Payment Gateway Integrations: A Complete How-To Guide (+ Top Tools)
New Gateway, New Possibilities: Chris Bajda aims to expand Groomsday's customer base by integrating a new payment gateway on their ecommerce platform.
Grooming for Global Reach: The integration reflects a strategic move to cater to a diverse clientele and enhance accessibility for international customers.
A Cashless Solution: The new gateway is expected to streamline transactions, offering users a seamless and efficient payment experience.
Tech-Savvy Tilt in Ecommerce: By adopting modern payment options, Groomsday positions itself as a cutting-edge player in the ecommerce space.
Chris's Bold Payment Move: Bajda's decision illustrates proactive leadership, leveraging technology to potentially boost sales and customer satisfaction.
Chris Bajda, an ecommerce entrepreneur and managing partner of Groomsday, decided to integrate a new payment gateway on their platform with the hopes of serving a larger customer base.
Little did they know it would trigger:
- About 15% increase in cart abandonment rates
- Multiple cart abandonment issues due to slow loading times and glitches during checkout.
It also turned out that the new gateway wasn’t initially optimized for mobile, where most of their traffic came from.
Need expert help selecting the right tool?
With one-on-one help, we guide you to your top software options. Narrow down your software search & make a confident choice.
Chris’s story makes you realize that payment gateways aren’t a one-size-fits-all approach, and that implementing the most popular tools isn’t always the best business move.
You need to consider your web and platform architecture carefully and understand your customer needs thoroughly.
Plus, you need to read this post in which we’ll cover the full scope of payment gateway integrations and guide you on how to choose the best tool for your business.
What is a Payment Gateway?
A payment gateway is a software application that securely authorizes, manages, and processes online payments for ecommerce businesses.
It acts as a bridge between multiple parties: your business’ bank, your merchant account, your customer’s bank, and your payment processor.
Think of the payment gateway and processor as two sides of the same coin—they work together to move payments smoothly from your customer to your business.
The payment gateway securely transmits data between the merchant’s site and the payment processor. The processor then communicates with the banks involved to authorize and transfer funds.
Some companies, like Square, offer a complete solution that combines both gateway and processing services—they’re known as payment service providers.
Although this is a watered-down explanation, we discuss the subject more in our Guide on Payment Gateways.
Merchants need these online payment gateways to:
- Automate the acceptance and processing of money using multiple payment methods and options, like crypto, BNPL, credit card payments, digital wallets, mobile payments, and credit scores.
- Secure payment data and its movement using encryption, compliance, and tokenization.
The technical process of adding a payment gateway to your ecommerce platform is called payment gateway integration.
Types of payment gateways
Different payment gateways are available for developers to implement and merchants to use depending on their needs and available resources.
Let’s look at the various payment gateways types in detail.
Redirect payment gateways
This gateway does as its name implies—they redirect customers away from your site to a third-party payment page to complete their transactions.
So, when your customer goes to check out, the gateway redirects from your site to the payment gateway site, which processes payment and sends them back to you.
For example, when you choose to 'Pay with PayPal' on this Etsy checkout page, you’re taken to PayPal’s site to enter your payment details.
Pay attention to the search bar:
Once the payment is processed, you’re redirected back to the Etsy store with a confirmation.
Why use them? Simplicity and security.
Redirect gateways are easy to implement because the gateway providers handle most of the data movement and secure payment data.
How do they work?
The merchant uses the gateway’s API, and integrates it into the form, so it shows as an option during checkout.
Here’s a simple example of a POST request to initiate a payment:
After sending this request, the customer is redirected to the provided payment_url to complete the transaction.
In addition to PayPal, other examples of redirect gateways include Stripe Checkout, Klarna, and Amazon Pay.
On-site payment gateways
These types of gateways allow customers to complete their transactions directly on your website without being redirected elsewhere. This provides a seamless and branded checkout experience, which can increase customer trust and reduce cart abandonment.
How do they work?
Take the example Sweet Serenity, a beauty and grooming store in Canada.
