Which Type of Payment Gateway to Choose? Modern or Classic?

May 26, 2021by woaliullah olee

The way we live has changed a lot in the past 50 years. In this modern time, we are always busy with our work and other things. We are very much dependent on the internet. Online shopping sites are way more accessible for us. And when it comes to the e-commerce service, the payment method is not the same as anymore. Instead of cash on delivery, people are using varieties of payment options for business purposes. They use PayPal, Square, Stripe, Amazon Pay, Apple Pay, and so on. All of them are different types of payment gateways. In this article, we will focus on the types of payment gateways and what to consider before choosing a payment gateway.

What Is a Payment Gateway?

The payment gateway is a money transaction system, or to be more specific; it is a merchant service that processes credit card payments for e-commerce sites. It is more like an electronic transaction process which is very secure and convenient to use as a regular cash counter.

Now, let’s check the types of payment gateway and the key considerations before choosing a payment gateway for your business. Key-considerations-before-choosing-payment-Gateway-types-of-payment gateway

Types Of Payment Gateway

There are two types of payment gateway- Classic payment and modern payment. Let’s know about their working procedure in a nutshell.

Classic Payment Gateway

For a classic payment gateway, you need to apply for a merchant account to a bank that offers the merchant account to their customers. Not every bank has the facility of a merchant account. Once you have applied for a merchant account, the bank will verify your application through many organizations. It takes almost 6 weeks to open this type of account.

Although the classic payment gateway is quite a hassle to open, the pre-transaction fee in this type of payment gateway is meager.

Modern Payment Gateway

There is no need to open a merchant account for a modern payment gateway. You do not need to change your bank account at all. It does not take much time to prepare your account for modern payment. But this gateway has some downsides as well. The per-transaction fee of a modern payment gateway charges more than the classic payment gateway.

Generally, there are four significant types of payment gateways under these two divisions-

1. Hosted payment gateways

Paypal-hosted-payment-gateway
PayPal Payment Gateway

Hosted payment gateway is a transaction system that takes the customer away from the e-commerce site. This system works in a loop. First, when the customer clicks for the payment option or the gateway link, it redirects the customer to the Payment Service Provider (PSP) page. There the customer fills out his own payment information by himself/herself. After that, the customer is redirected to the e-commerce site to complete his/her checkout process.

For example, we can talk about the renowned payment gateway, PayPal.

2. Self-hosted payment gateways

stripe-self-hosted-payment-gateway
Stripe Payment Gateway

In the self-hosted payment gateway system, the e-commerce site requests the payment details from the customer. After collecting the data from the customer, it is sent to the gateway’s URL. Then the customer needs to complete the transaction with a specific type of secret key.

Stripe is a perfect example of a self-hosted payment gateway.

3. API hosted payment gateways

google-pay-api-hosted-payment-gateway
Google Pay Payment Gateway

Here, the API stands for the Application Programming Interface. In this transaction process, the customer needs to fulfill his/her credit or debit card information directly on the checkout page of the e-commerce website. And the transaction takes place by using an API system or HTTPS queries.

Google Pay is an API-hosted payment gateway.

 

 

4. Local bank integration

Local bank integration payment
Local bank integration

As the name suggests, the local bank of the customer is involved in this electronic transaction process. When the customer clicks the payment gateway’s link,   he/she is redirected to the local bank’s website. Then the customer enters the payment details and contact details on the bank’s website.

And after the payment, the customer is redirected to the e-commerce website.

This is how the local bank integration payment gateway works in the field of e-commerce.

 

 

Before Choosing a Payment Gateway, Confirm Hosted or non-hosted

Before choosing a payment gateway, it is very important to differentiate both sectors to consider the best one. In the hosted payment gateway, your customer is headed to the payment website after placing the order. He/she needs to give enough information to the payment website to continue the process. After that, he/she is redirected to your website. As the payment website takes care of the transaction security, there is nothing to be worried about for you. It integrates your website. But at the same time, you don’t have any control over that. There is a possibility that your customer may get distracted. Paypal, Amazon Pay, and Stripe are the most trusted and popular hosted payment gateways.Before choosing a payment gateway, Confirm hosted or non-hosted

On the other hand, your customer needs to give his/her payment information to your e-commerce website in a non-hosted payment gateway. The customers are confined to your website and there is no way to get directed to any other website. In a word, the non-hosted payment gateway is quite easy to use for the customers. But there are some problems in the non-hosted payment gateways as well. And the first concern is security. In order to use the non-hosted payment gateway, you need to take every possible measure to keep your website safe for money transactions. APIs,  Authorize.net are some of the best non-hosted payment gateways.

Key considerations to choose a payment gateway:

Before choosing a payment gateway you need to consider the following things.

  1. Application process: You need to know about the application process of both hosted and non-hosted payment gateways. It is good to go for the process which is easier than the other one.
  2. The Time Frame: Each of the payment gateways has its own time frame. Use the one that has a minimum time frame so that you can cancel the gateway if you are unhappy with it.
  3. Supported Currencies: Make sure the payment gateway you are using supports multi currencies. But it takes a good fee. So if you have an international start-up then go for a payment gateway that supports multi-currencies. Otherwise use the one that matches your needs.
  4. Fees: Every payment gateway charges you some fees for the service. Before choosing one, compare the fees to get the best one.
  5. Card updater: Card updater is a must-have facility in your payment gateway. All the gateways take an annual fee to provide you with this facility.
  6. Fraud prevention tools: Your payment gateway must have some tools to find out the fraud activities on your website in order to keep the payment safe and secured. Choose a payment gateway that provides Card Verification Value (CVV), Address Verification System (AVS), Transaction IP Velocity Filter, and other security tools to maintain the security of the payment.
  7. Data Portability: Choose a website that ensures data portability. Because in an e-commerce website, nothing is more important than the data.
  8. High-risk Products: Avoid the payment gateways that use high-risk products. Because safety is the first thing you need to be concerned about when you are using a payment gateway.

Now it’s your turn to select a suitable payment gateway. When it comes to selecting a payment gateway, you need to consider what type of business model you have and how much work will be involved. For example, if your organization is set up with the classic payment gateway as its main focus then choosing one that doesn’t require many additional features might make sense for you. On the other hand, if your company has an emphasis on new technology or wants more flexibility in terms of working with different types of customers (such as international), then opting for a modern payment gateway may be best suited for your needs. Which option do you think would work better? Let us know! We can help by offering guidance based on our experience with these two types of platforms so that you don’t feel uncomfortable.

 

woaliullah olee

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