What Is a Payment Gateway? Plus 5 of the Best Payment Gateways Compared for 2022

Which payment gateway should you use for your e-commerce store? A lot of people struggle with this question. After all, payment gateways and online payments in general can be intimidating, especially if it's your first time around the block.

With dozens of online payment options to choose from, it can be a complicated decision. But this is where this guide comes into play. Here, we tell you what to look for in a quality online payment gateway and present five of the top solutions in the market.

 

In a hurry? Here's our summary of the top payment gateways out there:

🧐 Summary table:
5 of the best payment gateways Payment gateway Price from Editor's rating Payline credit card's own fees + 0.3% per transaction + $10 per month ⭐⭐⭐ Stripe 2.9% + 30¢ per transaction ⭐⭐⭐ Authorize.Net 2.9% + 30¢ per transaction + $25 per month ⭐⭐ PayPal 2.9% + 30¢ per transaction ⭐⭐ 2Checkout 3.5% + 30¢ per transaction ⭐⭐
🏁 Our recommendation:

In our opinion, the best solution right now is to use Stripe as your payment gateway of choice. It has honest rates, clear pricing, and provides integrations with all of the most popular e-commerce software solutions out there.

Alternatively, if Stripe is not available in your country, use PayPal for (mostly) similar experience.

We also recommend adding Wise on top of your payment gateway for easy handling of payments in multiple currencies. Skip to the bottom to learn why.

Table of contents:

👉 What is a payment gateway?
👉 How does a payment gateway work?
👉 How to pick a payment gateway
👉 Best payment gateways compared
👉 Summary and final recommendation

Let's start with the basics:

 

What is a payment gateway?

A payment gateway is the middleman between your online store and the payment processor that receives the payment from your customer.

In other words, once a customer enters their payment details on your site, the payment gateway takes care of sending that data securely to the payment processor.

You can think of it like this:

payment gateway

A payment gateway takes care of authorizing the payment and making sure that the data entered is enough to finalize the payment. The gateway protects the details of the credit card by encrypting all sensitive information it holds. This process ensures that personal private details are passed securely between the customer and the merchant.

A payment gateway is part of the “magic” that occurs in the background when a transaction takes place on the web. By sending information securely between the website and the payment processor, and then returning transaction details back to the website, it is a primary component that enables e-commerce stores to function.

If you have an (e-commerce) website and you are interested in accepting credit card payments online, you will need a payment gateway. It is effectively the bridge between your product sales and the customer.

 

How does a payment gateway work?

The good news is that, as an e-commerce store owner, you don't have to understand how the payment gateway actually works underneath. In practice, all you need to do is pick a gateway and then integrate it with your online store via what's usually a user-friendly setup wizard. After that, it just works and allows you to collect payments from customers.

But just to give you an idea, here's a general look at the steps that take place:

A customer places an order on your website. They enter the cart, proceed to checkout and fill in their payment details. The payment gateway takes the payment information, encrypts it and sends it through a secure channel to the payment processor. The customer gets redirected to the payment processor. The payment processor takes the customer through the steps to finalize the payment. The payment processor verifies if the payment was successful and displays an adequate message to the customer. The customer can return to the online store.

What this means in practice is that the payment gateway is only responsible for allowing the customer to communicate with the payment processor. The gateway is just what the name suggests – a “gateway” that takes the customer's personal information through a secure channel to the payment processor.

 

How to pick a payment gateway

Here's what to look for in a payment gateway:

Is the gateway supported by your e-commerce platform?

Based on which e-commerce platform your store runs on, you might have some payment gateways available but not the others.

Setting aside boutique payment gateways, nearly all e-commerce platforms support PayPal, Amazon Pay, Authorize.Net, Stripe, and Square. So you don't have to worry if you want to use either of these. The top-of-the-line e-commerce platforms all work with them no problem – I'm talking about platforms such as Shopify, BigCommerce, WooCommerce, Magento.

The way you can check which payment gateways your e-commerce platform works with is by going to the platform's official extension catalog or documentation and looking into the “payments” section. Here's where to begin:

The payment gateway extensions in WooCommerce A list of the payment gateways available in Shopify by country A list of the payment gateways available in BigCommerce A list of the payment gateways available in Magento
Do you want customers to enter payment details directly on your site?

From a technical point of view, there are three ways for you to take payment details from a customer:

Payment form on your site, details posted to your server. The smoothest checkout experience from your customer's point of view is to enter their payment details into a normal form on your site. Unfortunately, this is the least secure way of doing things, and you'd need to take very serious security precautions to remain PCI compliant. Unless you're making millions per year, this is not a solution for you. iFrame or redirect. An alternative to taking payment details directly on your site is to include the checkout form inside a secure iFrame (within a page on your site) or redirect customers to a hosted-outside payment page. It's harder to get the payment form to match the rest of your website with these approaches, but they're also the most secure way of doing things. Payment form on your site, details sent straight from the browser via a secure payment gateway (not via your server). This is a form of a middle-ground solution. This is actually how most modern payment gateways work, such as Stripe, for example. With Stripe, your customers can type in their card details into a form on your site, but the data is then taken directly to Stripe's server via a secure channel. The customer's credit card details never pass through your web server.
Do you want to work with a single company as payment gateway and payment processor?

Payment gateways and payment processors are two different things (more on the differences here). And you do need both in order to enable people to actually buy anything from your e-commerce store. Unless you can afford a merchant account – allowing you to process credit card payments directly (usually not a solution for small to mid-size