Compare Online Payment Gateways

Understanding Online Payment Gateways

For any business selling online in the UK, an online payment gateway is a fundamental part of the operation. It’s the technology that connects your website to the financial network, allowing you to accept and process card and other digital payments from customers. It securely works behind the scenes as a digital cashier for your website to handle the sensitive payment data safely and efficiently.

The world of online payments has changed, significantly increasing, with many customers preferring to pay by card or with digital wallets rather than with cash or bank transfers. An effective payment gateway ensures that you don’t miss out on sales by providing a seamless and trustworthy checkout experience. For a small to medium-sized business, a well chosen gateway can simplify financial management, reduce administrative tasks and help prevent fraud. For larger businesses the right gateway offers the scalability and robust features needed to manage a high volume of transactions and expand.

How an Online Payment Gateway Works

The process of an online payment, from the customer clicking “pay” to the money reaching your account, involves several steps that happen in a matter of seconds.

1. Submission of Payment Details: The customer enters their card details or chooses a digital wallet option on your website’s checkout page. The payment gateway’s software then securely captures this information.
2. Encryption and Transmission: The gateway encrypts the sensitive payment data to protect it from being intercepted by fraudsters. It then securely sends this encrypted information to a payment processor . The payment processor acts as a link between the gateway and the banks involved in the transaction.
3. Authorisation Request: The payment processor forwards the request to your business’s acquiring bank, which then communicates with the customer’s card issuing bank (e.g., their bank that issued the debit or credit card). The customer’s bank checks for sufficient funds and verifies the details, either approving or declining the transaction.
4. Response and Settlement: The approval or decline message is sent back through the payment processor to the gateway, which then relays the message to your website. If the transaction is approved, the money is held in a holding account before being settled.  

Funds deposited into your business bank account can vary in timescales, but the payment process is designed to be secure and nearly instantaneous, providing a smooth experience for the customer while protecting their sensitive data and securing the payment for the business.

Types of Online Payment Gateways

When choosing a payment gateway, you will come across three main types, each offering a different level of control and technical complexity.

Hosted Payment Gateways

With a hosted payment gateway, the customer is redirected from your website to a third-party payment page to complete their transaction. A widely known example of this is when a customer is sent to a secure page to enter their card details. Once the payment is processed, the customer is automatically redirected back to your website to a confirmation page. This is a very secure option because the sensitive payment data is never handled by your website, which simplifies your security requirements and reduces your compliance burden. However, it can disrupt the customer’s journey and may lead to a slightly higher rate of purchase abandonment.

Self-Hosted Gateways

With a self-hosted gateway, the payment form is integrated directly into your website’s checkout page. Customers enter their details on your site, but the data is then sent to the payment gateway’s servers for processing. This method gives you much greater control over the look and feel of your checkout process, which can provide a more seamless and professional experience for your customers. You will, however, have more responsibility for handling the security of this data and must ensure you comply with the relevant security, legal and regulatory standards.

API-Hosted Gateways

An API-hosted gateway gives you the highest level of control and customisation. The payment gateway provides an Application Programming Interface (API) that allows you to build a fully bespoke checkout experience on your website. All payment data is collected and sent to the gateway’s server, providing a very smooth user experience. This option requires more technical knowledge to set up and maintain, but it is popular with larger businesses and those that want complete control over their branding and customer journey.

Key Features of a Payment Gateway

When comparing different providers, it’s important to look at the features they offer and how they align with your business needs.

• Supported Payment Methods: The gateway should support the payment methods your customers prefer, including major credit and debit cards as well as digital wallets like Apple Pay and Google Pay.
• Security: Security is non-negotiable. Security measures like encryption, tokenisation and 3D Secure to protect both your business and your customers from fraud are a minimum. 
• Recurring Payments: If your business works on subscriptions or memberships, the gateway should have the ability to securely store customer details for future payments and manage the billing process automatically.
• Integrations: A good gateway will integrate seamlessly with your existing e-commerce platform (like Shopify or other providers), as well as your accounting and inventory software. This helps to automate processes and ensures that your data is consistent across your business.
• Reporting and Analytics: Most gateways provide a dashboard where you can view your sales data, monitor transaction history, and get insights into your business’s performance. This can be a valuable tool for understanding your customers and making informed decisions.

Pricing and Costs

The cost of a payment gateway in the UK can vary greatly. Providers often use a combination of different fee structures, so it’s important to understand the total cost before you commit.

• Transaction Fees: This is the most common charge, a percentage and/or a small fixed fee for each transaction processed. This fee can vary depending on the type of card used.
• Monthly Fees: Some providers charge a fixed monthly fee, in addition to transaction fees. This is often an option for businesses with a high volume of transactions to scrutinise, as it can reduce the per-transaction cost.
• Setup Fees: While many providers have eliminated these, some may still charge a one time fee to set up your account.
• Other Fees: Look out for other potential fees, such as those for chargebacks (when a customer disputes a transaction), or for using additional features like fraud protection tools.

Choosing a payment gateway is a significant decision for any online business. It’s about finding a solution that offers the right balance of features, security and cost, while providing a frictionless experience for your customers.