards implemented in the gateway, and how much customization and scalability you can get at different stages of the product life cycle.

4. Setup Your Merchant Account

A merchant account within the payment gateway serves as an intermediary stop for the funds paid by the customer before being deposited into the seller’s business account. Not all gateways require a separate merchant account, and in some cases, it’s provided automatically as part of the package, but that’s something you and your development partner need to discuss and confirm with the gateway provider.

5. Plan the Integration Approach

At this stage, you and your contractor need to outline the steps required to integrate the gateway and decide on the architecture of the gateway in relation to the main product. You will have three options to choose from: a hosted payment page, an embedded payment form, and full API integration. Earlier in this article, we have already described the specifics of all three, but the gist is that you’ll need to make the decision based on three key factors: ease of use, level of control, and security.

6. Obtain API Keys and Documentation

Depending on the integration method you and your contractor decide to go for, you will need API keys, documentation, and possibly other tools and supplies required to start the development project. Make sure your contractor has everything they need before the project begins, as putting things on pause to obtain additional data will inevitably drive up the project costs and delay the release.

7. Approve the Checkout Design

In addition to taking care of the back end of the payment gateway, your contractor will also need to develop and present the checkout flow design. In other words, this stage is all about how the checkout process will look and feel to the customer. The most important thing here is to make sure the process is easy, logical, and free of unnecessary steps. However, it’s also vital to make sure that it perfectly aligns with your branding and the message you are trying to convey. The contractor also needs to ensure that the checkout works well on both desktop and mobile devices.

8. Ensure Security and Compliance

Whether as a new or an established business, you cannot afford to take any risks with the security and compliance of the finished product. Confirm with your contractor that the integration follows security best practices so that you can release the solution with absolute confidence. Key security concerns include PCI DSS compliance, SSL certificates, and active fraud prevention mechanisms.

9. Test and Launch the Solution

Before launching live transactions, the product needs to undergo rigorous testing. This helps prevent unwanted scenarios that can tarnish your company’s reputation, cause reputation and financial losses, or trigger legal troubles. In most cases, the team will test the product using a sandbox environment to simulate the payment process without using actual money. The team will need to use all possible user scenarios, no matter how unlikely, to be able to launch on time and with every possible outcome accounted for.

10. Monitor and Maintain Your Product

Once the payment gateway goes live, the work is not over yet. Together with your team, you will need to monitor the product’s performance, noting all the issues, such as failed transactions or suspicious account activity, and use the data to further improve the product. In case you developed the product with an external contractor, a sensible decision will be to downsize the development team and task them with maintenance. Moreover, you may need to introduce updates or improvements, which is also the job of the development team.