happy person looking at phone
  • A Complete Guide to Choose the Best Payment Gateway

  • Published By:
  • Category: Ecommerce
  • Published Date: November 3, 2022
  • Modified Date: November 3, 2022
  • Reading Time: 12 Minutes

Featured Image Caption: Happy Person Looking at Phone

The eCommerce sector has seen accelerated growth in the last decade, especially in the post-pandemic world. Part of the reason for its success is the holistic shopping experience buyers get when they shop online, and paying for their purchase securely and quickly plays an important role in that experience.

Payment gateways provide a secure, hassle-free payment ecosystem that buyers have grown to trust over the years. It’s this trust that has contributed significantly towards making online retail a complete shopping experience, which is near identical to offline commerce.

Since their inception back in 1996, the best Payment Gateways have gone through a metamorphosis to offer increased security and functionalities, but each of them differs in terms of the package and features on offer.

In this article, you will read to understand the functioning of payment gateways, and which ones should you ideally consider to include in your custom eCommerce solutions.

Payment Gateways – An Introduction

The primary function of payment gateways is providing security to facilitate payments. They bridge the eCommerce website to the bank via a secure channel to facilitate buyer payments on an eCommerce website.

Buyers can pay for their purchase from the payment page on the eCommerce website itself, without having the need to visit their bank website. The whole process is completed with just a few clicks on the front end.

Thus, a payment gateway is a solution that transfers the payment from the buyer’s bank account to the merchant, in a series of steps that includes encryption to ensure safety.

Payment gateways – Functioning

A few intuitive steps for the buyer at the front end entail a series of steps at the back end that involves the following entities:

  • Issuing Bank: The bank that the buyer has an account with is called the Issuing bank. The payment is debited from the customer’s account in this bank. It is called an Issuing bank because it issues the debit or the credit card to the buyer, that is used for the transaction. The card is issued on behalf of an organization called the Card Association.
  • Acquiring Bank: The bank that the merchant has an account with is called the acquiring bank, or the bank that acquires the payments. The payment is credited to this bank account.
  • Card Association: A network of banks or an organization that enables card transactions is called the Card Association. For instance Visa, Mastercard, Citibank, Chase, AmericanExpress, and others. Some Card Associations like American Express issue credit cards on their own while others like Mastercard, partner issuing banks to provide customers with cards.
  • Payment Processor: The company selected by the merchant to process the payment between the merchant’s and the buyer’s bank accounts. Payment processors are financial platforms that provide the merchants.
  • The Payment Gateway: Authorizes the buyer credentials from the eCommerce website and transfers them further to the payment processor.

The transaction occurs with a streamlined involvement of all the aforementioned entities.

Let us understand the functioning behind each payment that takes place using these payment solutions.

But first, for the payment gateway to work, its Application Programming Interface or API has to be integrated into the custom eCommerce solution that is used for the website.

APIs are a connection between software that lets them exchange information. In this case, API between the eCommerce website and the payment gateway lets them share the buyer’s payment credentials with the gateway.

The transaction process functions as follows:

  • The buyer enters the card details and initiates the transaction process on the eCommerce website by clicking on the action button.
  • An order ID is generated and the transaction information is transferred to the payment gateway by the website. This step can also be accomplished by a hosted payments page.
  • The information is then sent to the issuing bank to request the customer to submit authentication details.
  • The transaction details are then sent to the payment processor by the payment gateway.
  • The payment processor transfers the transaction details to the card authority.
  • The card authority verifies the details, and checks for requisite funds in the issuing bank account.
  • The card authority gets a response from the issuing bank regarding the validation of necessary information.
  • This information is further sent to the payment processor. The payment processor transfers the information to the payment gateway.
  • The payment gateway informs the customer and the merchant about the status of the transaction via prompt messages.
  • Eventually, the funds are transferred to the merchant account either immediately or in a batch process.

The whole process is encrypted and minimizes any chances of security attacks. Furthermore, the best payment gateways are built to withstand fraud. Let’s see how that happens.

Payment gateways protect against fraud

eCommerce success for online merchants depends on a secure payment ecosystem. Payment gateways are engineered to withstand security attacks through a series of protocols, which are discussed below.

