Card payments account for about 37% of all online transactions in Nigeria and are projected to continue growing. This means that individuals and businesses who want to keep up with the demands of a growing population need an easy, secure, and scalable payment gateway to process payments with their customers. One solution is hosted payment gateways — a platform that supports card and other payment methods and simplifies payment processing by handling the complexities on behalf of users.
In this article, we’ll explore hosted payment gateways, how they work, their benefits, and what to consider before using one.
What is a Hosted Payment Gateway?
A hosted payment gateway is a third-party service that handles the processing of online payments on behalf of the merchant. It involves redirecting customers to the payment provider’s page to complete the transaction. Once the transaction is completed, the customer is redirected back to the merchant’s website.
The payment provider handles encryption, transaction validation, tokenization, PCI-DSS compliance, and other payment processing-related overheads on behalf of the merchant.
How Hosted Payment Gateway Works
Below is an overview of how a hosted payment gateway operates:
- Customer Initiates a Purchase: The first step in the payment process involves the customer selecting a product and proceeding to checkout to make a purchase. This part of the process is done on the merchant’s website.
- Redirect to Payment Gateway: The customer is redirected to the hosted payment gateway’s secure payment page.
- Payment Method Selection and Processing: The customer chooses their preferred payment method, enters the required payment information, and the transaction is processed.
- Confirmation and Redirect: Based on the payment information provided, the gateway either confirms the transaction and redirects the customer back to the merchant’s website or, in the case of failure, sends a failure message with the option to retry or end the payment flow.
Benefits of Using a Hosted Payment Gateway
Unlike other payment gateways that require direct integration into existing infrastructure, which can be complex and resource-intensive, a hosted payment gateway simplifies the process. It allows merchants to integrate payments into their systems with minimal resources. Below are some of the key benefits of using a hosted payment gateway:
- Ease of Integration
- Trust and User Experience
- Cost Effectiveness
- Enhanced Security
- Global Reach
Ease of Integration
One reason merchants choose a hosted payment gateway is the ease of integration. They don’t have to manage payment infrastructure, as the gateway hosts the payment page and handles transaction processes. This makes it an ideal solution for individuals and companies without large technical teams.
Trust and User Experience
Many hosted payment gateways are widely recognized and trusted by customers. So when they see familiar logos, it offers reassurance and potentially increases the conversion rate for the merchant. Furthermore, the payment page is often mobile-optimized and fully responsive, which ensures a smooth payment experience across devices.
Cost Effectiveness
Compared to developing in-house, which requires a dedicated team and resources, a hosted gateway has no or lower upfront cost, is easier to maintain, and often includes fraud detection tools at no extra cost.
Enhanced Security
A hosted payment gateway comes with built-in and industry-standard protection mechanisms around encryption, fraud detection, and compliance with regulations like PCI-DSS (Payment Card Industry Data Security Standard). This means that any merchant that integrates it doesn’t have to worry about payment security and data protection.
Global Reach
Most hosted gateways support multi-currency transactions. This means merchants can sell to international customers and get paid in various currencies.
While hosted payment gateways offer several advantages, merchants should consider customization, user experience, and other related aspects before deciding to use one. Let’s look at these factors in detail.
What You Need to Consider Before Using Hosted Payment Gateways
Below are some are some factors to consider before making a decision:
- Customer Experience
- Technical Expertise
- Level of Customization
- Transaction Fee
- Payment Methods and Global Reach
Customer Experience
One challenge with hosted payment gateways is the redirection process. When customers initiate the payment, they are redirected to an external page, which can disrupt the seamless checkout experience. You need to ensure that the transition to a hosted payment gateway page is smooth and transparent and that trust is maintained to avoid cart abandonment.
Technical Expertise
When adopting a payment gateway, you need to consider the technical resources and development skills available in your team. If you have a dedicated team capable of managing your payment processing, a hosted payment might not be an ideal choice for you. Instead, you can explore either an API-hosted payment gateway or a self-hosted payment gateway, as they give you a higher level of customization and do not redirect or break the seamless flow.
Level of Customization
Since the payment process takes place on the gateway’s platform, you have limited control over the design and layout of the payment page. If you prefer to have complete control over your user experience and other payment-related customization, a hosted payment gateway might not be an ideal choice.
Transaction Fee
Payment gateways typically charge merchants transaction fees, which may vary depending on the provider, payment methods, and transaction volume. These fees may include a percentage of each sale or a fixed cost per transaction. You need to consider these fees as they affect your profit margin before deciding on the payment gateway provider and the type to adopt.
Payment Methods and Global Reach
Before choosing a payment gateway, you need to verify the range of supported payment methods and currencies. If your customer base alternates between the card and bank transfer payment options when performing transactions, your choice of gateway provider must align with what your customer wants; otherwise, you risk an increase in abandonment.
Additionally, if you cater to a global audience, you need a gateway that supports multiple currencies.
Conclusion
A hosted payment gateway offers a convenient, secure, and reliable solution for merchants looking to accept online payments without managing complex technical integrations. Before selecting a payment provider, you must consider security, customer experience, and transaction fees to make informed decisions.
Ultimately, the right hosted payment gateway can improve your operations, reduce friction, and build trust with customers, which makes it a powerful tool for your business. Flutterwave offers all these and more, a platform you can trust to help you scale effortlessly. Sign up in a few steps to get started.