How To Choose A Payment Gateway?

A payment gateway is a service that authenticates and automates electronic payments made by customers to ecommerce merchants. It allows your web store to accept credit cards.

How does a payment gateway work?

Online payment gateways work by providing the secure, integral link between a web shop server and a bank. When credit/debit card details are submitted on a website the online payment gateway receives those details and transfer them to the bank for verification. The bank replies with a response; either accepted or declined. The payment gateway transfer this response back to the server when the corresponding message is displayed to the customer.

Alike the swipe machine, online payment gateways:

  • securely process transactions
  • verify details such as identification and limits
  • accept or rejects the transaction.

Types of payment gateways

There are two type of online payment gateway:

Hosted Payment Gateways are those that direct you away from the webshop. While making payments, the shopper is redirected to the real gateway page by clicking the gateway link.

Examples: PayPal, WorldPay and Nochex

Shared Payment Gateway is a type of payment gateway that issued as a third party payment processing to the vendor. Hosting environment does not need any special environment setting to be performed. While making the payments, a shopper is transferred to the payment page but not out of your webshop.

Examples: eWay

How to choose an e-commerce payment gateway?

Consider the following tips while choosing a payment gateway for your online shop:

  1. Sign up fees
  2. Countries and currencies supported
  3. Transaction fees
  4. Hosted or shared payment gateway (both of them have their pro’s and con’s)
  5. What products can you sell?
  6. Customer support
  7. When do you need to be paid (do they have recurring payments?)
  8. Fraud detection
  9. Virtual terminal (if you want to accept payment through phone)
  10. Customers feedbacks (reed customers feedback, not only professional reviews)
  11. Types of credit/debit cards supported

Merchant account

If you sell products online you will need a payment gateway and a merchant account. The merchant account is an online bank account that temporarily hold your money until it is moved into your actual bank account. Usually money is transferred to the bank account within 2-7 working days if the transaction is successful.

There are two types of merchant account: dedicated and a third-party merchant account.

The dedicated merchant account is when the whole transaction cycle takes place on the merchant’s website. If you have a large or medium online store – this solution is for you.


– improve professional company image

– lower processing costs

– quicker money transfer

– full control over your account

The third-party merchant account is when the merchant outsource the payment processing part of the transaction cycle to a third party. This type is suitable most for small business as do not require specific technical knowledge.


– easy to get started with

– requires less personal information

– less strict acceptance criteria

– usually no monthly fee

Tips: One of the most popular CMS for online stores is Magento, it has a many options for online payments. To set up the gateway payment you can either ask your magento programmers or do it yourself if you have appropriate skills.

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Marta Gromadzka is a writer and editor with a wide variety of experience, including writing for websites internationally and editing books on many different subjects and in a variety of formats.

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