4 Types of Payment Gateways: What Are the Main Pros and Cons of Each?

4 Types of Payment Gateways- What Are the Main Pros and Cons of Each-techinfoBiT-1
Image by Yannick McCabe-Costa from Pixabay

Payment gateways are one way that e-businesses and online sellers are able to have credit card payments processed. The benefits of using a payment gateway? They’re secure, they make merchants seem more credible and trustworthy, and best of all, they allow for instant payment.

But before you’re quick to rely on a payment gateway for your own business or personal benefit, know that there are many different types of gateways offered. Below are some of the most common to date. Read on to learn more about the pros and cons of each type of payment gateway to decide which might be best for you.

1. Hosted Payment Gateways

After a customer makes a purchase from your website or e-store, a hosted payment gateway directs them to a different website to complete their payment. PayPal would be an example of a hosted payment gateway.

The benefits of hosted payment gateways are that they offer strong fraud protection, are simple to use and set up, and they make an online seller or store look more honest. However, one con is that it’s hosted elsewhere. That said, the merchant will be unable to control the aesthetics and function of the gateway. Although, they won’t be held responsible for any technical issues.

2. Self-Hosted Payment Gateways

Those who want customers to pay directly on their website and not be directed to an outside source might prefer a self-hosted payment gateway. This way, customers can complete payment in one place, and the merchant has greater control over how the payment gateway looks and functions. Shopify, which is powered by Stripe, is an example of this type of gateway.

But every rose has a thorn. Self-hosted payment gateways are no exception. One issue with this gateway is that there’s often no technical support team that merchants can turn to for assistance. Often, sellers would have to select the help of a tech expert.

3. API-Hosted Payment Gateways

Like a self-hosted payment gateway, an API-hosted payment gateway allows customers to finish making a transaction through the merchant’s website. However, instead, payments are processed using an Application Programming Interface (API) or HTTPs queries.

Besides payments being conveniently made from the website, some benefits of this gateway are that it offers plenty of room for customization from the merchant, and it’s versatile to use on many different devices including tablets. The security of this gateway, however, may be compromised.

4. Local Bank Integration

To allow customers to make a transaction with their bank savings versus with their credit card, you can use a local bank integration gateway. How it works is, the customer is redirected to the bank’s website to complete the payment and then redirected back to the merchant’s website afterwards.

The great thing about bank integration is that not only does it allow customers to pay for products or services with their bank account versus with a credit card, but it offers a very simple and quick way to process transactions. The bad news? Well, it offers very basic features, and merchants aren’t able to customize it. Plus, returns and recurring payments can’t be made.

4 Types of Payment Gateways- What Are the Main Pros and Cons of Each-techinfoBiT
Image Credit: pixabay.com


Generally, there are numerous types of payment gateways out there that you can take advantage of. Hosted, self-hosted, API-hosted, and local bank integration are all popular types of payment gateways. Before selecting one to use, it’s a good idea to weigh the pros and cons of each first as each type of payment gateway varies from one to the next.


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