Unique card verification numbers – CVV and AVS

Address Verification System or AVS is attached with each credit or debit card. It enables the card association to verify the address of the card’s owner

Card Verification Value or CVV is a 3 digit number. It can be found on the backside of the card, printed near the signed label. This number is used for verification each time a customer uses the card to make a transaction.

Both AVS and CVV are verified by the card association, in that order.

Device Identification – IP address tracking

All devices have a unique Internet Protocol or “IP” label. These labels are a unique numerical sequence that is attached to devices when they access the internet. Device Identification in payment gateways uses the IP address to track devices that access their services. Additionally, they also take into account the internet connection, browser, and device type.

A list of past offenders is maintained in a database. Moreover, any malicious activity can be identified and tracked using device identification.

Payer Authentication – Personal Identification Number

When a transaction takes place on a payment gateway. A unique Personal Identification Number or “pin” is sent via email or as a message to registered users. A prompt asks the user to enter this pin. The transaction proceeds only when this pin is verified.

Lockout mechanisms – Card Block

Lockout mechanisms are emergency protocols that block a card after a number of repeated failed attempts at using the card. Additionally, during the worst-case scenario that a card has been lost, or misplaced, or a customer feels that it can be misused, a request can be made to block the card.

Parameters to select an ideal Payment Gateway

There are multiple payment gateways that are a popular choice for eCommerce websites.


Payment gateways handle financial transactions on eCommerce websites, forming the backbone of the business. Security is paramount to its operations.

Compliance with the Payment Card Industry (PCI) Data Security Standards DSS is imperative. The PCI DSS defines a set of requirements that includes protocols for a secure transaction process.


eCommerce business can scale expeditiously, especially in the post-pandemic space. Accelerated digitization has further presented newer opportunities. Integrated payment gateways should support the progress and grow with the business.


Payment Gateways differ in the way they charge for the services offered. There are different costs that need to be considered while gauging the ideal payment gateway for your online business.

A payment gateway may come with a signup fee, recurring payment, transaction charges, or a combination of any of these three.

Depending upon the business, target market, and the products on sale, any of these payment modes may be appropriate.

Apart from these charges, there may be a periodic maintenance fee, chargeback fee, PCI DSS compliance fee, early termination charges, and others. These charges vary from one payment gateway to the other.

Additionally, some payment gateways may levy charges that are exclusive to their platform. For example, Stripe charges a radar fee and Payoneer levies charges for its international transactions.

Thus, it is important to research in detail 一 the cost to the business of a payment gateway before opting for the services of one.

Performance of the payment gateway

Payment is the last step in the eCommerce funnel, so the performance of payment gateways is important as well. Slow performance can test the patience of buyers, and on the other hand, seamless performance, and a successful transaction will make a good lasting impression on the buyer.

After-sales support

Compared to offline retail stores, eCommerce businesses operate for longer periods of time. That is simply because the website can be accessed by anyone, from anywhere in the geographical region the business operates. Offering customer service for extended periods, even 24X7, is normal for online retail stores. Payments form an integral part of the buyer’s journey. Any queries regarding payments will need a resolution. Thus, the quality and duration of customer service from your payment gateway will be quintessential to the success of your business.

Top Payment Gateways

We considered the top solutions available in the market and based on the parameters discussed above, and customer reviews, a list of the most preferred is given below.


Square is a payment solution by Square INC, an American financial services and digital payment company. Square is one of the most affordable and user-friendly payment solutions. Its USP is simplicity, an important consideration for startups. Square offers a dashboard that is a one-stop solution for all functionalities of the software.The payment solution offers fraud detection, chargeback protection, account takeover protection, and more. It also offers a virtual terminal that allows a business to accept payment from any device.


Payoneer is a platform for universal growth. It provides businesses with a payment ecosystem that is 200+ countries with 150 local currencies strong. If the online business is intended to operate across international borders, Payoneer can be a preferred choice. Online businesses that use Payoneer can accept payments in local currencies in the countries they operate in. The payment will be credited in the currency the business wishes to receive. Payoneer facilitates faster payouts. It can credit them in as fast as 2 hours. The payment solution offers the buyers on Payoneer integrated website a Payoneer account. This account facilitates the buyers to easily manage their transactions on the website. Payoneer offers direct withdrawal of funds with a debit card. Payoneer’s services can be best utilized by large businesses that operate internationally.


