Skip to content 
New year sale is live! →
How does money actually move in an online purchase?
Behind every successful transaction is a payment gateway, a platform that securely connects your website, the customer’s bank, and your account.
There are four types of payment gateways available: Hosted, Self-hosted, API-hosted, and Bank integration.
In this guide, you’ll learn what each type does, how to integrate them, and how to pick the right one for your business. Also, we’ll look at how they stand against each other. Let’s begin.
What Are the Types of Payment Gateways?
There are four major types of payment gateways, each built to suit different levels of control, customization, and compliance. They are:
- Hosted
- Self-hosted
- API-hosted
- Bank integration
Before we get into details, let’s take a quick look at the platforms and how they compare.
| Aspect | Hosted Gateway | Self-hosted Gateway | API-hosted Gateway | Bank Integration Gateway |
| Definition | Redirect to external checkout | On site payment form, but data managed via payment provider | Direct API integration on your site. | Direct integration with banks. |
| Control | Minimal | Moderate | Full control over flow and behavior | Limited, depends on bank setup |
| Security Handling | Provider handles everything | Partially your responsibility | You control everything | Bank decides most of it |
| Integration Effort | Easiest | Moderate | Complex (developer needed) | Bank-specific |
| User Experience | Redirected from your site | Stays on your site | Fully on-site and seamless | Varies by bank |
| Customization | Limited | Moderate | Highly customizable | Very limited |
| Examples | PayPal2Checkout | Shopify custom payment gateway | StripeRazorpayBraintree | Local bank payment APIs (e.g., Bank of America) |
| Best For | Small or medium-sized business | Mid-sized store or business | TechSaaSeCommerce | Local and international business |
| PCI Compliance | Provider is responsible | Shared responsibility | You must ensure full compliance | Bank’s responsibility |
Let’s dive into each type of payment gateway below, including their benefits and drawbacks.
1. Hosted Payment Gateways
If you want to avoid the intricate process of integrating payments and maintaining gateways, a hosted service is the best bet.
A hosted payment gateway takes your customer to a third-party page to complete their payment. When your customer is ready to buy and clicks on “buy now”, it goes to the payment service provider page.
Once the customer fills out the info and the transaction is processed, they’re redirected back to your website.
Here are some of the popular payment gateways in this category:
- PayPal
- Payoneer
- Stripe
- 2Checkout
- Skrill
- Amazon Pay
This approach will keep things simple for your business owners, and it offloads all the sensitive data handling, security, and PCI compliance to the gateway provider.
It’s a great fit for small businesses, startups, and solo sellers who want to get up and running quickly without worrying about technical or legal complexities.
One of the biggest advantages of this setup is that it reduces liability. Since customer card data never touches your servers, you are free from compliance.
Pros:
- Quick and easy to integrate
- Security and compliance handled externally
- Low risk of data breaches
- Works with most CMS platforms
- Ideal for businesses without dev teams
Cons:
- Less control over design and UX
- Slower load time depending on provider
- Branding mismatch
- Relies on third-party system uptime
2. Self-Hosted Payment Gateways
A self-hosted payment gateway collects payment info directly on your site but sends it to a provider’s system for processing.
Here, you’ll collect the payment data and pass it securely to the gateway for authorization and settlement. Some of the best self hosted payment gateway examples are:
- Stripe
- Shopify
- Authorize.Net
- CyberSource
These payment gateways give you more control over your checkout and user experience while relying on the third party payment gateways for authorization.
The major benefit of this experience is a fast checkout process and complete translation on your (merchant) site. Customers won’t be redirected to any other payment pages.
And the drawback is that you’ll have to rely on technical teams.
It’s widely used by mid-sized businesses and platforms that want a branded user experience but don’t want to build a payment system from scratch.
Pros
- Branded and seamless checkout
- Full UI control
- Customer stays on your domain
- Better tracking and analytics
- No redirection risk
Cons
- Merchant handles data transmission
- Must comply with PCI DSS
- Needs regular security updates
- Setup is more technical
3. Non-Hosted (API-Hosted) Payment Gateways
An API-hosted or non-hosted payment gateway gives full control over your checkout experience by allowing you to embed payment forms directly on your website. You don’t have to send your customers anywhere else.
If you’re running an online store, a SaaS product, or a marketplace and care about giving users a clean, fast checkout, this setup is a great fit.
Popular options include:
- Stripe
- Braintree
- Razorpay
- Paystack
These tools give you flexible features and great support for developers. Even better, they come with helpful extras like subscription management, split payments, smart fraud detection, and support for multiple currencies.
It takes more setup than other options, but if you’re ready to grow and want your checkout to feel just right, this is the way to go.
Pros
- Complete control over the payment flow
- Custom UI/UX design
- Fast checkout with no redirection
- Deep backend integration
- Supports advanced billing setups
Cons
- Full PCI compliance required
- Expensive to build and maintain
- Needs backend infrastructure
- Longer launch timeline
4. Bank Integration
A bank gateway connects your business directly to a bank. In this setup, the bank itself handles both the gateway and the subscription payment processing. There’s no third-party platform involved—everything flows through the banking channel.
