eCommerce Payment Gateway – Types, Example and How It Works

Last updated on April 22nd, 2024 at 12:39 pm

As eCommerce continues to grow, the demand for secure and reliable payment processing has become increasingly important. Payment gateways play a vital role in this process by allowing eCommerce businesses to securely and efficiently process transactions. With so many eCommerce payment gateway options available, choosing the right one can be a daunting task.

In this comprehensive guide, we’ll explore everything you need to know about payment gateways for eCommerce websites. From understanding how payment gateways work, to comparing the features and fees of popular options, we’ll equip you with the knowledge and tools necessary to make an informed decision for your business.

What is An eCommerce Payment Gateway?

Source: KORONA POS

An eCommerce payment gateway is a technology that securely processes online payment transactions between a buyer and a seller. It acts as a bridge between an online store and the bank that processes the payment.

When a customer places an order and proceeds to checkout, the payment gateway encrypts and securely sends the payment information to the payment processor for verification and approval.

Once the payment is authorized, the payment gateway sends a confirmation message back to the eCommerce website, allowing the order to be processed and fulfilled. The payment gateway provides a secure and reliable payment processing solution, ensuring that online transactions are protected against fraud and other security risks.

How Did Payment Gateways Work?

Payment gateways work by securely processing online payment transactions between a buyer and a seller. The process typically involves the following steps:

• Customer places an order: The customer selects items to purchase and proceeds to checkout on the eCommerce website.
• Payment details are entered: The customer enters their payment details, such as credit card number, expiration date, and CVV code, into the payment gateway.
• Payment details are encrypted: The payment gateway encrypts the payment details to protect them from being intercepted by third parties.
• Payment details are sent to the payment processor: The encrypted payment details are sent from the payment gateway to the payment processor, which verifies the information with the customer’s bank.
• Payment is authorized or declined: The payment processor communicates the payment authorization or decline status back to the payment gateway.
• Order is processed: If the payment is authorized, the payment gateway sends a confirmation message back to the eCommerce website, allowing the order to be processed and fulfilled.

Throughout the process, the payment gateway ensures the security and integrity of the payment transaction, protecting both the customer and the seller against fraud and other security risks. Unlike payment orchestration, which coordinates various payment methods and processors for optimized payment processing, payment gateways focus mainly on facilitating individual online transactions and handling the associated financial aspects.

Why Payment Gateways Are Important for eCommerce?

Payment gateways are an essential component of custom eCommerce website development as they play a critical role in ensuring secure and reliable online transactions. Without a payment gateway, eCommerce businesses would not be able to accept online payments, which could significantly impact their sales and revenue.

Payment gateways are important for eCommerce businesses for several reasons.

Firstly, they provide a secure and reliable payment processing solution, protecting against fraud and other security risks. Customers are more likely to trust an eCommerce website that offers secure payment options, which can increase their confidence in making online purchases.

Secondly, payment gateways offer a seamless checkout experience for customers, enabling them to complete their purchases quickly and easily. This can lead to increased customer satisfaction and loyalty, as well as a higher likelihood of repeat business.

Lastly, payment gateways offer a range of features and customization options that can be tailored to the unique needs of an eCommerce business. This can include support for multiple payment methods, integration with other eCommerce systems, and advanced fraud detection and prevention tools.

Overall, payment gateways are a critical component of custom eCommerce website development, providing a secure, reliable, and convenient payment processing solution that is essential for the success of online businesses.

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Types of Payment Gateway

When it comes to choosing the best eCommerce payment gateway, there are several types of payment gateways to consider. Each type of payment gateway has its advantages and disadvantages, and the right choice will depend on the specific needs of your eCommerce business.

Here are some of the most popular types of payment gateways:

Hosted Payment Gateways

These payment gateways redirect customers to a third-party website to complete their payments. Hosted payment gateways offer a simple and secure checkout process, but can sometimes be less customizable.

Self-Hosted Payment Gateways

These payment gateways allow customers to complete their payment on the eCommerce website itself, providing a more seamless checkout experience. Self-hosted payment gateways can be more customizable but require additional security measures to protect against fraud.

