Payment gateways: What they are, what they’re not, and what they cost.

Nov 20 2020 | PayPal editorial staff

Online transactions seem so simple and quick on the surface, but there are a number of processes working together behind the scenes to move funds from buyer to seller.
A payment gateway is part of that “magic” and below we’ll dive into: what a payment gateway is and what it does, if you really need one (you do, by the way), how a payment gateway differs from a payment processor, fees, and the PayPal payment gateway solution.

What is a payment gateway? 

The simplest way to think of a payment gateway is the secure technology that provides a bridge between your business and your customer.
Once a customer hits the ‘Buy Now’ button on your website, your payment gateway takes action. It securely sends your customer's credit card information from your website to the credit card payment network for processing. It then returns the transaction details and response from the payment network back to your website to tell you if the charge is authorized, allowing the order to be completed.
In the same way a point-of-sale terminal at a brick-and-mortar cash register looks at a card's chip to ensure the card is valid, a payment gateway helps ensure a payment is legitimate. Since you can't access the physical card when processing an online order, the payment gateway helps do that work for you.

Do you need a payment gateway?

As long as you accept (or want to accept) credit card payments online or on a mobile device, you’ll need a payment gateway. Without it, you won't be able to verify a customer's credit card information, process payments, or finalize the sale.
If your business is brick-and-mortar only, you might not need a payment gateway. Your point-of-sale terminal will authorize the credit card payment using the chip reader. But if you plan to offer a hybrid of online and offline sales, it can make sense to incorporate a payment gateway into both your e-commerce and real-world checkout process.

What's the difference between a payment gateway and a payment processor?

You'll often hear the terms 'payment gateway' and 'payment processor' used interchangeably, but they're different.

  • payment processor passes along the customer's credit card information to the issuing bank. Once the transaction is approved, it connects the issuing bank with your merchant account to transfer the funds. While a payment processor is a requirement to process the transaction, a payment processor alone doesn't help securely authorize the transaction.
  • Like a payment processor, a payment gateway also passes along the customer's credit card information and connects accounts together. But it also securely authorizes the transaction, ensuring you'll get paid. You need both for online sales, but using a payment gateway that’s different from your payment processor can give you flexibility to go with your preferred bank. And if you ever want to change your bank, you can do so without changing your integration or backend processes.

What to look for in a payment gateway.

Not all payment gateways are created equal. If you want to accept online payments, it's worth taking the time to research your options and find one that best fits the unique needs of your business. Here's what to look for:

  • Security: As a merchant, you need to protect your customers' credit card data. If a customer doesn't trust your website with their information, they're unlikely to complete the sale. If you want to accept credit cards online, ensure your payment gateway is PCI compliant.
  • Hosted versus self-hosted: A hosted payment gateway will send customers to a different website to enter payment details. This can make it easy to get started and helps ensure PCI compliance, but doesn't allow you to control the whole customer checkout experience. A self-hosted payment gateway collects the credit card information from your site, providing a holistic customer experience. But since this option puts responsibility for security on you, you'll need a self-hosted option that can provide PCI compliance.
  • Customer experience: While security is important, you don't want your customer to go all the way through the checkout process only to realize your website won't accept their preferred payment method. You need to make sure your payment gateway lets you process the payment types your customers prefer to use so they don't get frustrated or take their business elsewhere.
  • Implementation: Your payment gateway needs to connect your website and merchant bank account together with other processors. Choose a provider that makes it simple to implement and connect everything without a lot of hassle.
  • International capabilities: When you sell online, there's no reason to limit yourself to only your local market. As e-commerce becomes more global, you need to attract, nurture, and sell to customers internationally. That means your payment gateway needs to make it simple to accept more than just your local currency.
  • Optional features: Depending on your business, you may need extra features that other merchants don't, like additional fraud protection, buyer authentication or the ability to process recurring payments like membership fees.

What are average payment gateway fees?

Average payment gateway fees can vary widely, depending on the provider and your requirements. Expect a monthly fee ranging from $0–$25 and gateway fees of about $.10 per credit card payment. Also be aware that payment gateways sometimes have hidden fees that can drive up costs.