This type of gateway is useful when you need to accept payments across different regions or deal with large volumes. It also supports multiple currencies if you serve international customers.
In the U.S., examples of banks and providers offering integrated gateway services include:
- Chase Paymentech
- Wells Fargo Merchant Services
- Bank of America Merchant Services
- Elavon (partnered with U.S. Bank)
- Citibank Merchant Services
- PNC Merchant Services
These providers often include extra features like fraud protection, chargeback management, and detailed reporting tools—all managed within the bank’s ecosystem. That means stronger security and better visibility over your transactions.
Pros
- Supports wallets like Apple Pay, Google Pay
- In-app checkout experience
- High-speed transactions
- Biometrics-based authentication
- Seamless UX for mobile users
Cons
- SDKs vary by platform
- Requires frequent testing during app updates
- Not always compatible with older devices
- Needs mobile development expertise
- Doesn’t help with desktop/web checkout
How to Choose the Right Payment Gateway for Your Business
Everyone promises “fast,” “secure,” and “easy,” but when you dig into the details, things like hidden fees, integration headaches, or lack of local payment options can quickly become dealbreakers.
So instead of vague comparisons or generic advice, here’s what actually matters when picking the right payment gateway for your business.
Security and Compliance
Your payment gateway must comply with PCI DSS Level 1 standards. It is the highest level of security certification in the payments industry.
Look for gateways that offer end-to-end encryption, tokenization, and built-in fraud protection tools like velocity checks and AI-based risk scoring.
Integration and Platform Compatibility
Your payment gateway should integrate smoothly with your website, whether you’re using Shopify, WooCommerce, Magento, or a custom-built website.
Hosted gateways offer quick deployment via redirection to a secure page, while API-based solutions allow complete control over the checkout flow.
Choose based on your technical team’s capabilities. Stripe and Razorpay offer excellent developer documentation for custom integrations, while providers like PayTabs or 2Checkout offer ready-made plugins.
Supported Payment Methods
Not all gateways support the same range of payment methods. Ensure the one you choose accepts major credit and debit cards.
For example, e-wallets like Apple Pay and Google Pay, and regional methods like UPI and RuPay in India or iDEAL in the Netherlands.
Business Model Fit
Your industry and product type influence the ideal gateway. If you’re running a subscription-based service, you’ll need recurring billing and invoicing tools built-in.
Marketplaces may need multi-party split payments and escrow functionality. For example, Stripe Connect or PayTabs for Platforms support advanced payout routing, which standard gateways do not.
Currency Support and Localization
If you plan to serve customers across borders, your payment gateway should support multi-currency transactions and display prices in local currency.
Some providers also auto-convert currencies at competitive exchange rates. In addition, local language support on the payment page increases trust and reduces drop-off rates.
Local Banking and Merchant Support
A payment gateway must support your business regionally, not just globally. Some international providers don’t support local settlement or currency conversion in certain countries.
Settlement Times and Reserve Policies
Fast and predictable settlement is essential for cash flow. Some gateways release funds within 1–3 days, while others may delay disbursement, especially for new or high-risk accounts.
Also, review reserve policies as some providers hold a portion of your balance as a rolling reserve to cover potential chargebacks, which can affect liquidity.
Customer Support and Documentation
You should go for gateways that offer 24/7 support through live chat or phone, not just email tickets.
Review their developer documentation as well. Stripe, Razorpay, and PayTabs, for example, maintain robust guides and sandbox environments to help with testing and integration.
Final Words
At the end of the day, it’s all about picking the right one from the different types of payment gateways out there. Choose something that’s secure, easy for your customers to use, and fits your budget.
Use this payment gateways list and explore payment providers that best align with your needs. The right choice helps you make more sales and keeps customers coming back.
Don’t forget, happy shoppers who can pay without hassle become loyal fans of your store.
FAQs
How much do payment gateways typically cost for small businesses?
Most payment gateways charge 2.9% + $0.30 per transaction. For example:
- PayPal, Stripe, and Braintree have no monthly fee, but PayPal has a $20 and Stripe has a $15 chargeback fee.
- Square offers POS with $0 chargeback fee, while Authorize.Net charges $25/month + $0.10 daily batch.
- Shopify Payments is best for Shopify users with rates from 2.4–2.9% + $0.30, plus $39/month store fee.
Can I use multiple payment gateways on one website?
Yes. Many businesses use more than one payment gateway to increase redundancy, support different regions, or offer customer-preferred options (e.g., PayPal + Stripe). However, managing multiple gateways adds complexity in reporting and integration.
How do international payment gateways handle currency conversion?
International payment gateways like PayPal, Stripe, and Payoneer convert currencies at real-time exchange rates with an added margin (often 1–3%). They also support local payment methods and multi-currency checkout, which improves global reach and reduces cart abandonment for international shoppers.
