Hosted vs Native Payment Gateways: How its Differences Impact Your eCommerce Business

Payment gateways come in all shapes and sizes, and there are a wide variety of payment gateways to choose from, usually categorised between local and international payment gateways. This is to be expected as in the dynamic and ever-changing of eCommerce, payment gateways and payment methods evolve at a rapid pace, and thus it is to the benefit of the discerning eCommerce merchant to keep abreast about such trends and developments.

One such aspect of payment gateways that is important to bear in mind is the differences between hosted payment gateways and native payment gateways, and how their differences impact your eCommerce business.

What is a Hosted (Redirected) Payment Gateway?

A hosted payment gateway is one that redirects the user to the payment service provider’s (PSP) page, and usually handles the entire transaction process along with the provision of enhanced security and data protection for a fee¹. They are known to be simple to set up and are maintenance-free due to the aforementioned fact that the PSP handles and controls the transaction process¹.

What is a Native Payment Gateway?

A native payment gateway, or non-hosted payment gateway, allows the user to complete the checkout process on the merchant’s own web page¹. Unlike with a hosted payment gateway, a native payment gateway grants the merchant full control over the entire transaction process and allows them to craft the customer experience as they see fit¹. This gives the merchant a much higher level of customer data tracking, allowing them to improve future marketing efforts¹.

Benefits and Drawbacks of Using Hosted Payment Gateways and Native Payment Gateways

Nothing is perfect and that applies to the realm of eCommerce. So, here are the benefits and drawbacks of both hosted and native payment gateways:

Hosted Payment Gateways

Benefits

• No Need to Handle Transactions: The PSP handles all of the burden in the transaction process, with some input from the merchant in customising the UX.
• Easy Setup and Maintenance-Free: Due to the fact that the PSP is responsible for the whole checkout process and also the maintenance of the payment gateway, setting up is not only simple, but technical knowledge is also not a requirement on the merchant’s part.

Drawbacks

• Limited Customisation: The merchant’s ability to shape the customer’s UX is often limited by any options provided by the PSP.
• Fee Required: Since the PSP bears the burden of both processing transactions and maintaining the payment gateway, the merchant is required to pay a recurring fee to keep using the payment gateway.
• Increased Risk: The merchant runs a heightened risk of cart abandonment due to the fact that hosted payment gateways redirect buyers to a different page entirely to complete the checkout process.
  

Native Payment Gateways

Benefits

• Full Control over Checkout Process: The PSP handles all of the burden in the transaction process, with some input from the merchant in customising the UX.
• Total UX Customisation Freedom: Due to the fact that the PSP is responsible for the whole checkout process and also the maintenance of the payment gateway, setting up is not only simple, but technical knowledge is also not a requirement on the merchant’s part.
• Direct Access to Customer Data: Native payment gateways allow the merchant to have the greatest degree of control over their checkout process, and this includes tracking customer data. This allows them a much better opportunity to create future marketing efforts.

Drawbacks

• Responsibility is the Merchant’s Own: With great power, comes great responsibility. Total control over the customer UX and the checkout process also means that everything related to the payment gateway is the merchant’s responsibility as well, including the maintenance of the payment gateway.
• Technical Skill Required: Some degree of technical skill and knowledge is required to make full use of the features that native payment gateways possess. This also means that if a merchant lacks either the skill or knowledge, they would have to resort to paying an expert to set it up for them.

Now that you know the differences between hosted and native payment gateways, you can now make a more informed decision in choosing between them that suits your business needs best. If you’re still wondering about the right payment gateway to choose from, why not opt for Tazapay? With one account, you could penetrate into more than 173 markets around the world, and payment solutions that fit your business needs, no matter what it is.

Sources

1. Hosted vs non-hosted payments | The Jotform Blog