Table of Contents
Introduction
Online merchants often face important decisions when developing their websites and checkout processes. One of the biggest choices they have to make is whether to use a hosted or non-hosted payment gateway on the checkout page. This decision is crucial because it directly impacts the customer experience and ultimately determines how funds are transferred from the payer.
According to a study by the Baymard Institute, 21 percent of shoppers have abandoned purchases because they found the checkout process too lengthy or complicated. Therefore, it is essential for merchants to choose the right payment gateway to ensure a seamless transaction and avoid any roadblocks that may hinder customers from completing their purchases.
What is a Payment Gateway?
A payment gateway is an e-commerce service that facilitates and authorizes the transfer of credit and debit card payments between buyers and sellers on websites or online stores. It acts as an intermediary, ensuring a smooth transaction between the two parties.
There are two main types of payment gateways to choose from: hosted and non-hosted. The choice depends on the desired customer experience and the level of control the merchant wants over the payment process.
Hosted Payment Gateway
A hosted payment gateway is a third-party checkout system that redirects users to the payment service provider’s (PSP) page. This means that customers will leave the merchant’s website to complete the payment and then return to finalize the checkout process.
Hosted payment gateways offer several benefits for merchants. Firstly, the payment service provider handles the entire transaction process, providing enhanced security and data protection for a fee. This ensures that sensitive customer information is safeguarded.
Setting up a hosted payment gateway is relatively simple, often involving the use of templates where merchants input their information. Additionally, these gateways are maintenance-free for merchants as the PSP controls the process.
Most top-rated PSPs allow some level of customization for the checkout page, enabling merchants to display their company’s branding. This visual cue instills trust in customers, assuring them that their credit card information is secure.
However, one of the drawbacks of hosted payment gateways is the potential risk to customer trust. When customers are redirected to another page for payment, some may hesitate to complete the transaction if the checkout process does not convey trust or is difficult to use. This can result in lost sales for merchants.
Moreover, by opting for a hosted payment gateway, merchants relinquish some control over the transaction process. Although they can customize the checkout page and choose the PSP, the overall process is ultimately controlled by the PSP.
Non-Hosted Payment Gateway
On the other hand, a non-hosted payment gateway allows customers to complete the checkout process directly on the merchant’s web page. There is no redirection to another page for payment. Customers enter their payment information directly on the merchant’s website.
Using a non-hosted payment gateway provides merchants with complete control over the customer experience. This can enhance conversions as customers only deal with a trusted brand—the merchant’s own. The checkout page seamlessly integrates with the rest of the branded website, eliminating any confusion about the payment destination.
Furthermore, a non-hosted payment gateway enables merchants to track customer data more effectively, which can be utilized for future marketing efforts. By linking purchases made through the gateway to customer accounts, merchants can monitor purchasing habits and tailor their marketing strategies accordingly.
While having this level of control is advantageous, merchants using a non-hosted payment gateway must also take responsibility for ensuring transaction security and data protection throughout the entire checkout process. This can require significant resources that may not be readily available to all merchants.
Additionally, technical support can be a challenge for merchants who opt for a non-hosted payment gateway. If any issues arise with the checkout page, merchants will be responsible for troubleshooting and resolving the problems. This may necessitate hiring a professional, resulting in potential additional costs.
Choosing the Right Payment Collection Option
When deciding between a hosted and non-hosted payment gateway, merchants should consider the following questions:
- How does the gateway on your site enhance the customer checkout experience?
- Will the gateway seamlessly integrate with your current website platform?
- Can the gateway scale and accommodate your business’s growth?
Understanding the answers to these questions, along with considering customer and business needs, will help merchants make the right choice between a hosted and non-hosted payment gateway.
In conclusion, the choice of a payment gateway is of utmost importance for online merchants as it directly affects the customer experience. By selecting the appropriate gateway type, merchants can ensure a seamless checkout process, enhance customer trust, and facilitate secure transactions. Whether opting for a hosted or non-hosted payment gateway, merchants should carefully evaluate their specific requirements and select the option that aligns best with their business goals and objectives.