They use Shopify Payments to process transactions directly on their site. I tried to buy an automatic trimmer from their site:
Instead of using Shop Pay, Shopify’s redirect gateway, I select ‘More payment options.’ This takes me to a form powered by Shopify Payments, where I enter my credit card details.
Here’s what happens behind the scenes:
- When you enter your card details, Shopify’s Payments API encrypts and tokenizes the information to ensure security.
- This tokenized data is then sent to the merchant’s server, which makes an API call to the gateway for payment processing.
This method allows for greater control over the customer experience but also means that the merchant needs to handle certain security measures, such as PCI DSS compliance, SSL/TLS encryption, and secure JavaScript insertion.
Self-hosted payment gateways
Self-hosted payment gateways give you maximum control over the entire checkout experience.
Unlike on-site gateways, where the provider handles most of the backend processes, self-hosted gateways allow you to collect and process payment information on your own site before securely sending it to the payment processor via APIs.
How does it work?
When a customer enters their payment information on your site, it’s your responsibility to securely collect and transmit this data.
The gateway provider then takes over, handling the actual transaction and fund transfer.
This approach allows for complete customization of the user experience, from the design of the payment form to the checkout flow.
What’s the difference from on-site gateways?
- You have full control over the frontend design and user experience, which is ideal for businesses that want a fully branded checkout process.
- You must implement robust security measures such as SSL certificates, PCI DSS compliance, firewalls, and data tokenization—this ensures customer data is encrypted and stored securely.
Examples of self-hosted gateways include Braintree, Authorize.net with custom forms, and Adyen. They allow for more flexibility but also require a higher level of technical expertise and compliance.
Direct post method
The direct post method allows your site to collect payment information and send it directly to the gateway using a simple API call.
This means that sensitive data is never stored on your servers, reducing your PCI DSS compliance burden.
How does it work?
When a customer enters their payment details on your site, these details are sent directly to the gateway using a POST API request—a secure method of sending data over the internet.
The gateway then processes the payment and sends back a confirmation or error message.
What’s the benefit?
This method offers a balance between control and security.
You can maintain a consistent front-end user experience without handling sensitive data on your servers. Your focus shifts to securing your site itself, such as ensuring your forms and pages are secure, while the gateway handles the sensitive information.
Examples include Stripe and PayPal Payments Pro.
Local bank integration
Local bank integrations allow customers to pay directly from their bank accounts, which can be particularly useful for accommodating regional payment preferences or meeting regulatory requirements.
How does it work?
When a customer chooses this payment method, the transaction is processed through local bank systems, such as ACH (Automated Clearing House) in the US or Interac Online in Canada.
This often requires custom code or specialized plugins to connect your ecommerce platform with the bank's payment system.
Why choose this method?
- Regional preferences: Some customers prefer to use local bank transfers over credit cards or digital wallets.
- Lower fees: These integrations often come with lower transaction fees compared to traditional gateways.
- Regulatory compliance: They can help meet specific regional regulations for processing payments.
Examples include ACH transfers in the US, Interac Online in Canada, and Zelle.
Hybrid payment gateways
Hybrid payment gateways combine multiple types of payment solutions into one platform, offering merchants the flexibility to choose the best payment method for their business needs.
For example, a hybrid gateway might include features of both redirect gateways (like PayPal) and on-site gateways (like Shopify Payments), allowing you to offer a variety of payment options within a single integration.
Why choose a hybrid gateway?
- You can offer different payment experiences depending on customer preferences or transaction types. For example, you could use a redirect option for high-risk payments and an on-site solution for regular transactions.
- Instead of managing multiple gateway integrations, a hybrid gateway consolidates them into one platform, simplifying management and reducing technical overhead.
- As your business grows and your needs change, hybrid gateways can easily adapt without requiring a complete overhaul of your payment system.
A popular example is PayPal, which allows merchants to offer both redirect and on-site payment options, as well as local bank transfers and buy now, pay later (BNPL) options.
Why Payment Gateway Integration is a Must
Every ecommerce professional knows that without gateway integrations, they can’t get paid.
This defeats the purpose of having an online store. In addition to payment processing, here are four reasons you must integrate payment gateways.
