Software developers implementing payment solutions in their products or for clients face a wide range of payment gateways to choose from. Each gateway comes with its own sets of features, benefits, and limitations, which, if not properly managed, can complicate the integration process and disrupt the project timeline.
Selecting the right payment gateway is about more than just handling transactions—it’s about ensuring scalability, security, and smooth user experiences. In this article, we’ll discuss what a payment gateway is, the common ones developers should know, and key points to consider when selecting one.
What is a Payment Gateway?
A payment gateway is a digital service that allows businesses to accept, process, and manage payments from customers. It ensures funds are securely transferred from one party to another by incorporating security measures like tokenization, encryption, and fraud prevention mechanisms, and they are usually PCI DSS-compliant.
In Nigeria, a payment gateway lets merchants process payments using their cards, banks, virtual accounts, unstructured supplementary service data (USSD), mobile money, and more.
Types of Payment Gateways
Payment gateways can be broadly categorized by how they handle transactions and interface with end users. They also differ in terms of integration complexity, security requirements, and the level of control they provide over the payment flow. Below are the popular types:
- Self-hosted Payment Gateways
- Hosted Payment Gateways
- API-hosted Payment Gateways
Self-hosted Payment Gateway
Self-hosted payment gateways collect payment details on the merchant’s website and then send them to the payment provider’s gateway URL. The payment process is completed on the merchant site without any redirection and has full control of the payment flow.
These are the benefits of Self-hosted payment gateways:
- Complete control of the user experience.
- Ability to integrate payment with other application features (like custom checkout flow and analytics).
However, they also come with drawbacks, such as:
- The merchant has to handle security and PCI compliance.
- More complex setup.
- Implementing it requires more technical expertise and resources.
This payment gateway gives you a higher level of customization on the payment flow and general user experience. For instance, a company handling a large volume of daily transactions may choose a self-hosted payment gateway to maintain full control over the checkout process, including fraud prevention, transaction flow, and customer data management.
Hosted Payment Gateway
Hosted payment gateways redirect customers to the payment provider’s page to complete the transaction. Once the transaction is completed, the customer is redirected back to the merchant’s website.
These are the benefits of Hosted payment gateways:
- They are easy to implement because the provider abstracts all the technical overhead.
- The provider handles security and compliance.
- Merchants don’t have to worry about storing sensitive data.
However, they also come with drawbacks, such as:
- Limited control over the payment experience.
- Redirections can lower conversion.
This payment gateway helps you get started quickly as most of the payment-related overhead is handled for you.
API-hosted Payment Gateway
API-hosted payment gateways allow merchants to integrate payment processing features into web or mobile applications using the payment gateway’s application programming interface (API). In an API-hosted payment gateway, payment details are collected on the merchant’s site, but the actual processing is done by the payment gateway’s API. The API facilitates communication between the merchant’s website and the payment processor.
These are the benefits of an API-hosted payment gateway:
- Highly customizable checkout experience.
- Moderate control over the payment process for your merchants.
However, they also come with drawbacks, such as:
- It is human resource intensive (software engineers, quality assurance, DevOps engineers, compliance managers, etc. are needed).
- Merchants need to handle PCI compliance.
This payment gateway gives you the flexibility and moderate control you need when processing payments.
How to Choose a Payment Gateway
One of the important decisions you need to make to ensure the success of your business is selecting the right payment gateway that aligns with your business needs. It impacts your transaction costs, user experience, and operational efficiency. Below are some points to consider before making your decision:
Business Size and Transaction Volume
If you run a large business with higher transaction volumes, you may opt for an API-hosted gateway because of the customization and scalability it offers. However, if you run a smaller business, you might opt for a Hosted gateway. You need to consider transaction volume, projected growth, and scalability.
Level of Customization
If you prefer to have complete control over your user experience and other payment-related customization, an API-hosted or Self-hosted gateway might be an ideal choice. You need to consider the extent of branding and user experience customization required.
Technical Expertise
If you have a dedicated development team with the required expertise, an API-hosted or Self-hosted gateway might be the ideal choice because you have a team that can handle their complexities. In essence, you need to consider the technical resources and development skills available.
Security and Compliance
If you work in industries with strict security and data privacy regulations (e.g., healthcare or finance), a Hosted gateway that handles security protocol and PCI compliance might be an ideal choice.
Support for Additional Features
If your business requires advanced features like recurring payment, split payments, fraud detection, or multi-user support, a Hosted or API gateway that supports these features might be an ideal choice.
The table below summarizes some criteria for the different types of payment gateways
The number of decisions to make can be overwhelming and can sometimes deter you from your business’s primary goal. This is why partnering with a specialized provider can be beneficial. Such a partner can abstract the integration complexities, allowing you to concentrate on your users and business growth. Let’s examine in detail how the right partner can assist you.
Why is Flutterwave the Right Choice for your Payment Integration?
Managing payment integration can be complex, but with Flutterwave, you don’t have to navigate it alone. We simplify the process by offering secure, seamless solutions designed to fit your business, whether you’re handling large transaction volumes or just getting started.
With us, you’ll have full support every step of the way:
- Advanced fraud protection.
- Secure account management.
- IP whitelist for enhanced security.
- PCI-DSS compliant for safeguarding sensitive data.
Whether you’re looking for Hosted (Flutterwave Inline), Self-Hosted (Flutterwave Standard), or API-hosted gateways (API Reference), Flutterwave has a solution tailored to your needs. Not a developer? We’ve got you covered. You can check out our payment links, invoices, and online store to start processing payments without writing a single line of code.
We’re here for you every step of the way. Our dedicated team is ready to assist with any questions or guidance you may need. If you’d like to stay connected with our community and keep up with the latest updates, you can join our Slack community to engage with other users and developers.