Before developers and business decision-makers fill out their checklists for a payment gateway, it’s useful to understand the complexity behind what a payment gateway does and what occurs within payment processing.

A payment gateway functions as the midway point that facilitates a transaction between the buyer and the seller. Within this connection, the payment gateway also protects buyer/cardholder data, often handling the burden of Payment Card Industry (PCI) responsibility for the developer or ISV.

In providing a safe route for transactions, a payment gateway performs the following functions.

• Links everyone in the payment process: buyer’s and seller’s banks, the acquiring bank, and the payment issuer.
• Authenticates payment details and screens for fraud.
• Ensures that, once details are authenticated, the bank authorizes the transaction and allows the bank to transfer payment to the seller’s bank.
• Safely transmits data following security standards from the Payment Card Industry.
• Protects the seller from most liability regarding the customers’ private information.
• Rolls all of these features into one, integrated payment process.

There are two distinct kinds of payment gateways. At checkout, customers are either brought to another window within the business site or presented with a pop-up window to enter payment details and then redirected once the payment is done.

1. Integrated. This is the payment gateway that stays within the business website. In this instance, customers never need to be redirected away to complete the checkout process, which can sometimes lead to shopping cart abandonment.

   While not every business has the technical knowledge required for this integration or the finances to outsource the job, there are integration guides and API specs available to help. With the Payanywhere Android SDK, for instance, the payment environment can be customized by processing transactions from a backend server, POS system, website, or another payments gateway that acts as a plugin or middleware.

2. Hosted or semi-integrated payment gateway. These gateways are hosted by third parties and can be a solution for startups and small businesses. While payment gateways can generally be trustworthy, they don’t typically offer much customization for the business owner.

   There are a few types of hosted payments.

   • Plugins. Available for some websites such as a BigCommerce integration or the WooCommerce plugin for WordPress sites, these typically have user-friendly and flexible features.
   • iFrames. An option to embed a frame into the business website. An Invoicing API collects payment information and, once processed, returns the data to the host. An iFrame JavaScript SDK also can enable a payment button right on the site.
   • Hosted pages. This type of solution, such as EPX Hosted Checkout, directs transactions to be completed on a payment processor’s website, which is separate from the ecommerce website.

These options shift security responsibilities away from the business and onto the payments partner.

There are two main questions to ask in terms of gateway performance.

• Is there a lot of lag time between the submission of payment information and the next step in the checkout process?
• Is the platform sensitive to small errors or anomalies in data that are inconsequential to security?

While just having a payment gateway that is up and running reliably is a great start, business growth requires thinking a little further: What features will be needed in the future? Some structures can include the following.

• Subscription services
• Recurring product orders and payments
• Loyalty programs
• Coupon codes
• Landing page integration
• Buy now, pay later
• Invoicing options
• PCI compliance programs
• Storage of customer payment information
• Notifications verifying transactions
• A virtual terminal that mimics a physical credit card terminal
• Certified, point-to-point encryption and tokenization of sensitive payment information
• Painless integration with existing accounting or shopping cart software
• More intricate reporting tools such as a Business Reporting API

The terms of use should be read carefully for pricing information. Costs can involve a combination of the following.

• Registration fees
• Set-up fees
• Monthly charges
• Transaction fees
• Processing fees
• Chargeback and refund fees
• Fund transfer charges
• Termination penalties
• Pricing changes with increased volume

Customer data portability is also a significant concern in the event that a business needs to switch payment gateway providers. Make sure that data is able to be transferred to a new gateway to preserve contacts, billing information, and transaction histories, should it be necessary.

In the end, payment gateways should give the consumer the easiest and most secure payment route possible while still delivering all of the customization and features needed to run and expand a business.