To process, secure, and receive payment
As we’ve agreed, the primary purpose of payment gateways is to automate the processing and receipt of payments. It handles everything from credit card transactions to digital wallets and even cryptocurrency payments.
Remember the case of Chris Bajda?
Chris faced issues when he integrated a payment gateway that wasn’t compatible with his web architecture and wasn’t optimized for mobile.
As a result, he couldn’t process payments efficiently, leading to lost sales and increased cart abandonment rates.
Now, consider Dubin Fine Jewelry:
This family-owned jewelry store was manually charging credit cards and entering payment details into their POS system, which was time-consuming and prone to errors.
After switching to Cardknox, they could process payments online faster and with lower processing fees.
With the right payment gateway, you can also offer a variety of payment methods to suit your customers' preferences.
For instance, Newegg provides a range of options like buy now, pay later (BNPL), cryptocurrency, store credit cards, and major credit and debit cards. This flexibility allows you to cater to a broader audience, improving the customer experience and potentially increasing sales.
Some other payment processing options include wallets like Apple and Google Pay, bar codes, OCR payments, mobile payments, and many more.
To secure payment information
In June 2023, Juniper Analysts predicted that global losses from online payment fraud would exceed $362 billion over the next five years.
In 2023 alone, merchants lost $38 billion due to fraud.
With numbers like these, it’s no surprise that ecommerce businesses are prime targets for scammers, handling large volumes of financial transactions.
Payment gateways are designed to take on much of the security burden, protecting both you and your customers from fraud.
For instance, Stripe has a machine-learning-based fraud detection tool called Stripe Radar that evaluates transactions for fraud risks and takes the appropriate action.
Many payment platforms offer 3D security for extra verification and tokenization, are compliant with PCI DSS and other international regulations, and offer buyer protection and dispute resolution.
To expand your customer base
Payment gateways are essential for expanding your ecommerce business beyond local markets, enabling you to accept orders and payments from customers around the world.
With features like multi-currency support and localized payment methods, gateways allow you to tailor the buying experience to different regions.
Case in point: Adyen.
Adyen is a multi-currency payment gateway that helped Caudalie, a global skincare brand, personalize its payment flow across 23 sites in Europe, the United States, and Asia.
Adyen helped them provide their ideal buyer experience that satisfied each customer.
They also helped them service customers worldwide and understand how customers from different regions think, as they said in their case study.
It’s important to satisfy all our customers. This means first of all understanding their buying habits.
A French customer will not have the same purchasing habits as a Dutch customer, for example.
The former will prefer to pay by credit card, while the latter will most likely want to use iDEAL.
It’s therefore essential to have a champion on our side who knows these nuances and can integrate local payment methods.
This is precisely Adyen's strength, which means we can offer our customers the payment methods they’re familiar with.
This also ties to our next point about analytics and how payment gateways help.
To analyze and discover insights
Most payment gateways come with built-in reporting and analytics tools that provide invaluable insights into your business operations.
Here’s how you can use these features to your advantage:
- Geographic sales performance: Identify which countries generate the most transactions and adjust your marketing strategies to focus on high-performing regions.
- Customer behavior and preferences: Analyze which products are most popular and what payment methods customers prefer to inform your marketing, advertising, and product strategies.
- Operational efficiency: Monitor metrics like transaction failures, cart abandonment, refunds, and chargebacks. Use this data to optimize the checkout process and improve customer experience.
- Fraud prevention and risk management: Track and report suspicious transactions to take preventive measures, adjust fraud detection settings, and reduce the risk of chargebacks.
- Customer experience optimization: Identify pain points like frequent cart abandonment or high refund rates and address them to enhance customer satisfaction and boost conversions.
All these benefits help you earn more money, aid inclusivity, and provide a better shopping experience for your customers.
How to Integrate a Payment Gateway Into Your Online Store
Now that we’ve established the importance of integrating a payment gateway, let’s explore how to get started.
According to Olamide Banjo, a freelance engineer with over five years of experience in payment gateway integration:
The technical part of integrating payment gateways is extremely easy to implement using APIs, SDKs, or custom code.
