The Best Payment Gateway Hosting: Who's The Best For Your Site? [Updated: 2018]

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Payment Gateway Hosting

Payment Gateway Hosting

What Is a Payment Gateway?

Does your business plan include offering its products and services for purchase online? Unless you plan to be the first business in history to accept cat photos and tweets as payment, your site is going to need support for, and access to, a payment gateway.

Why Do You Need a Credit Card Payment Gateway?

If you're planning on doing business online, it's essential to be able to accept credit card payments. Credit cards account for 90% of online sales, so if you don't accept them, you're losing out on that revenue.

While solutions like PayPal might work for occasional transactions, opening up a merchant account to process your credit card payments can be a more efficient and cost-effective solution for higher-volume online businesses..

Security of Payment Gateway Transactions

PayPal Demo Checkout
Demonstration of a checkout with PayPal.

Payment gateways are the online equivalent to the checkout lane at your local store. They provide a secure and reliable method for processing online transactions by encrypting customer credit card information.

The encrypted data travels between the customer, their financial institution, and the merchant selling the product or service.

How Payment Gateways Work

How Payment Gateways Work in 6 Simple Steps

Payment gateways are analogous to the checkout counter in a brick and mortar store. There are no more wheeling carts up to counters. Instead, customers select their items, enters their payment details, followed by a one-click checkout on your site's e-commerce software.

The payment gateway procedure is fairly straightforward:

  1. Browser Encryption
  2. Data Sent to Gateway Server
  3. Data Sent to Your Bank
  4. Data Forwarded from Your Bank
  5. Authorization
  6. Authentication

All of this takes less than five seconds to occur.

Browser Encryption

The customer's browser uses its built-in encryption (generally with HTTPS [HyperText Transport Protocol Secure] protocol). This protects their information as it is sent from their computer to your server.

Data Sent to Gateway Server

Razorpay Demo
Razorpay is another payment gateway which is becoming increasingly popular.

Your server sends the information to your designated payment gateway server, protecting the information with SSL (Secure Socket Layer) encryption. The payment gateway server must receive this data.

Data Sent to Your Bank

The payment gateway forwards the purchase to your bank, again using SSL. The data's route through the bank is a key step to achieve payment authorization.

Data Forwarded from Your Bank

Your bank forwards the information, still using SSL encryption. The customer's bank or credit card payment processing agent receives this to verify funds.

Authorization

The payment processor returns either an authorization or a failure to the payment gateway, based on available credit or funds. If approved, the authorization is added to your daily "take" for processing by your bank at the end of the business day.

Authentication

The payment gateway sends the response back to your web server, where your e-commerce software either finishes the transaction or rejects it.

Online Credit Card Payment Solutions

2Checkout Payment Demonstration
As supported by Siteground, here is a demonstration of 2Checkout.

If you're just starting out online, many hosting packages include support for e-commerce. In fact, it's almost expected of hosting plans to cover e-commerce standards.

Merchant Fees and Per-Transaction Fees

Usually, PayPal is used as a payment gateway to accept major credit cards. PayPal does, however, charge merchant fees for payment processing.

Anyhow, these fees are often much lower than for higher-volume payment processors. Paypal can seem like an ideal solution. They don't charge any fees besides the per-transaction fee.

Benefits of Merchant Accounts

PayPal Community
While some have worries about PayPal disputes, there is a strong community page with plenty of resources.

However, there are other factors for businesses to consider besides fees. Merchant accounts provide many features missing from Paypal, such as dispute resolution, fraud protection, and security.

Using a merchant account, funds are deposited directly into your bank account. This isn't the case with PayPal, although withdrawals are simple. With a merchant account, you're using a long-established system backed by the FDIC. Choosing the manner of any dispute resolution is considered standard.

Regulation of PayPal

PayPal is not an FDIC-insured bank and isn't required to follow federal banking regulations. They have the power to freeze your funds and cut off your account access if they suspect fraud. There is no way for you to appeal their decision or argue your case.

