In the realm of e-commerce and online transactions, choosing the right payment gateway is crucial for businesses. Payment gateways serve as intermediaries that process credit card transactions and facilitate secure payments. Two common types of payment gateways are hosted and integrated. Understanding the differences between these two can help businesses select the most suitable option for their needs.
Hosted Payment Gateways
1. Definition and Functionality
A hosted payment gateway redirects customers from the merchant’s website to a secure payment page hosted by the gateway provider. This means that when a customer is ready to checkout, they are taken to a separate, secure page to enter their payment details. The gateway provider manages the payment processing, including handling sensitive information.
2. Security and Compliance
Hosted payment gateways are known for their robust security features. Since the payment page is hosted by the gateway provider, they are responsible for maintaining PCI-DSS (Payment Card Industry Data Security Standard) compliance. This reduces the merchant’s liability as they do not handle or store sensitive customer information directly.
3. Integration and Customization
The integration of a hosted payment gateway is generally simpler compared to integrated gateways. Merchants need only to add a payment button or link to their website that directs customers to the hosted payment page. However, customization options are limited. The checkout page’s design and layout are controlled by the payment gateway provider, which may not align perfectly with the merchant’s website aesthetics.
4. User Experience
While hosted payment gateways offer high security, the user experience can be somewhat disjointed. Customers are redirected away from the merchant’s site to complete their payment, which can impact the overall shopping experience. Some customers might be hesitant to leave the merchant’s website, affecting their confidence and potentially causing abandonment.
5. Fees and Costs
Hosted payment gateways may have different fee structures, often including setup fees, monthly fees, and transaction fees. Merchants should evaluate these costs in the context of their business model and transaction volume.
Integrated Payment Gateways
1. Definition and Functionality
Integrated payment gateways provide a seamless payment experience by processing payments directly on the merchant’s website. Customers can enter their payment information on the same page without being redirected. This method involves integrating the payment gateway’s API (Application Programming Interface) directly into the merchant’s website or application.
2. Security and Compliance
With integrated payment gateways, the responsibility for PCI-DSS compliance often falls more heavily on the merchant. Since the payment information is processed on the merchant’s website, it is crucial for merchants to implement stringent security measures and maintain compliance. This can involve additional costs and technical expertise to ensure that the payment process is secure.
3. Integration and Customization
Integrated payment gateways offer greater flexibility and customization. Merchants can design and control the entire checkout experience, from the layout to the payment options available. This allows for a more cohesive and branded payment experience. However, the integration process can be complex and may require developer support.
4. User Experience
The user experience with integrated payment gateways is typically smoother. Since customers do not leave the merchant’s website, they can complete their purchase without interruption. This seamless experience can enhance customer satisfaction and reduce the likelihood of cart abandonment.
5. Fees and Costs
Fees for integrated payment gateways can vary widely. Merchants may face setup fees, monthly fees, and transaction fees, but there may also be additional costs associated with development and maintenance. It’s important for businesses to weigh these costs against the benefits of a customized checkout experience.
Comparison
1. Security
- Hosted: Security is managed by the payment gateway provider, reducing merchant liability.
- Integrated: Security is the merchant’s responsibility, requiring additional measures and compliance.
2. User Experience
- Hosted: Customers are redirected to a separate page, which can disrupt the shopping experience.
- Integrated: The payment process is completed on the merchant’s website, providing a seamless experience.
3. Customization
- Hosted: Limited customization; the payment page is controlled by the gateway provider.
- Integrated: Full control over the checkout experience, allowing for extensive customization.
4. Integration Complexity
- Hosted: Easier to set up; requires minimal technical knowledge.
- Integrated: More complex; may require developer support for integration.
5. Cost
- Hosted: Varies based on setup, monthly, and transaction fees.
- Integrated: Costs include gateway fees and potential development expenses.
Conclusion
Choosing between hosted and integrated payment gateways depends on a variety of factors including security needs, user experience preferences, customization requirements, and budget. Hosted payment gateways offer simplicity and robust security, making them suitable for businesses that prefer ease of setup and lower responsibility for handling sensitive information. Integrated payment gateways, on the other hand, provide a seamless checkout experience and greater control over the payment process, but they require more technical expertise and involve higher security responsibilities.