Payment Aggregators

Payment aggregators are a type of hosted payment gateway that allows businesses to accept payments from multiple sources, such as credit cards and e-wallets, through a single account.

API-Integrated Payment Gateways

These payment gateways offer more advanced customization options, allowing businesses to integrate the payment gateway directly into their eCommerce website using an API. API-integrated payment gateways require more technical expertise but offer greater control and flexibility.

Virtual Terminal Payment Gateways

These payment gateways allow businesses to accept payments over the phone or by mail, providing a more flexible payment processing solution.

Ultimately, the best eCommerce payment gateway will depend on the specific needs of your business. Consider factors such as security, customization options, and ease of use when choosing the right payment gateway for your eCommerce website.

10 Best Payment Gateways For eCommerce Website

There are many payment gateways available for eCommerce websites, but here are ten of the best payment gateways that offer a wide range of features and support multiple payment methods:

PayPal

PayPal is one of the most popular payment gateways for eCommerce websites, offering a secure and reliable payment processing solution that is trusted by millions of users worldwide. Founded in 1998, PayPal allows businesses and individuals to send and receive payments online, using a simple and convenient payment processing platform.

With PayPal, customers can make payments using a variety of payment methods, including credit cards, debit cards, and bank transfers. PayPal also offers advanced fraud detection and prevention tools, providing businesses with an additional layer of security to protect against fraudulent transactions.

In addition to its payment processing services, PayPal offers a range of additional features and services for eCommerce businesses, including customizable checkout options, support for recurring payments, and integration with popular eCommerce platforms such as Shopify and WooCommerce.

Overall, PayPal is a reliable and trusted payment gateway that offers a simple and secure payment processing solution for eCommerce businesses of all sizes.

Features

• PayPal is a recognized and assured payment provider; hence shoppers must be reassured.
• The competency to assimilate into the checkout
• PayPal is a trendy eCommerce payment gateway; hence, many shoppers have accounts and funds and use PayPal Credit.
• It is entirely free to set up (PayPal will charge the fee per transaction)
• The competency to align with the checkout
• Easy to accept the international payment

Pros and Cons

Pros	Cons
Secure Transfer	The free account is relatively basic
Zero Subscription Charge	Charges are high for low-volume sellers.
Simple to use	PayPal takes customers off-site to complete the purchases. It declines the competency for optimizing the checkout.
Reliable Subscription Services	Support can be slow, and it often takes 24 hours for email services.

Stripe

Stripe is another popular payment gateway for eCommerce websites that offers a wide range of features and customization options. Founded in 2010, Stripe has quickly become one of the most popular payment gateways, with thousands of businesses relying on its payment processing services.

One of the key benefits of Stripe is its customizable checkout options, which allow businesses to tailor the checkout experience to their specific needs. Stripe also supports a wide range of payment methods, including credit cards, debit cards, and mobile payments such as Apple Pay and Google Pay.

In addition to its payment processing services, Stripe offers a range of additional features for eCommerce businesses, including support for subscriptions and recurring payments, advanced fraud detection and prevention tools, and integration with popular eCommerce platforms such as Shopify and WooCommerce.

Overall, Stripe is a flexible and feature-rich payment gateway that is trusted by businesses of all sizes. With its wide range of payment options and customization options, Stripe is a great choice for eCommerce businesses looking for a reliable and customizable payment processing solution.

Features

• A simple structure of fee and commonly charge less than PayPal.
• Stripe considers a flat fee of 20p for all types of cards, additionally 1.4% of the transaction value.
• Fast and comparatively easy to set up
• Keep on-site to customers during checkout
• Can manage recurring payments. Effective for retailers to offer subscription-based services or products.
• Maintains customers on-site at the time of checkout
• Very emphasis on small and startup business

Pros and Cons

Pros	Cons
Simple to Use	Geo Restriction
A higher amount of Integrations	Needs a Developer
Depth Documentation	Needs technical knowledge
Custom Libraries	Inadequate in-person transactions
Payment Choices	No high-risk sectors
Better Assistance	The 20p flat fee can eat into the profit margins for retailers needing lower-value transactions.