In addition, some of your clients and customer may not want to use Paypal. It pays (literally) to have other options available to them. Being able to accept credit card payments directly on your website instead of sending your customers to PayPal, makes your website appear more professional.

PayPal vs Credit Card as a Customer

It's important to look at things from a customer's perspective too. Let's see the side by side facts of PayPal vs direct Credit Card payments:

  Convenience Incentives Conversion Vulnerability
Credit Card Details can now be stored in your browser, although it isn't considered safe Rewards systems in place, with gift incentives Currency conversions, are done by your bank Credit card fraud can be easy to fall for, although obvious
PayPal Details are kept safe in your PayPal account, secured by a password Multiple credit card rewards systems can be linked to your PayPal PayPal converts your transactions at a disadvantageous rate, should your currency not be accepted PayPal fraud is common via phishing, fake websites and craftier methods, due to the comfort of the average user

Dedicated Solutions for Growing Businesses

If your business is well-established and processing a high amount in payments each month, it's worth doing some research. You may want to look at more robust, dedicated solutions like Authorize.net or Stripe.com.

Purchasing website hosting directly from some payment gateway companies is also a possibility, to create a "one-stop shop."

Monthly Fees for Larger Sales Volumes

Depending on your sales volume, you can expect a dedicated payment gateway to carry a monthly fee as well as a standard per-transaction fee.

The per-transaction fee is usually a percentage of each transaction plus a predefined dollar amount. For example, they might charge you 2.6% plus 30 cents for each transaction. Other fees may be charged for account setup, support, and add-ons.

Find The Best Payment Gateway Hosting For You

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SiteGround screenshot
SiteGround StartUp plan
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BlueHost Shared Basic plan
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A2 Hosting Lite plan
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HostPapa Business plan
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HostGator Linux Hatchling plan
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GreenGeeks EcoSite Starter plan
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GoDaddy.com Web Hosting Economy plan
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LiquidWeb 2 GB VPS plan
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Getting Payment Gateways Through Your Web Host

Hostgator Gateway Information
Hostgator provide some useful information on compatible gateways and merchant accounts.

Many web hosts will provide the option to process credit card payments as a feature of their web hosting plans.

This doesn't happen automatically when you open your hosting account. You must set up and activate it before you can use it. These work like other merchant accounts, so there are often still application fees, monthly fees, and per-transaction fees.

Choosing the Right Payment Gateway

Be sure to always get complete information before purchasing a plan from your hosting provider or gateway. Your goal in choosing a payment gateway should be to make easy for your customers to pay you.

When choosing a payment gateway to make sure you keep your customer's needs in mind. You'll probably want the ability for your customers to pay via most major cards. Moreover, you'll likely also want debit card payment, which is typically linked.

Integration and User Experience

Another consideration to take into account is how the payment process integrates with your website. If the payment gateway integration you're utilizing doesn't offer the best user experience, then this could actually cut into your sales.

Choose your payment gateway provider wisely. Select the provider that's not only best for your need but for your customer's as well.

Payment Gateway Features

5 Key Features to Spot with Payment Gateways

All-in-all, you want to keep an eye on 5 important points when selecting a payment gateway:

  • Security;
  • Responsibility;
  • Convenience;
  • Fees;
  • Ease.

Let's expand on these features to get a better idea of what you should look for.

Security

Sagepay Resources
Sagepay is a good example of a gateway with decent resources.

Realistically, how safe is your customer's data? Once your visitor's data is in your hands, it's your partial responsibility to protect it. This doesn't only build trust, but an overall respectable image for your business.

Responsibility

Who is in charge of that data? Are you fully responsible or is the payment gateway service? You should know the answers to these questions for both legal and ethical reasons.

Convenience

Is the selected gateway convenient to use? Put yourself in your customer's shoes and be real. How much hassle must I endure to get to the end of my checkout? Simply test out each service to decide what is right for your shoppers.

Fees

Are the fees reasonable to you? How about your customers? You can obviously be selfish here, but then you're risking losing some valuable customers. Keeping them happy will keep you happy in the long run. Look for those lower fees for both parties.

