Hosted Payment Gateway: Complete Guide 2022

Hosted Payment Gateway

Online selling has become a growing industry in itself and includes both D2C ecommerce and resellers. The increasing Internet user base and favorable market dynamics have helped many business owners to start selling online. This exponential growth is expected to take the market value of the Indian e-commerce industry to US$ 350 billion by 2030 (Source: Statista).

Like many business owners or aspiring startup enthusiasts, you would want to streamline the payment experience for your customers. This requires selecting the most suitable payment gateway from the available choices.  However, comparing different payment gateways based on their features and benefits may not be enough. 

Based on the payment flow, payment gateways are further classified into three different types – hosted, self-hosted, and API-hosted. 

Making the right selection based on this criterion is quite crucial because it directly affects the customer experience. Whether you want to sell furniture or clothes online, understanding how these payment gateways work will help you make an informed decision. 

In this blog post, we will cover hosted payment gateways in detail. 

What is a payment gateway?

A payment gateway or PG is the technology that allows online business owners to start accepting payments online from their targeted customers. It acts as a cashier that connects your business, customers, and the linked banks altogether.

Most payment gateways in India support multiple payment options to make it easier for your customers to pay you via their preferred payment method. Right from the stage when a customer pays you online to the moment you receive payment in your merchant account, there are several stakeholders involved in the process, including:

  • Issuing Bank
  • Card Network
  • Acquiring Bank
  • Payment Processor

Recommended Read: What is a Payment Gateway & How Does It Work?

What is a hosted payment gateway?

A hosted payment gateway refers to the third-party payment software that redirects a buyer on your website to a payment page managed by a Payment Service Provider (PSP). It means that the buyer will leave your app or website to make the payment and then come back to your website to complete the checkout process. 

This type of payment flow is beneficial for merchants like you as the PSP handles the transaction process and takes care of the security and data protection side. 

Other features of a hosted payment gateway are:

  • Encryption technology for each transaction to maintain payment security
  • Easy to set up and start using a hosted payment gateway
  • Easy to customize the checkout page as per the company’s branding

Keep in mind that while the customers will be redirected to a different page for payment, it is completely safe to proceed with the checkout process in this manner. 

How’s It Different from a Non-Hosted Payment Gateway?

A non-hosted payment gateway, also known as an on-site payment solution, is the one in which customers complete the checkout and payment process on your web page only without any redirections. In other words, if you integrate a non-hosted payment gateway, your customers will be asked to enter the payment details on your website. You will also exercise complete control over the customer experience, i.e., you can customize the entire checkout page as per your brand color scheme. 

Other features of non-hosted payment gateways include:

  • Easy to track customer data and use it for various marketing and business decisions
  • Easy to track the purchase habits of your customers 

While having more control over the payment experience is quite beneficial, it also means your business will be responsible to handle the transaction security. Similarly, the onus of managing the required technical support for checkout glitches will be on you.

When trying to select the right type of payment gateway – non-hosted or hosted payment gateway, you need to understand their specific benefits and how they relate to your business.

Benefits of using a hosted payment gateway

  • Easy to use payment process

One of the most critical aspects of payment processing is the integration of the chosen payment solution.

A seamless checkout experience backed by a hosted payment gateway reduces the risk of cart abandonment and ultimately, boosts sales. Depending on the payment service provider you choose, you can provide customers the option to pay via credit cards, debit cards, UPI, net banking, Buy Now Pay Later, and others.

Besides this, you can also enable recurring payments or subscriptions if you want to sell products or services via a subscription model. This will further improve customer satisfaction as there will be no need to authorize every transaction. 

  • Availability of Plug-and-Play plugins 

If your e-commerce website is based on a Content Management System (CMS), you know how easy it is to activate plugins and add more functionalities to your website.

The best part is – most hosted payment gateway providers have such plugins available for CMSs like WooCommerce, Shopify, Magento, and others. All you need to do is to search for and activate a suitable payment plugin and start accepting payments online from your customers.

Before you take it to the live site, you can also test the payment process at the staging server and then use your ID and secret key to save the changes made.

  • Payment fraud management 

Amidst the rising risk of payment fraud, many customers are now concerned about paying for purchases on legitimate sites only. They would prefer leaving the checkout process halfway without buying on finding dubious pages and links involved, leading to a higher cart abandonment rate. 

You can deal with such payment security issues by opting for a hosted payment gateway that has an in-built fraud detection mechanism to ensure payment security. Irrespective of whether you are a freelancer or running a large enterprise, you can use a hosted payment gateway to accept online payments. 

Knowing that you have chosen a reliable and secure payment solution for your website will also boost your customers’ confidence to buy from you.

Self-hosted vs. hosted payment gateway: comparison

Self-hosted Payment GatewayHosted Payment Gateway
Get the payment process completed on the same business website or app without any redirectionRedirects customers to a secure page for payment after checkout
Hosted by the business ownerHosted or maintained by a PSP
More control over the checkout and payment experienceLesser control over the customer experience and payment page design
Requires the business owners to undergo PCI-DSS compliancePCI-DSS compliance and other related regulations covered by the underlying PSP

Also Read: Types of Payment Gateways You Can Choose From 

How to choose a hosted payment gateway?

While there are several hosted payment gateway providers available for Indian businesses, selecting the right one can be challenging. Given below are certain tips you should consider to make the payment gateway selection process easier:

  • Check for the number of payment options available

The more payment methods your hosted payment gateway supports, the easier it is for your customers to pay you.

  • Consider the payment gateway settlement cycle

Ideally, you would want the payment gateways to settle the funds into your bank account (not merchant account as there is a difference) in a day. Therefore, check for the payment gateway that supports the next-day payment settlement cycle.

You May Also Like to Read: Payment Gateway Vs. Merchant Account

  • Look at the process of merchant onboarding and integration 

The easier the integration and onboarding process is, the better it is for you. You can also look for a solution that covers 100% online onboarding.

  • Compare the costs involved

Lastly, you must take into account the pricing of the hosted payment gateway you select for your business website. Instead of looking for a free payment gateway, search for the one whose benefits are worth paying a competitive price. 

Wrapping up

The final selection of the right payment gateway type should be based on your business-specific needs. Keep in mind that peer recommendations can help you narrow down your search for the right hosted payment gateway. But it is important to consider your unique business requirements before making any final selection.


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