Authorize.net

Authorize.net is a payment gateway that provides a reliable and secure payment processing solution for eCommerce businesses. Founded in 1996, Authorize.net has established itself as one of the leading payment gateways, serving thousands of businesses across the globe.

One of the key benefits of Authorize.net is its support for multiple payment methods, including credit cards, e-checks, and digital payments such as Apple Pay and PayPal. Authorize.net also offers customizable checkout options, allowing businesses to tailor the checkout experience to their specific needs.

Authorize.net also offers advanced fraud detection and prevention tools, which help to protect businesses against fraudulent transactions. Additionally, Authorize.net provides a range of features and services for eCommerce businesses, including support for recurring payments, invoicing, and integration with popular eCommerce platforms such as Shopify and WooCommerce.

Overall, Authorize.net is a reliable and feature-rich payment gateway that offers a comprehensive payment processing solution for eCommerce businesses of all sizes. Its support for multiple payment methods, customizable checkout options, and advanced fraud detection and prevention tools make it a popular choice among businesses looking for a secure and reliable payment processing solution.

Features

All Authorize.net accounts consider the below features with no additional cost:

• Advanced fraud detection:

The integral of fraud detection technique that spontaneously addresses suspicious deals and unclear IP addresses. It can be configured according to your business requirements.

• Customer information manager:

It permits the customers to save payment and shipping data; hence, they don’t need to re-enter it for potential orders.

• Recurring payments:

It provides opportunities for instalment payment and an automatic monthly billing system for subscription-based services.

• Invoicing:

Send custom digital invoices for customers by email and view the reports for checking invoices sent, drafted, paid, and cancelled.

Pros and Cons

Pros	Cons
24*7 Customer Support	Obsolete user interface
Opportunities for streamlining	Highly expensive to sign up via Authorize.net

Square

Square is a payment gateway that is designed to provide a simple and secure payment processing solution for small businesses. Founded in 2009, Square has quickly become one of the most popular payment gateways, offering a range of features and services for businesses of all sizes.

One of the key benefits of Square is its simple and easy-to-use payment processing platform, which allows businesses to process payments quickly and securely. Square also offers support for a wide range of payment methods, including credit cards, debit cards, and mobile payments such as Apple Pay and Google Pay.

Square also offers a range of additional features and services for eCommerce businesses, including support for invoicing, virtual terminals, and integration with popular eCommerce platforms such as Shopify and WooCommerce. Additionally, Square provides advanced fraud detection and prevention tools, which help to protect businesses against fraudulent transactions.

Overall, Square is a reliable and easy-to-use payment gateway that is designed to provide a simple and secure payment processing solution for small businesses. Its support for a wide range of payment methods and integration with popular eCommerce platforms make it a popular choice among businesses looking for a convenient and reliable payment processing solution.

Features

• Capability for accepting payments online, over the phone, and in person.
• Simple-to-use interface
• Low charge
• 24/7 Customer Assistance

Pros and Cons

Pros	Cons
Estimated flat-rate cost	Not ideal for big firms with large volumes of transactions
Better assistance for small-scale businesses	Account stability concerns to some extent
No monthly charge	Not preferred for high-risk sectors
A remarkable set of features	High Charges for large-level businesses
Inexpensive chip card readers	No phone assistance
Free technique for online selling
Single payment mode

Amazon Pay

Amazon Pay is a payment gateway that allows customers to pay for goods and services using their Amazon account. Founded by Amazon in 2007, Amazon Pay provides a secure and convenient payment processing solution that is trusted by millions of customers worldwide.

One of the key benefits of Amazon Pay is its ease of use. Customers can complete purchases quickly and securely using their Amazon account, without having to enter their payment and shipping information manually.

Amazon Pay also offers a range of fraud detection and prevention tools, providing businesses with an additional layer of security to protect against fraudulent transactions.

