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What are the different types of payment gateway?

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Last editedNov 20223 min read

Payment gateways connect your business with a payment processor, facilitating a smooth checkout process on your eCommerce website. When you’re setting up a payment system, you have several options, but what are the different types of payment gateway in eCommerce and how can you make sure you choose the right option? 

Here’s what you need to know.

4 different types of payment gateway

Before you can choose the best fit for your website, think about your business needs and infrastructure. Some types of payment gateway are self-hosted, while others offer a full package service. 

The main difference between these four types of payment gateway is how they’re integrated into your website. Some require more maintenance and upkeep, while others offer hands-off support from the host.

The four different types of payment gateway are:

  • Hosted payment gateway

  • Self-hosted payment gateway

  • API-hosted payment gateway

  • Local bank integration gateway

1. Hosted payment gateway

If you don’t want to deal with the finer details of integrating and maintaining your website’s payment gateway, a fully hosted service is probably your best bet. A hosted payment gateway works by directing the customer away from your checkout page. 

Instead, when the customer is ready to make a purchase, they click on a ‘buy now’ link which redirects to the host or payment service provider (PSP) page. This separate site is where the customer fills out payment details before being redirected back to your business website to complete the sale. One example of a popular hosted gateway is PayPal.

This type of payment gateway offers a high level of security with PCI compliance and fraud protection. It’s also very user-friendly and easy to set up, with the host taking care of the details. However, because a hosted gateway is external, you won’t be able to fully control your buyer’s checkout experience.

2. Self-hosted payment gateway

If you prefer to have greater control over your user experience, you might be more interested in choosing a self-hosted payment gateway like Shopify or Stripe. The difference between a hosted and self-hosted gateway is that in the case of self-hosted, customer payment details are collected directly on the merchant website. These details are then encrypted and submitted to the third-party payment gateway for authorisation.

One benefit is that a self-hosted gateway enables a faster checkout process, because the transaction is completed solely on the merchant site. There’s no redirection to a separate site for payment, so the merchant is in full control over a user’s payment experience. The disadvantage is that you won’t have access to a full technical support team as you would with a hosted service. 

3. API-hosted payment gateway

An API-hosted payment gateway is best for a merchant who wants to take complete control of their website design. Both the payment details and processing are handled directly on the merchant website, using an application programming interface or API. An API-hosted gateway offers a fully customisable checkout experience and can be integrated with a variety of setups including mobile devices.

What’s important to remember if you choose this type of payment gateway is that the merchant is responsible for security. That means you need to pay extra for SSL certification and ensure that the payment process is PCI DSS compliant.

4. Local bank integration gateway

This gateway redirects the customer to the merchant’s website where all payment and contact information is input and exchanged. The customer is then redirected back to the merchant’s site once payment has cleared alongside a payment notification.

This is very much an entry-level solution with a basic feature set, and rarely allows returns or repeat payments. So, while it might be simple and quick to set up and implement, it's not suitable for businesses that intend to scale and is certainly not suitable for wholesalers.

The bottom line

To choose the best payment gateway, think about your comfort level with website building, as well as the level of control you’d prefer to have over your user experience. 

Some types of payment gateways in eCommerce work better with certain scripts. For example, you might want to find out how many types of payment gateway in PHP work vs Java or HTML. 

Also think about pricing structures, customer support and special features before making a final decision.

Differences between payment gateways





  • Transactions are fully PCI compliant.
  • Easy, use, install and customise.
  • External payment gateway factors prohibit the merchant from monitoring the entire consumer journey.


  • As the transaction is being processed in one location, customer service is generally excellent.
  • The entire customer journey can be monitored.
  • Self-hosted systems rarely have anything in the way of technical support. If there’s a problem, you must fix it yourself.


  • Completely customisable with complete oversight.
  • Integrates easily with multiple devices.
  • The merchant must strictly comply with PCI DSS and achieve SSL certification.

Local bank integration

  • Fast and simple so ideal for sole traders.
  • A very basic feature set.

We can help

GoCardless is a payment gateway that integrates seamlessly with over 300 partners. 

It helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. 

Find out how GoCardless can help you with ad hoc payments or recurring payments.

Over 85,000 businesses use GoCardless to get paid on time. Learn more about how you can improve payment processing at your business today.

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Interested in automating the way you get paid? GoCardless can help
Interested in automating the way you get paid? GoCardless can help

Interested in automating the way you get paid? GoCardless can help

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