The business aspect is the hardest part.
You have to choose your vendors wisely—how does the vendor handle chargebacks, their gateway fees, and customer support?
A wrong partner can mess up your business and make you lose money.
Another important tip is to always check your provider’s chargeback dispute policy
This leads to our next point: how do you choose the right payment gateway?
Step 1: Choose the right payment gateway
Here’s how to choose the best gateway for your business:
- Assess your business needs. Start by evaluating your current and future requirements. Are you catering primarily to US customers, or do you need support for multiple currencies? Are you focused on maximum security, minimizing processing fees, or offering a variety of payment methods? Outline your priorities to guide your search.
- Consider supported payment methods. Look for a gateway that accommodates diverse customer preferences, such as credit cards, digital wallets (like PayPal and Apple Pay), BNPL options, and cryptocurrencies. The more options you provide, the easier it is for customers to complete their purchases.
- Ensure integration and mobile compatibility. Verify that the gateway integrates seamlessly with your website and mobile platforms. Check for comprehensive API documentation and SDK support to avoid technical issues during implementation.
- Manage chargebacks effectively. Select a gateway that provides robust tools for handling chargebacks and disputes. Efficient chargeback management can protect your revenue and maintain positive customer relationships.
- Review fees and pricing structure. Compare transaction fees and watch for hidden costs, like setup, monthly, and chargeback fees. Make sure the gateway’s pricing aligns with your business model and transaction volume.
Watch out for other features like reporting and analytics, excellent customer support, international and multi-currency transactions (if you need), customization, processing speed, security and fraud prevention, and recurring billing and subscriptions—making it easier for businesses with subscription models.
Read our list of the 20 best payment gateways for a more comprehensive guide on choosing the best for your business. You can see our top 10 picks right here:
Step 2: Set up a merchant account
A merchant account is a specialized bank account that acts as a middleman between your customer’s payment and your business bank account.
It temporarily holds funds while the payment processor verifies the transaction for security and fraud prevention.
Here’s how to set up your merchant account:
- Register your business: Ensure your business is legally registered according to the regulations in your country. You may need to obtain necessary licenses and permits depending on your location.
- Obtain a business identification number: This is required for tax purposes and regulatory compliance. In the US, you’ll need an Employer Identification Number (EIN). In Canada, you’ll need a Business Number (BN) from the Canada Revenue Agency (CRA).
- Open a business bank account: Set up a separate business bank account to receive funds from your merchant account. This keeps your business finances organized and helps with bookkeeping.
- Research and choose a merchant account provider: Evaluate providers based on fees, processing times, customer support, security features like PCI DSS compliance, fraud protection, and integration options. Read third-party reviews to get a sense of their reputation.
- Apply for a merchant account: Once you’ve selected a provider, submit an application with the required details. This might include your business’s financial statements, processing history, and other documents.
- Set up payment processing and test: After your merchant account is approved, set up your payment processing system and run tests to ensure everything works smoothly. Once testing is complete, you’re ready to start receiving payments!
And, you’re off to the races. Let’s move to the next step.
Step 3: Obtain API keys
An API key is a unique code provided by your payment gateway that allows your ecommerce platform to securely communicate with the gateway’s services.
Think of it as a digital pass that authenticates your application and enables it to access the gateway’s features, like processing payments and managing transactions.
Here’s how to get your API key:
- Log in to your payment gateway account: Access your account through the provider’s website.
- Navigate to the API section: Look for sections labeled ‘Integrations,’ ‘API,’ or ‘Developers.’ This is where you’ll find the tools to generate your API key.
- Generate or copy your API key: Click on the option to generate a new API key. If an API key has already been provided, you can copy it from here.
- Store your API key securely: Treat your API key like a password—keep it in a secure location and don’t share it publicly. It’s your key to accessing the gateway’s services, so protecting it is essential.
API keys not only enable secure connections but also allow you to track usage and monitor activity.
By setting up rate limits and access controls, you can manage how your application interacts with the gateway, preventing abuse and ensuring smooth operations.
With your API key in hand, you’re ready to integrate your payment gateway and start processing transactions.