In addition to its payment processing services, Amazon Pay offers a range of features and services for eCommerce businesses, including customizable checkout options and integration with popular eCommerce platforms such as Shopify and WooCommerce.

Amazon Pay also supports a wide range of payment methods, including credit cards, debit cards, and mobile payments such as Apple Pay and Google Pay.

Overall, Amazon Pay is a trusted and convenient payment gateway that offers a simple and secure payment processing solution for eCommerce businesses of all sizes. Its ease of use and integration with the Amazon ecosystem make it a popular choice among businesses looking to provide a seamless checkout experience for their customers.

Features

• Competency to accept payments from Amazon customers
• Secure for the checkout procedure
• Easy incorporation with online stores

Pros and Cons

Pros	Cons
Stress-free checkout is provided for customers with Amazon accounts.	Reserve policy delays payouts, particularly for new accounts.
Supports international customers and currencies	No in-person payment assistance.
No monthly or setup feed is offered, with pay only per transaction.	No custom packages or volume discounts are available.
Alexa voice aligned for tracking and placing orders.

Braintree

Braintree is a payment gateway that provides a flexible and scalable payment processing solution for eCommerce businesses. Founded in 2007, Braintree is now a subsidiary of PayPal, offering businesses a reliable and secure payment processing platform that is trusted by millions of customers worldwide.

One of the key benefits of Braintree is its support for a wide range of payment methods, including credit cards, debit cards, and digital payments such as Apple Pay and Google Pay. Braintree also offers customizable checkout options, allowing businesses to tailor the checkout experience to their specific needs.

Braintree provides advanced fraud detection and prevention tools, helping businesses to protect against fraudulent transactions. Additionally, Braintree offers a range of features and services for eCommerce businesses, including support for recurring payments, invoicing, and integration with popular eCommerce platforms such as Shopify and WooCommerce.

Overall, Braintree is a reliable and feature-rich payment gateway that offers a comprehensive payment processing solution for businesses of all sizes. Its support for multiple payment methods, customizable checkout options, and advanced fraud detection and prevention tools make it a popular choice among eCommerce businesses looking for a secure and scalable payment processing solution.

Features

• Competency in accepting payments in different currencies
• Easy assimilation with online stores
• Protection from fraud

Pros and Cons

Pros	Cons
Modest fee structure and affordable compared to others. There are no monthly charges; the merchant pays 1.9% and 20p per transaction.	Braintree’s API requires some technical knowledge so it may be less appropriate for beginners.
Estimated flat-rate costs	Many complaints are made regarding the strict fraud structure of Braintree and funds being held from the merchants.
Simple-to-use functionality	It is in the USA; customer support can take longer than some UK payment gateways.
Multi-Currency choices	Long account development times
The broader category of payment sorts	Not supported to higher risk sectors
Developer access on the backend	Not the preferred choice for gateway only
UI customization
Number of sound features

2Checkout

2Checkout is a payment gateway that provides a simple and flexible payment processing solution for eCommerce businesses. Founded in 2000, 2Checkout offers a range of features and services for businesses of all sizes, including support for multiple payment methods and integration with popular eCommerce platforms such as Shopify and WooCommerce.

One of the key benefits of 2Checkout is its support for a wide range of payment methods, including credit cards, debit cards, and digital payments such as PayPal and Apple Pay. 2Checkout also offers customizable checkout options, allowing businesses to tailor the checkout experience to their specific needs.

2Checkout provides advanced fraud detection and prevention tools, helping businesses to protect against fraudulent transactions. Additionally, 2Checkout offers a range of features and services for eCommerce businesses, including support for recurring payments, invoicing, and integration with popular accounting software such as QuickBooks.

Overall, 2Checkout is a reliable and feature-rich payment gateway that offers a comprehensive payment processing solution for businesses of all sizes. Its support for multiple payment methods, customizable checkout options, and advanced fraud detection and prevention tools make it a popular choice among eCommerce businesses looking for a simple and flexible payment processing solution.