PayCafe is an all-in-one payment solution for eCommerce business operations. It offers easy setup, advanced security, and 24X7 customer support. Paycafe operates in 150+ countries, in their local currencies.PayCafe is a quality credit card processing solution. It allows merchants to accept one-time payments, subscription charges, or invoice payments with a few simple clicks.

Paycafe features a shopping cart with impressive functionalities 一 Higher conversions, multiple payment options which will also support bitcoins in the near future, and an industry-leading fraud protection system. The payment solution assists in disputes with tailored dispute responses by leveraging the holistic data collection by Paycafe. Additionally, Paycafe offers Currency Conversion and Customized Emails. The payment gateway offers 24X7 customer support via phone.


Stripe is a popular solution to provide quality payment infrastructure for the internet. It offers an impressive list of functionalities to receive payments and send payouts. The payment solution helps companies to beat fraud, send invoices, issue virtual and physical cards, get financing, manage business spending, and much more. With Stripe, marketplace platform owners can automate payouts, and streamline the workflow of the online business. Moreover, businesses that have the flexibility to integrate the solution with an in-house team or outsource this task can utilize the customizable development features. Stripe has a host of APIs that facilitate the creation of subscription services, and allow integration with on-demand marketplaces, or crowdfunding platforms A key differentiator of Stipe is the flexibility and customizability it has to offer. It supports Ruby, Python, PHP, and Java, and other popular development languages, which maximizes its integration with numerous websites an software. Stripe operates in 35+ countries and supports payments in 135+ currencies.

PayPal (Standard Plan)

PayPal is one of the more popular payment platforms, globally. It supports multiple payment methods including cryptocurrency (restricted to a few states within the US). PayPal is active in more than 200+ countries and supports 100+ currencies. In essence, it has a presence in about the same number of countries as Payoneer, although, the supported currencies are lesser Merchants can have the functionality of a full-service solution with PayPal. POS, a merchant account, Invoicing solution, and the means to accept payments are all possible with the PayPal platform. With PayPal, buyers can link their bank account directly to have ease of instant payments. PayPal has lower transaction charges, which helps merchants to minimize the recurring overheads on the business.

Google Pay

One of the cheapest payment gateways, Google pay, or GPay, utilizes Google’s popularity and universal appeal to offer a payment solution that is trusted globally. Gpay offers nifty functionalities by leveraging its service suite. For instance, buyers can pay using Gmail. The payment solution is easily and quickly integrated into most websites and software With GPay, online businesses can drive higher sales by leveraging the trust of Google.


Payment Gateways provide a fast, secure, and convenient way to handle payments on eCommerce websites. They add other functionalities that help online marketplaces streamline merchant payouts as well. The more popular payment gateways that offer nifty features and perform well have been listed in this blog. But we recommend that you go through a complete analysis to determine which payment gateway is best suited to your online business. Most popular payment gateways can be integrated with eCommerce websites. For the stable performance of the payment gateway, custom eCommerce solutions can be integrated by availing of eCommerce development services.

Ramesh Lal

By Ramesh Lal
who is an SR. Digital Marketing Executive at FATbit Technologies. He has extensive expertise in assisting businesses to streamline their business operations and launch new ventures. With in-depth knowledge of B2B marketing, Ramesh also assists B2B businesses in reaching new customers and securing conversions.

Member since December, 2021
View all the articles of Ramesh Lal.

Like it? Share it!

FacebookTwitter / XLinkedInPin ItBufferRedditEmailWhatsapp

Do You Enjoy Writing and Have Something Interesting to Share?

You are at the right place. Inspiring MeMe is the world's fastest growing platform to share articles and opinions. We are currently accepting articles, blogs, personal experiences & tips and would love to have you onboard.

Share your article today!

All images and content mentioned herewith have been shared by the authors/contributors as on dated November 3, 2022. We do not hold any liability for infringement or breach of copyright of third parties across the spectrum. Pictures shared by authors/contributors are deemed to be authorized by them likewise. For any disputes, we shall not be held responsible.


Does a Fence Increase the Home Value?


How to Make Sure Catered Business Events Run Smoothly

Leave a Reply

© 2015-2024 Inspiring MeMe | All rights reserved.