Hidden payment gateway fees to watch out for include: Set-up fees, a monthly fee, processing charges that may include a percentage of the sale plus a flat charge per transaction Fees for things like early cancellation of a contract, currency conversions, or processing minimums

The easiest way to get started is to go with an all-in-one solution.

If you're starting from scratch, you can get the gateway and processor in one package. This convenience saves you the hassle of implementing and managing two different providers and by reducing complexity, you also make it easier to help ensure all your security needs are being met and that the customer experience is seamless. The PayPal Commerce Platform gives you a payment gateway and payment processor all in one, making it simple to start selling. There are no set-up or monthly fees for PayPal Commerce Platform.  

Payflow: The PayPal payment gateway.

If you already have a payment processor, you can add Payflow, which is PayPal's payment gateway. Payflow gives you two gateway options depending on the level of customization you need on your checkout page:
  • Payflow Link: With Payflow Link, your customers enter their payment details at checkout on a secure, PCI-DSS compliant template hosted by PayPal. You can choose to integrate an embedded template that sits right on your website, or you can use a customizable full-page template. All templates include PayPal and PayPal Credit1, so customers have more options to pay. Payflow Link is available without set-up or monthly fees.
  • Payflow Pro: This option is fully customizable, letting you build a unique checkout experience that helps meet the exact needs of your business and your customers. From language and layout to page sequence and PCI-DSS compliance options, you can control everything. Payflow Pro is $25 per month, with no setup fees.
With both the PayPal Commerce Platform and Payflow, you get everything you may need in a payment gateway:
  • Security: Help simplify the work and cost of PCI and other regulatory requirements, with basic fraud detection for no additional cost.
  • Customer experience: Easily accept all major credit and debit cards along with PayPal so your customers can pay the way they want. You can also accept L2/L3 purchase cards, prepaid cards, foreign currencies, TeleCheck, and ACH, along with offering customers the ability to pay through PayPal Credit1 at no additional cost.
  • Implementation: PayPal' s payment gateway is pre-integrated with all major shopping carts and works with almost every payment processor, so you don't have to worry about any difficulty incorporating it into your operations.
  • International capabilities: Accept payments in 25 currencies from 203 markets around the globe.
  • Optional features: For an additional fee, PayPal's payment gateway can help you process recurring payments automatically. You can also add additional protection and security tools, along with buyer authentication, through the Verified By Visa and MasterCard SecureCode programs.
To get started with Payflow, you'll first need a merchant account. If you don't have one, you can easily sign up with PayPal. Our solution provides both a payment gateway and a merchant account. Learn more about Payflow.
The content of this article is provided for informational purposes only. You should always obtain independent business, tax, financial, and legal advice before making any business decision.

PayPal Credit is subject to consumer credit approval.

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Frequently asked questions.

The Payflow Gateway supports the passing of additional purchase card parameters to your payment processor as long as your processor supports it.

Consult the Payflow Pro Developers Guide to find out which level 2 data your processor requires and supports
The PayPal Developer Portal offers support for developers who have questions about technical topics, such as APIs or integration. Below is a list of common topics searched for by developers. You can also browse and search on the Developer Portal for additional topics.

Account Authentication
Information about validating your visitor's PayPal account.

Encrypted Website Payments
To make online payments more secure, you can make Encrypted Website Payment buttons that rely on standard public key encryption for protection.

Identity API
PayPal offers a secure commerce Identity API that lets your customers sign in to your web site using their PayPal credentials.

Instant Payment Notification
Instant Payment Notification is a message service that automatically notifies merchants of events related to PayPal transactions.

Merchants, developers, and business solution providers use Invoicing APIs to automate the creation, delivery, tracking, and reconciliation of invoices with an integrated payments solution.

Mobile SDK
Accept PayPal, credit cards and other payments methods through mobile apps.

Name-Value Pair (NVP) API
Information and support on name value pairs and NVP SDKs.

PayPal Checkout
PayPal Checkout gives your buyers a simplified and secure checkout experience that keeps them local to your website or mobile app throughout the payment process.

Payflow Gateway
Payflow Pro is a high performance TCP/IP-based client-server architecture solution. It includes a secure payment gateway that gives merchants total control over the payment process.

PayPal Sandbox Support
Information and support for users testing in the PayPal Sandbox environment.

PayPal Shopping Cart
The PayPal Shopping Cart system allows buyers to select multiple items on your website and pay for them with a single payment.