Features

• Competency to accept payments in several currencies
• Fraud security
• Simple integration with the online stores

Pros and Cons

Pros	Cons
People can consider multiple payment techniques like debit cards, credit cards, and PayPal.	Some people have complaints about slow support and customer service quality.
For merchants selling globally, it can process 87 currencies, including over 200 nations.	2Checkout charges 3.5% and 25p per transaction. The percentage is more than most of the payment gateway discussed here.
Reviews indicate that it is easy to start with 2checkout, which is effective for beginners.	Card-present transactions cannot be processed.
It can be aligned with over 120 shopping carts like Wix and Shopify.	Regular offering reports on held funds
More comprehensive assistance for global merchants	Not accessible for high-risk sectors
Better advertising and website
Monthly billing
Expectable flat-rate costing

WorldPay

WorldPay is a payment gateway that provides a global payment processing solution for eCommerce businesses. Founded in 1989, WorldPay is now part of FIS, a leading provider of financial services technology solutions.

WorldPay offers support for a wide range of payment methods, including credit cards, debit cards, and digital payments such as Apple Pay and Google Pay. It also provides customizable checkout options, allowing businesses to tailor the checkout experience to their specific needs.

One of the key benefits of WorldPay is its global reach, with support for over 120 currencies and a network of acquiring banks that spans over 146 countries. This makes it an ideal choice for businesses that operate in multiple countries and need to accept payments in different currencies.

WorldPay provides advanced fraud detection and prevention tools, helping businesses to protect against fraudulent transactions. It also offers a range of features and services for eCommerce businesses, including support for recurring payments and integration with popular eCommerce platforms such as Magento and Shopify.

Overall, WorldPay is a reliable and feature-rich payment gateway that offers a comprehensive payment processing solution for businesses of all sizes. Its global reach, support for multiple payment methods, and advanced fraud detection and prevention tools make it a popular choice among eCommerce businesses looking for a global payment processing solution.

Features

• Competency to accept the payment in different currencies
• Protection from Fraud
• Easy integration with the online stores

Pros and Cons

Pros	Cons
They are aligned with leading business software solutions like Authorize.net and BigCommerce.	Inadequate upfront pricing.
Facilitates 24*7 Customer Support	Lack of transparency about product details
It has more comprehensive assistance for software solutions and networks.	There are long lead times in the setup of the account.
It is moderately easy to configure and execute.	Misleading free terminal proposal
It has sound technical assistance while you have the feasible contact.	Early termination charge of up to $295

Adyen

Adyen is a payment gateway that offers a global payment processing solution for eCommerce businesses. Founded in 2006, Adyen has grown to become one of the largest payment processors in the world, processing transactions for some of the world’s leading eCommerce brands.

Adyen offers support for a wide range of payment methods, including credit cards, debit cards, and digital payments such as Apple Pay and Google Pay. It also provides customizable checkout options, allowing businesses to tailor the checkout experience to their specific needs.

One of the key benefits of Adyen is its global reach, with support for over 250 payment methods and 187 currencies. This makes it an ideal choice for businesses that operate in multiple countries and need to accept payments in different currencies.

Adyen provides advanced fraud detection and prevention tools, helping businesses to protect against fraudulent transactions. It also offers a range of features and services for eCommerce businesses, including support for recurring payments and integration with popular eCommerce platforms such as Magento and Shopify.

Overall, Adyen is a reliable and feature-rich payment gateway that offers a comprehensive payment processing solution for businesses of all sizes. Its global reach, support for multiple payment methods, and advanced fraud detection and prevention tools make it a popular choice among eCommerce businesses looking for a global payment processing solution.

Features

• Competency to accept payments in several currencies
• Protection from fraud
• Easy integration with the online stores
• Two-factor Authentication
• Data Tokenization
• Reliability and Performance

Pros and Cons

Pros	Cons
Payments are accepted across in-store, online, and app payment channels.	Challenging pricing model.
Availability of international payment options.	Less amount of invoice required.
No month-to-month integration, setup, and closure charges are available.
24/7 customer assistance.
Available Test account

Payline

Payline is a payment gateway that offers a comprehensive payment processing solution for eCommerce businesses. Founded in 2009, Payline provides a range of payment processing solutions for businesses of all sizes, including support for multiple payment methods and integration with popular eCommerce platforms.

