Different Types of Payment Gateways to Choose for a Small E-Commerce Business

July 28, 2016

Different Types of Payment Gateways to Choose for a Small E-Commerce Business

“First and foremost the reliability of the service, you don’t want to lose out on a valuable customer just because there is an error in the payment. Success rate is one of the biggest criteria to evaluate a payment gateway. “Even a 1% improvement in success rates can add Rs 20 crore to our top line.” –Kunal Bahl, CEO, Snapdeal.

Online business is easy to start but little difficult to manage and run as it has involved use of different kind of technologies at every level. So, it means you should have knowledge or deep information about the latest technologies to make it profitable and well managed.

Like the case when it comes to choosing an online payment gateway for your online business, as dozens of online payment gateways’ options are available in the market.

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What is the Use of a Payment Gateway in an Online Business?

A payment gateway is a service that is used by ecommerce businesses like you to manage online payments processes done by customers through debit and credit cards. When a customer buys something from an e commerce website and chooses online payment option during checkout process along filling his/her cards detail at payment gateway to get approval for the transaction, a payment gateway helps in perusal and matches the filled information with bank and afterward transfer the selected amount from customers account to merchant’s account. As a whole the process deals with money transfer and payment gateways play very crucial for safe transactions.


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Understanding the Procedure of Payment Gateway Process



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Different Types of Payment Gateways

Hosted Payment Gateways

PayPal Standard, 2Checkout and Payza etc. offer Hosted Payment Gateways Services (HPS)! The HPS allows capturing of cards details filled by the users on the merchant’s website. HPS takes customers off from website payment page right after when they click on pay now button. Afterward they redirected to Payment Service Provider (PSP) page for providing the card details. Once the payment confirmed, customer again redirected back to the merchant website to complete the checkout process.

In another option, PSP can use an iframe or a form on merchant’s website to capture customer’s cards information firmly without storing it into the merchant’s website. So whenever customers provide card info by filling up the attached form, the PSP receives all the information. In case of refund and cancellation of payment, everything is looking after by payment gateway’s site.

Whenever any payment related activity carried out on website, Payment gateway’s website will send notification URL on the provided email ID instantly.

Key Advantages of Hosted Payment Gateways

  • Security –Credit and debit cards’ details are securely captured by PSP.
  • Simple –PSP takes care of everything. So very simple to implement.


Self/Pro Hosted Payment Gateways

Paypal, PayU Money and others offer hosted payment gateway! For this type of payment gateway, merchant need to get the customer’s cards and payments details on its own website. Customers fill all the details on website and then merchant website will pass it to the payment gateway’s website. Sometime, some gateways demands info in a specific format while some others demand some specific security key. For recurring payments, payment gateway will be responsible. It will send the notifications to the merchant website. Merchant needs to provide the website information to the payment gateways website to get the notifications of all the recurring payments.

Key Advantages of Pro Hosted Payment Gateway

  • Easy to Customize – It gives control from start to finish, and make easy to make changes as per your choices.
  • Great Customer Experience –Give more confidence to your customers when completing a purchase.


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Payments Directly at Merchant’s Website/ Non Hosted Payment Gateways/ API Hosted Payment Gateways

Stripe and Authorize.net are non hosted payment gateways. CIM When merchants don’t want to direct customers from their checkout page; a non hosted payment gateway can be selected. Customers can enter their cards details directly on the checkout page and process payments using their API’s. Mostly this type of payment gateways support fixed as well as recurring payments.  Most importantly, some payment gateways also provide facility for payment cancellation, refund and inquiry etc.

Key Advantages of Non Hosted/ API Payment Gateway

  • Flexibility – Merchant have full control over what payment page UI.
  • Customer Never Leave Website–Customers never leave your website as they can have more confidence when completing a purchase.

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Payment Gateways Integrated with Local Banks

These payment gateways can be integrated easily with the local bank. They are just like hosted payment gateways and can be implemented easily. Customers are redirected to payment gateway’s website to fill all details of cards. Afterward, they are redirected back to the merchant website. These gateways are not supportive to recurring, cancellation and refund etc.

Key Advantages of Payment Gateways integrated with Local Banks

  • Simple Yet Efficient: Very Simple and Good option for small business, who are looking for onetime payment solutions

Direct Payment Gateways

DataCash, ePay and many others are examples of direct payment gateways. They don’t support direct payment notification. They create customer’s profile and then deduct the amount from his/her account. However for authentication checking multi efforts are required. Generally, they ask for the information on website and accept both recurring and fixed payments.

Key Advantages of Direct Payment Gateway

  • No redirection to payment gateway.


To avoid some serious mistake during the selection of an online payment gateway for your business, ask the following questions from yourself:


If you succeed to get the answers for all these questions, you may proceed further to know about the different types of payment gateways available in the Indian market. The below mentioned information may also help those startups who are facing any difficulty with their primary payment gateway and looking for the new and better one to choose from the abundant options.

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Recommended Payment Gateways for Your Business in India

There are a number of popular payment gateways available for small e commerce businesses to choose from. The list includes PayPal, Atom Payments, Paytm, Paynimo, PayUbiz, 2Checkout, Airpay, BitPay, CCAvenue, Citrus Payments, EBS, GoCoin, PayDollar, PayTabs LLC, PayPal Express Checkout, PayU India, PayU Money, Razorpay, NETbilling etc. all they are increasing in popularity wise and building a new market segment. Most of these payment gateways service providers charge monthly fees and supportive to mobile payments. However be careful to choose the best one payment gateway to offer great customer experience.


So we have explained you almost all types of payment gateways. Now choice is yours! However you can ask SME Joinup Team for more help as they can guide you to select the well suited payment gateway for your business.

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July 28, 2016

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