Permissions Service API
PayPal's permissions service enables you to request and obtain authorization to make API calls and take action on behalf of your customers.

The PayPal SOAP API is based on open standards known collectively as web services, which include the Simple Object Access Protocol (SOAP), Web Services Definition Language (WSDL), and the XML Schema Definition language (XSD).

Testing Your Apps in Sandbox
A guide for developers testing their apps in the PayPal Sandbox environment.

Virtual Terminal
Information about PayPal's Virtual Terminal - a web-based application that processes credit and debit cards, replacing swipe machines.

Website Payments Pro
PayPal's Website Payments Pro is an API-based solution that enables merchants and developers to accept credit cards, debit cards, and PayPal payments directly on their website.
PayPal Payments Standard
You can accept credit cards online easily and offers a streamlined checkout experience to customers using mobile devices.
As a global leader in enabling authenticated payments, CardinalCommerce is PayPal's chosen vendor to integrate 3-D Secure technology.

CardinalCommerce has developed industry-leading solutions for merchants, shopping carts, gateways, acquiring banks, processors and issuing banks to make it easy to implement payment authentication initiatives (verified by Visa and MasterCard SecureCode) to gain the benefits of consumer authentication.

With headquarters in Cleveland, Ohio, and facilities in the US, Europe and Africa, CardinalCommerce services a worldwide customer base.

Whether you're getting ready to start a business, advance your small business, or grow an online business, PayPal has a product for you. From complex business products to simple solutions for your business, we’ve got you covered.

Here’s more information on the different business products PayPal offers.

PayPal Payments Standard: PayPal Payments Standard is loaded with everything you need to get paid online, including a checkout experience that’s already optimized across devices.

PayPal Payments Advanced: PayPal Payments Advanced is an all-in-one payment-processing system that lets you accept payments online, offline, or on the go. PayPal Payments Advanced lets customers using a credit or debit card check out directly on your website.

PayPal Payments Pro: PayPal Payments Pro gives you the flexibility and payment processing security to build a professional-grade ecommerce site. It can be configured to suite your business needs – and works across devices. Plus, because it’s from PayPal, you can tap into over 184+ million active customer accounts around the globe.

Payflow Payment Gateway: A payment gateway links your website to your processing network and merchant account. Like most gateways, Payflow Payment Gateway handles all major credit and debit cards. What makes our gateway different is the low rates and incremental sales boost from offering PayPal and PayPal Credit payment options on your site.

PayPal Here: One app, many ways to get paid. Choose your reader for accepting card payments, then with the PayPal Here app, you can issue receipts, manually enter card payments, track cash and check payments and send invoices.

PayPal Checkout: Add PayPal as a payment option to your checkout page - or use it as a stand-alone solution. You’ll open the door to over 169 million active PayPal users who look for and use this fast, easy, and secure way to pay.

Virtual Terminal: You can use Virtual Terminal wherever you have Internet access—at your office, at a trade show, even at the airport. To take a credit card order, simply log in to your PayPal account and enter the payment details into the secure Virtual Terminal order form. We’ll process the payment and send you a confirmation.  

PayPal powered by Braintree PayPal powered by Braintree makes it easy to accept payments through your Partner store. Our payment gateway is similar to the credit card terminal you swipe your card through at the grocery store—we'll make sure your customer's payment information gets to the right places and doesn't fall into the wrong hands.
 PayPal Payments StandardPayPal Payments ProPayflowPayPal powered by BraintreePayPal Checkout (formerly known as Express Checkout
Monthly Fee
(See all Merchant fees)
Design and Host your own
check out pages for full control
 (if allowed by your partner site) 
Accept Credit Cards via phone,
fax and mail (VT)
Accept credit and debit cards
(your buyers don't need a PayPal account)

(Must have a 3rd party processor)
Accept PayPal payments
Send Invoices online for fast payment 
Accept payments in 25 currencies
from 202 countries
Simplified PCI compliance♦**
No long-term contracts, setup,
withdrawal or cancellation fees
Nonprofit discount available
for PayPal transactions
Toll-free phone support
Offer special financing on
purchases $99 and up
♦*** (only through PayPal Standard or Checkout)

**Requires use of the hosted templates in PayPal Payments Pro.

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