Payline offers support for a wide range of payment methods, including credit cards, debit cards, and digital payments such as Apple Pay and Google Pay. It also provides customizable checkout options, allowing businesses to tailor the checkout experience to their specific needs.

One of the key benefits of Payline is its advanced reporting and analytics tools, which provide businesses with detailed insights into their payment processing activity. This can help businesses to optimize their payment processing and improve their overall eCommerce performance.

Payline provides advanced fraud detection and prevention tools, helping businesses to protect against fraudulent transactions. It also offers a range of features and services for eCommerce businesses, including support for recurring payments and integration with popular accounting software such as QuickBooks.

Overall, Payline is a reliable and feature-rich payment gateway that offers a comprehensive payment processing solution for businesses of all sizes. Its support for multiple payment methods, customizable checkout options, and advanced reporting and analytics tools make it a popular choice among eCommerce businesses looking for a simple and flexible payment processing solution.

Features

• Point-of-sale options
• Provide accommodations for high-risk clients
• Chargeback and Fraud protection services
• POS products, assimilation for shopping carts, and QuickBooks.

Pros and Cons

Pros	Cons
Interchange Plus pricing model makes it simple and accessible to price.	Equipment should be purchased separately.
Availability of POS, eCommerce, and mobile payment are available.	A minimum $25 monthly charge is required for all the packages.
Monthly contract available with no cancellation fees.	More complex to predict the costs of payment processing.
Email and Phone customer support with professionals from the team.	Fees are not required for not finishing the PCI compliance survey and losing a chargeback dispute.
User-friendly and highly accessible payment gateway interfaces are available.	Limited customer assistance hours from Monday–Friday, 8 am–5 pm
Placement is available for high-risk merchant accounts.
Assistance for in-person, mobile, and offline payments
Specialist payment choices for healthcare firms are available.

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Difference Between Payment Gateways and Payment Processors?

Although the terms “payment gateway” and “payment processor” are sometimes used interchangeably, they actually refer to two different components of the payment processing system.

A payment gateway is a service that allows online businesses to accept electronic payments from their customers securely. It acts as a middleman between the merchant’s e-commerce site and the payment processor or acquiring bank.

When a customer places an order on the e-commerce site and enters their payment information, the payment gateway securely transmits the information to the payment processor or acquiring bank for authorization.

On the other hand, a payment processor is a financial institution or third-party service that handles the actual processing of electronic payments. It communicates with the customer’s issuing bank and the merchant’s acquiring bank to authorize and settle transactions.

The payment processor is responsible for verifying that the customer has sufficient funds to make the payment and transferring the funds from the customer’s account to the merchant’s account.

In summary, the main difference between payment gateways and payment processors is that payment gateways act as a secure link between the merchant’s e-commerce site and the payment processor, while the payment processor handles the actual processing of electronic payments.

Payment gateways are primarily responsible for encrypting and securely transmitting payment information,

while payment processors are responsible for verifying the payment details, ensuring funds availability, and transferring funds between the customer’s account and the merchant’s account.

Conclusion

In conclusion, payment gateways are an essential component of any eCommerce website, as they provide a secure and convenient way for customers to make purchases online. There are many different payment gateway options available, each with its unique features and benefits.

Choosing the right payment gateway for your eCommerce website is an important decision that should be based on factors such as your business needs, the payment methods you want to support, and the level of security and fraud prevention required.

As an eCommerce website development company, we understand the importance of selecting the right payment gateway for your business. By working closely with our clients, we can help to identify the payment gateway that best meets their needs and integrate it seamlessly into their websites.

Whether you are just starting or looking to expand your eCommerce business, we can provide the expertise and guidance you need to build a successful online store.