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

Dec 02 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.

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.

PayPal has two gateway options that give you different levels of customization for your online checkout pages.

Payflow Link is cost-efficient, PCI-compliant, and works with your existing merchant account. At checkout, your customers enter their payment details on a secure, PCI-compliant template hosted by PayPal. You can choose to integrate our embedded template (which sits right in your website), or you can choose a customizable full-page template. All templates include PayPal and PayPal Credit, so your customers have more options to pay. Payflow Link has no setup or monthly fees.

Payflow Pro is a fully customizable gateway, so you can build a checkout experience as unique as your business—from language and layout to page sequence and PCI compliance options. You can add a PayPal button to help drive more sales, or use our hosted pages and offer PayPal Credit, too. Payflow Pro has a $99 setup fee and a monthly fee of $25.

There are optional features such as additional fraud protection, recurring billing and buyer authentication. Click here to see pricing.

If you have a Premier or Business account, Payment Receiving Preferences can handle payments automatically. You can convert any payment into your primary currency or block certain types of payments.

You can:

  • Block payments from U.S. customers who don't have a confirmed address.
  • Block payments sent to you in a currency you don't hold.
  • Block payments for duplicate invoice IDs.
  • Block payments from customers who have non-U.S. PayPal accounts.


To set your Payment Receiving Preferences:

  1. Click Settings.
  2. Click Payment preferences under "Account & Security" on the left of the page.
  3. Click Update in the "Block payments" section.
  4. Update your settings and click Save.
The sender of a Mass Payment is charged a fee for each individual payment.

Please visit our Fees page for information on Mass Payment fees.

Note:
  • Your PayPal account balance must be sufficient to cover the fees as well as the total amount of the payment
  • The fee is assessed at the time of the Mass Payment
  • No fee is charged to the recipient
You can make payments online, by phone, or by mail.
  • To make payments online, log into your PayPal account, then select PayPal Credit. You'll then be transferred to the Synchrony Bank servicing site where you can make one-time payments, or have the option to set up recurring payments.
  • To make payments by phone, call Synchrony Bank at 844-373-4961, Mon-Fri 8am-11pm ET, and Sat-Sun 9am-9pm ET.
  • To make payments by mail, use the payment address provided on your billing statement.

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