Ease-of-Use

How simple is the integration, or your host may already have it ready for you? It's certainly worth addressing your time as an investment with integration and set-up, aside from general use. Time is valuable.

Credit Card Alternatives

Credit Card Payment Gateway Alternatives

Planning on creating an e-commerce store from day one? Then you'll need an e-commerce payment gateway that integrates with your existing site and shopping cart. Most web hosts who offer integrated payment gateways and e-commerce builders tend to bundle the two together.

Importance of SSL certificates

SSL Certificate
Having an SSL certificate is a must - not only for trust but for security.

After all, what good is an e-commerce site if you can't actually take payments? Also, keep in mind that you'll need an SSL certificate to process secure online payments. So, check with your host to see if an SSL certificate is included in your hosting.

Some hosts also specialize in WooCommerce payment gateways. Are you using WooCommerce to build out your online store? Then check that WooCommerce specific payment gateways are included in the price of your host.

Other Alternative to Hosted Payment Gateway

Hosted payment gateways are probably the most professional way to accept payments through websites today. They aren't required in order to accept online payments though.

Shared Payment Gateways

You may not want to operate a hosted payment gateway on your website and still take payments online for your products and services. In this case, the primary alternative is a shared credit card payment gateway.

Shared payment gateways take your website visitors off of your website to a payment provider like PayPal or 2CO, who then takes your credit card information, processes the transaction, and then sends your visitor back to your store once the transaction is complete.

Over-the-Phone Payments

A third alternative and a highly unpopular alternative with most online shoppers today is to take an order with no credit card required. This requires a follow up by phone to complete the transaction.

In an eCommerce scenario, processing payments this way is very inefficient. In the service industries, this may be more practical. Furthermore, using a shared payment gateway is always preferred over having no payment gateway.

Hosted or Shared Payment Gateway

How Does A Hosted Gateway Compare To A Shared Gateway?

As briefly discussed above, there are two types of credit card payment gateway. One is a hosted payment gateway, where you have a payment service built directly into your website. The other is a shared payment gateway, where payments are accepted through Paypal.

Hosted Payment Gateway

The first and most frequently used is a hosted payment gateway. Hosted payment gateways usually come included in your hosting package. They help effectively and securely process credit cards for online merchants.

If you are an existing brick and mortar retailer, you probably already have an account with a payment processor. It is likely they have a solution for your hosted payment gateway needs that directly connect to their system.

Before you rush to use a new payment gateway offered by your hosting company, it is recommended you start with your existing vendor.

Shared Payment Gateway

By comparison, a shared credit card payment gateway is one used by multiple online stores. The most mainstream solution for a shared payment gateway is PayPal. Furthermore, there are several others on the market that deserve consideration, including:

  • 2CO
  • WorldPay
  • Google Wallet
  • Authorize.net.

Many online stores (especially ones new to the market) start out using a shared gateway and then evolve to a hosted gateway over time.

Merchant Accounts for Hosted or Shared Payment Gateways

Some old-school payment gateways require you to have a separate bank account known as a merchant account. This lets you accept both credit and debit card payments.

Depending on the online payment gateway you're using, this may be a requirement. Most newer payment gateway providers only require an existing bank account.

It is very likely that your hosting provider will offer you some form of payment gateway. Consult with them if you have questions prior to making a decision on a payment gateway for your business.

Payment Gateway Hosting Frequently Asked Questions

  • What is a credit card payment gateway?

    A payment gateway is system that allows your website to accept payments on your website via credit card and have the payments deposited to your bank account.

  • Why are credit card payment gateways necessary?

    Payment gateways are needed so ecommerce businesses can securely process credit card information and provide a similar payment experience as brick and mortar stores.

  • What does a payment gateway actually do?

    Payment gateways perform verification of customer billing information and funds along with request approvals so confirmation numbers can be generated.

  • What is a main difference between a modern and classic payment gateway?