Don’t forget to always check for API updates to keep your system compatible.
Step 4: Implement the gateway on your website
Integrating a payment gateway into your website can be done in several ways, depending on your technical expertise and business needs.
Here are the main options to consider:
- Use hosted payment pages: Redirect customers to a secure, external page provided by the gateway to complete their payment. This method requires minimal setup and keeps sensitive payment data off your site. Ideal for quick and secure implementation without extensive coding.
- Integrate using JavaScript or platform-specific SDKs: Embed payment forms directly on your site using JavaScript libraries or mobile SDKs for iOS and Android. This option allows for a fully customized checkout experience and is best suited for businesses with a development team.
- Install plugins or use low/no-code options: Leverage pre-built plugins or low-code solutions for platforms like Shopify or WooCommerce. These are easy to install and configure, making them perfect for small businesses or those without a dedicated technical team.
Step 5: Test your integration
Thoroughly testing your payment gateway integration in a sandbox environment—a safe, simulated testing area—is essential to ensure everything works correctly before going live.
Here are the key test scenarios to consider:
- Successful transactions: Simulate typical purchases and verify that payments process correctly with proper confirmations and order status updates.
- Declined payments: Test scenarios like insufficient funds or invalid card details to ensure your system provides clear, informative error messages without revealing sensitive information.
- Handling errors: Create intentional errors to verify that your system logs them and displays user-friendly messages to inform customers without causing frustration.
- Refunds and cancellations: Process refunds and cancellations to ensure they update the order status correctly and notify the customer.
- Multiple payment methods: Test all payment options (credit cards, PayPal, etc.) to confirm they work consistently and provide a smooth experience.
- Partial payments: Simulate partial payments to ensure your system handles these situations properly and notifies customers of any remaining balance.
- Currency conversion: Test transactions in different currencies to verify accurate exchange rates and correct display of local currency amounts.
- Fraud detection scenarios: Simulate fraudulent patterns, such as mismatched billing information, to ensure your system flags and blocks these transactions effectively.
Other scenarios to consider: testing for recurring billing, high-volume transactions, failed payment recovery, duplicate payments, 3D Secure Authentication, and user experience.
Remember to document any issues you encounter and resolve them before going live. Testing thoroughly now can save you from costly problems later.
Step 6: Go live and monitor
After thoroughly testing your payment gateway and resolving any issues, you’re ready to go live.
Follow these steps to ensure a smooth launch:
- Replace test API keys with live ones: Update all configurations to use live API keys, ensuring real transactions are processed correctly.
- Check live settings: Verify that all transaction settings, such as currencies and payment methods, are correctly configured for live operations.
- Monitor performance: Use your payment gateway’s reporting tools to track transaction success rates, errors, and customer feedback. Supplement with analytics tools like Google Analytics or Hotjar for a complete view of the payment process.
- Watch key metrics: Keep an eye on successful and failed transactions, chargebacks, and customer feedback to identify and resolve any issues quickly.
By closely monitoring your payment gateway’s performance, you can ensure a smooth transition to the live environment and provide a seamless experience for your customers.
Best Practices for Secure Payment Gateway Integrations
Since implementing the solution doesn’t ensure a successful payment integration, learn the best practices that make the customer and brand experiences seamless.
The following are ideas, but they should be adapted as needed based on the research.
Ensure PCI DSS compliance
The Payment Card Industry Data Security Standards (PCI DSS) are essential guidelines designed to protect customer card information during transactions. If your ecommerce business handles card payments, compliance is non-negotiable.
Failure to comply can lead to severe fines, security breaches, and loss of customer trust.
PCI DSS requires businesses to implement strong security measures, such as encrypting and tokenizing cardholder data, restricting access to sensitive information, and conducting regular security and vulnerability scans.
These measures help prevent unauthorized access and data breaches.
Taking these steps ensures that your business meets industry standards, protects customer data, and avoids the heavy penalties associated with non-compliance.
Implement strong data encryption
Robust encryption methods safeguard against security lapses and give clients and merchants peace of mind about their money.
