While making a purchase online, you may have noticed two different checkout experiences. Sometimes you’re redirected to a platform like Google Pay or a bank page to complete the payment. Other times, you finish the entire transaction without leaving the website itself. These represent two widely used payment gateway types: the hosted payment gateway and the integrated payment gateway.
Both options are secure, but they work differently and can influence customer experience, compliance responsibilities, and even conversion rates. The real question is: which model suits your business better, and how should you decide between them? Let’s answer the questions with a detailed overview of the two payment gateways.
| Table of Contents: |
| What is a payment gateway? |
| What is a hosted payment gateway? |
| What is an integrated payment gateway? |
| Comparing Hosted vs Integrated Payment Gateway |
| Which Is the Best Payment Gateway for Your Business? |
| How to Evaluate Payment Gateway Providers? |
| Bottomline |
| FAQs |
What is a Payment Gateway?
A payment gateway acts as the bridge between your website and the banks or card networks that process payments. It captures payment details, routes them through payment processors, and ensures secure authorization of each transaction. Without one, it is difficult to accept card or digital wallet payments online.
There are different payment gateway types, and each serves businesses differently:
- Hosted Payment Gateway: Redirects customers to the provider’s platform for completing payments before returning them to your site.
- Integrated Payment Gateway: Embedded directly into your website or app, allowing customers to complete payments without leaving your platform.
- Self-Hosted Payment Gateway: Payment details are collected on your website but submitted to the gateway’s server for processing.
- Local Bank Integration Gateway: Redirects customers to their bank’s page for authentication and payment, after which they return to your site.
- Direct Payment Gateway: Processes payments directly through APIs, offering complete control but requiring strict compliance measures.
With multiple payment gateway providers offering these models, the choice often comes down to whether you want simplicity, control, or scalability.
What is a Hosted Payment Gateway?
A hosted payment gateway redirects customers from your website or app to the gateway provider’s secure page to complete the transaction. The provider collects and processes payment details on its servers and then sends the transaction status back to your platform. This setup makes security and compliance the responsibility of the gateway provider rather than the business.
An example of a hosted payment gateway is PayU Hosted Checkout, where customers are redirected to a PayU-hosted page to select their payment method and complete the transaction. Once done, they return to the merchant’s site with the payment status.
With a hosted gateway, the integration process is simple. You usually need to embed a code or plugin into your e-commerce platform, and you’re ready to start accepting payments. Because the provider manages PCI-DSS compliance, fraud detection, and technical maintenance, businesses benefit from high reliability and minimal development effort.
However, certain limitations of this method include:
- Customer redirection: The shift to an external payment page may disrupt the checkout flow and affect user experience.
- Limited branding control: Businesses cannot fully customize the final payment page, which can impact the sense of brand consistency.
This option works well for small businesses and startups that want a secure, quick-to-deploy solution.
What is an Integrated Payment Gateway?
An integrated payment gateway (also known as an API-based gateway) allows payments directly on your website or mobile app. The customer never leaves your platform, and transactions flow in the background through the gateway and payment processors. With the integrated payment gateway, businesses gain complete control over designing their checkout process. It ensures a smooth payment journey for the customer. Plus, the look and feel of the brand remains consistent as the payments happen on your website. As the business grows, integration can support advanced features like recurring payments or multi-currency support.
However, certain limitations of this method are-
- Higher responsibility: You must ensure PCI-DSS compliance and data security standards.
- Technical integration required: Development expertise is needed for setup and maintenance.
This option is often considered the best payment gateway for business models that want to scale, improve user experience, and maintain control over transactions.
Comparing Hosted vs Integrated Payment Gateway
When choosing between these two payment gateway types, businesses can consider factors such as customer experience, compliance responsibility, cost, and technical capacity.
| Factor | Hosted Payment Gateway | Integrated Payment Gateway |
| Setup Complexity | Easy | Requires technical skills |
| Security Management | Provider-handled | Business responsibility |
| Customer Experience | Redirects off-site | Stays on your site |
| Brand Consistency | Limited | Full control |
| Suitability | Small businesses/startups | Scaling businesses |
Which is the Best Payment Gateway for Your Business?
There is no universal answer. The best payment gateway depends on your size, industry, and growth plans:
- If you are a small retailer or service provider with limited resources, a hosted payment gateway can be the most practical choice. It saves time and ensures secure transactions with minimal effort.
- If you are scaling or need advanced online payment solutions, an integrated payment gateway can deliver better control and customer retention.
It’s also important to consider the role of payment gateway providers. Some offer both models, giving you flexibility to switch as your business grows. Evaluating them alongside the best payment processor for small business options can help you optimize transaction fees and service quality.
How to Evaluate Payment Gateway Providers
When shortlisting payment gateway providers, consider the following parameters for evaluation:
- Ease of integration: Check if they support your e-commerce platform or app.
- Security standards: Ensure PCI-DSS compliance and fraud detection measures.
- Pricing model: Compare transaction fees, setup costs, and hidden charges.
- Support and reliability: Look for responsive customer support and proven uptime.
- Scalability: Choose a provider that can grow with you, offering both hosted and integrated options.
A good provider, paired with the best payment processor for small business, can help you reduce costs while delivering smooth online payment solutions.
Bottomline
Both hosted and integrated gateways have their place among modern online payment solutions. The decision depends on whether your business prioritizes convenience and simplicity or greater control and scalability. When your choice of payment gateway types is matched with long-term strategy and supported by reliable payment gateway providers, you can secure the best payment gateway for business, one that delivers smooth transactions, builds customer trust, and supports growth
FAQs
- Do small businesses need an integrated payment gateway?
Not always. A hosted gateway combined with the best payment processor for small business may be more suitable for startups or businesses without technical expertise. - How do payment gateway providers charge businesses?
Most payment gateway providers charge transaction-based fees, along with possible setup and annual maintenance costs. Some also charge for advanced features like recurring billing. - Can a business switch between payment gateway types?
Yes, many online payment gateway providers offer both models, allowing you to start with a hosted version and later migrate to an integrated system as your needs evolve.