    A modern gateway does not require the ecommerce store owner to have a merchant account while a classic gateway does.

  • What alternatives are there to hosted credit card payment gateway?

    The main alternative to hosted payment gateways are shared payment gateways which take your customers off your website to a payment provider like PayPal or 2CO. Another alternative, although unpopular, is take an order and follow up by phone.

  • How much does a payment gateways cost?

    This depends on the number of transactions you do per month. Some providers will charge a percentage of the transaction along with a per transaction cost and possibly a monthly fee. Many providers such as PayPal will have tiered services where the most basic plan only charges a percentage of the transaction.

  • How does a hosted payment gateway compare to a shared credit card payment gateway?

    As briefly discussed above, there are two types of credit card payment gateways. The first (and most frequently used) is a hosted payment gateway. Hosted payment gateways are usually included in your hosting package to help process credit cards online and do not require the purchaser to leave your website to enter payment information. By comparison, a shared credit card payment gateway is another commonly used method.

  • What are some of the drawback of using a shared payment gateway?

    Since shared payment gateways such as PayPal are not regulated by the FDIC, they are not compelled to follow government regulations. Shared payment gateways can also restrict account access and stop funds any time without giving you the ability to dispute. Finally, some customers may not want to pay through a service like PayPal and prefer directly entering payment information.

  • What are the advantages of merchant-based solutions for online payments?

    Merchant-based solutions have a number of advantages over standard payment solutions:

    • Dispute resolution
    • Fraud protection
    • Greater security
    • .

    In addition, using a merchant payment solution will make your website look more professional and enhance visitor experience.

  • Do free open-source shopping carts support hosted payment gateways?

    Open-source shopping carts such as OpenCart support both shared and hosted payment gateways through plugins. However, you may need to perform additional research or consult with an ecommerce expert to ensure proper setup and configuration.

  • Do I need to be PCI compliant if I use a shared payment gateway?

    The vendor of a shared payment gateway handles all aspects of PCI compliance so you will not need to. However, if you use a self-hosted gateway you will need to be PCI compliant up to a certain level depending on how you handle customer payment information. Though this is a major advantage of using a shared payment gateway, it could reduce conversion rates.

  • Is it possible to migrate from a shared payment gateway to a hosted payment gateway?

    Since many ecommerce management systems such as OpenCart give website owners the flexibility of integrating multiple payment gateways, it is possible to start with a shared payment gateway such as PayPal standard and eventually add a self-hosted solution.

  • Do I need to have programming knowledge to use a payment gateway?

    Since many payment gateways are available as a plugin, you don't need to have coding experience. Just download and install a compatible plugin. However, if your store uses a system without a plugin available, some coding will be required.

  • Do I need to be concerned about payment gateway installation?

    You should only be concerned about installing a payment gateway if you are using an outdated platform like Microsoft Frontpage, since much of the programming is obsolete. You should not have to worry about installation if your ecommerce platform's payment gateway is included or activated via plugin.

  • Is there any reason to not use one-click installations for payment gateways?

    You should always take advantage of one-click installs of payment gateways especially if you do not have much programming experience and need a payment gateway for your online store. Plus, many payment gateways are included within the content management system or available as a plugin.

  • What are some requirements for hosting a credit card payment gateway?

    Whether you use a shared or hosted payment gateway, there are no specific hosting requirements other than having the correct plugins installed and settings configured. However, let your hosting provider know your intentions so they can set-up the hosting environment accordingly.

  • Is it possible to host a credit card payment gateway on shared hosting plans?

    Since many shared hosting plans feature one-click installs of ecommerce management systems, including support for SSL certificates, and offer plugins for configuring payment gateways, it is possible to host a payment gateway these types of plans.

    If you want a hosted payment gateway, however, you will need your own IP address, which will usually increase your hosting costs marginally.

  • What does a self-hosted ecommerce solution mean?

    A self-hosted ecommerce solution means you install and configure the online shopping cart on a plan from your hosting provider. The alternative is an ecommerce plan hosted by the actual platform developers.

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