Here’s how to ensure strong encryption for your ecommerce platform:
- Use SSL/TLS certificates: Secure Sockets Layer (SSL) and Transport Layer Security (TLS) encrypt data transmitted between your website and the customer’s browser. This prevents data from being intercepted or tampered with during transmission.
- Implement end-to-end encryption: Encrypt data at every stage of the transaction process, from data entry on your site to storage in your database. This ensures that even if data is intercepted, it remains unreadable and secure.
- Secure payment links: Ensure that all payment links are encrypted and not susceptible to interception. This protects customers who use payment links sent via email or messaging apps.
Strong data encryption helps gain and keep customers' trust and gets you your money safely!
Streamline the user experience
A long and complicated checkout process can cause customers to abandon their carts before completing a purchase.
To prevent this, focus on simplifying each step.
Limit the number of form fields to only what’s necessary, such as shipping and payment details. The fewer fields customers need to fill out, the quicker and easier their checkout experience will be.
Make sure your payment interface is intuitive and easy to navigate on all devices—desktop, mobile, and tablet.
A seamless experience across platforms helps reduce friction and frustration.
Additionally, offering a variety of payment options, such as credit cards, digital wallets, and Buy Now Pay Later (BNPL) services, can accommodate different customer preferences and encourage them to complete their purchases.
Test thoroughly before going live
Before launching your payment gateway, conduct comprehensive testing in a sandbox environment—this is a safe, simulated space where you can identify and resolve issues without affecting real customers.
Test various scenarios, such as successful transactions, declined payments, and error handling, to ensure everything works smoothly.
I recall a moment when we integrated a new gateway, and it triggered multiple cart abandonment issues due to slow loading times and glitches during the checkout process.
That experience taught me to never underestimate the importance of speed and user experience. Testing became my best friend; we ran numerous A/B tests and gathered feedback to optimize the process.
Taking the time to test your integration thoroughly will help you catch potential issues early, optimize performance, and provide a seamless checkout experience for your customers.
Handle errors gracefully
Payment errors can occur due to issues like incorrect card details or insufficient funds. How you handle these errors can determine whether customers complete their purchase or abandon their cart.
Use clear error messages that explain the issue and offer next steps, such as: “Please check your card details and try again.”
This helps guide customers and reduces frustration.
By providing specific guidance and options, you can turn a negative experience into a positive one and encourage customers to complete their transactions.
Monitor and optimize performance
You don’t know what you don’t monitor, and you can’t improve what you don’t know.
Regularly monitoring your payment gateway’s performance is crucial for identifying issues and making improvements. Track key metrics like transaction success rates, payment failures, and fraud attempts to spot problems early.
For example, if you notice a high rate of declined transactions, you can investigate the cause and adjust your checkout process or error messaging.
Use monitoring tools and analytics to gather data, make informed decisions, and continually optimize your payment processes.
Staying proactive with monitoring helps ensure a smooth and secure payment experience for your customers.
Plan for scalability
You don’t need to wait for your business to mature before planning for scale.
It’s better to go with an option that embraces scaling from the get-go than switching your provider, where you risk losing important information.
Look out for:
- Flexible solutions can handle small and increasing transaction volumes without compromising performance.
- Ensure compatibility with other systems, like CRMs and accounting, not just your ecommerce platforms and payment tools.
- Stay informed on emerging technological changes in the industry to stay competitive.
These best practices should guide you to integrate the right payment gateway for your business.
If fraud prevention feels like guesswork, it’s time for some fraud prevention training that actually works.
Always Have a Backup Plan
At the end of my interview with Chris Bajda, he shares the best takeaway:
Always have a backup plan.
Integrate at least two gateways to avoid dependency on a single provider, and read the fine print on fees—they add up quickly!”
According to data from Baymard Institute, 18% of customers abandon carts due to prolonged or complicated checkout processes.
So, keep it simple and user-friendly.
It's not just about collecting payments; it's about creating a seamless, stress-free experience for your customers.
The world of ecommerce moves fast—and so do you. Subscribe to our newsletter with the latest insights for ecommerce managers from leading experts in ecomm.
