Choosing Between Payment Gateways and Hosted Checkouts for Online Payments

• Setting up an ecommerce system for your business can be a great way to boost sales and revenue
• There are different types of online ecommerce payment solutions to choose from based on your needs
• The right payment processing partner can help your business choose the optimum ecommerce setup

For businesses who are taking their first steps into the world of online sales, choosing the right type of payment processing solution can help to accelerate success. However, understanding the reasons why one online checkout solution may be preferred over another for your particular business is critical to ensuring the implementation of an optimized ecommerce system and payment processing gateway.

Traditional brick-and-mortar retailers have certainly had a very challenging time over the last few years. The impacts of the global COVID-19 pandemic have been felt by businesses of all types, but in particular on those businesses who historically have relied on in-store foot traffic and face-to-face transaction and payment processing. While it’s long been established that ecommerce is an effective way to increase sales for retailers of all types, the repeated lockdowns and operational restrictions of the COVID years proved beyond a shadow of a doubt that online sales platforms are absolutely essential to the survival of many businesses.

Advantages of Ecommerce Platforms for Your Business

There are many distinct advantages that ecommerce will provide for your business, such as expanding the reach of your business to more customers, adding convenience to the customer experience, and boosting profits through lower overhead costs. Let’s take a quick look at a few of the most notable advantages of having an ecommerce platform in place for your company.

Online sales platforms allow your business to reach larger groups of customers in two ways. First, you can now serve customers who are otherwise unable to visit your business due to physical limitations, or their ability to travel to your location falls outside of your normal operating hours. Second, you are now able to expand your reach to customers globally, offering service to areas far beyond your typical local radius, and shipping products directly to their homes or places of business.

In many ways, operating an online digital storefront is far less costly than a physical location, as rent, utilities, merchandising displays, signage, and many other essential aspects of retail stores are not needed. While there are still some costs associated with services such as web hosting, ongoing upkeep, maintenance, optimization, and other tasks related to online store management, they will surely be much lower in total when compared to overhead costs of retail storefronts.

Ecommerce websites also provide greater convenience for customers, allowing them to shop for your products anytime, anywhere, even while on the go. Smartphones and connected tablets have rapidly become the standard devices with which most people access the internet, enabling them to shop on their own terms. In fact, many customers have grown to prefer online shopping over in-store shopping for a vast array of products, and this trend has only increased in recent years.

Making the decision to move ahead with the introduction of an online ecommerce solution for your business is a relatively easy one, as the benefits are quite clear, but choosing the best method of payment processing to go along with that ecommerce solution can be a little more complicated.

What Is a Payment Gateway?

On any ecommerce website, when the transaction must be processed and payment details are entered, the customer will land on a page known as a payment gateway. This is where the details of the transaction are compiled, including customer details, payment type, card numbers, purchase amount, and others. Once all the necessary information is entered in the payment gateway and the customer clicks the final button to submit their payment for processing, the encrypted data is securely passed digitally through to the payment processor. This is when payment details are checked and verified with the card issuer, the customers bank, and the merchants bank, before finally reaching an approved conclusion. Once the approval has been obtained, the payment gateway then redirects to the appropriate order success page for the customer.

Payment gateways are how sensitive customer information and payment details, like credit card numbers, are handled securely to prevent transaction fraud and data theft. They act as the intermediary between the customer and the merchant, providing all the behind-the-scenes action needed to verify and approve transactions online by communicating with card issuers like VISA or MasterCard, and the banking institutions of both the merchant and the customer.

Now, while the basic mechanic of how all payment gateways function is essentially the same, there is one major difference that must be considered when choosing how to set up an ecommerce website for your business. You must choose whether you will utilize a payment gateway that operates with a hosted checkout or a non-hosted checkout.

What Is a Hosted Checkout?

In simplest terms, a hosted checkout is where the customer on your ecommerce website is redirected to a secure third-party checkout to enter their payment details and complete the processing of their transaction. This hosted checkout does not actually live on your website, but rather securely connects to pass through the transaction approval back to your system where the order is then completed and submitted for fulfillment.

Hosted checkouts offer businesses the convenience of not having to keep customer payment details secure, as this information is all retained by the third-party payment processor. Hosted checkouts can also be set up quickly with minimal coding or back-end web development required, and can immediately start accepting a diverse range of payment methods.

However, it’s important to note that hosted checkouts managed by third-party payment processors often limit the amount of customization that can be made to the checkout process, which can be a challenge in terms of providing a seamless brand experience for your customers. In addition, the amount of customer data available for analysis is more limited, as much of it will be retained by the third-party checkout provider and not be accessible for you.

What Is a Non-Hosted Checkout?

Non-hosted checkouts are payment gateways built directly into your ecommerce website, where all payment data is entered and collected without any redirection to an external site for the final steps of transaction processing. The integration and setup of a non-hosted checkout on your site allows the encrypted payment data to be securely transmitted to the card issuer and banking institutions to help protect against data theft and transaction fraud.

With a non-hosted checkout, your business retains complete control over the payment experience for customers, as the entire end-to-end ordering process can be seamlessly branded to match the rest of your website. Furthermore, as your business retains all transaction data for each customer, there is far more potential for sales analysis to obtain insight into customer behaviour and purchasing trends that can be obtained and used for the development of powerful future marketing efforts.

It’s important to note that, with a non-hosted checkout, your business will be solely responsible for the secure retention and protection of customer transaction data. This means your company must ensure 100% compliance with PCI (Payment Card Industry) standards on data security, and may require investment or upgrades in IT resources and software to achieve the necessary level of protection.

How to Choose Between Hosted Checkouts and Payment Gateways for Your Business

Deciding between a hosted or non-hosted payment gateway for your ecommerce business can be made easier by focusing on some of the key differences between the two options. For example, if it’s critical to your business to maintain a completely on-brand customer experience across every touchpoint, then you’ll want to opt for a non-hosted checkout that gives you complete control over the look and feel of the entire transaction process. This can be particularly significant for businesses who require additional details or specific information during the transaction process, such as product variations or custom options, that standardized checkouts cannot provide.

On the other hand, your business may elect to minimize responsibilities related to data security and PCI compliance by choosing a hosted checkout from a well-known third-party payment processor. This is a common procedure for many small and medium businesses who want to maintain focus on their main strengths and leave PCI compliance to a trusted expert. In addition, your business can benefit from the well-known brand of the third-party processor, as customers may be very familiar with them and quite comfortable in submitting their payment details through this hosted gateway, helping to reduce abandoned carts and increase order completions.

There’s no one-size-fits-all approach to choosing a hosted or non-hosted checkout, so it’s important to carefully consider the needs of your business against the different pros and cons of each method. This is also why partnering with the right merchant services provider can be such a major benefit, and with MONEXgroup on your side, you’ll have help from the most knowledgeable experts in the payment industry to guide you towards the optimum online checkout solution for your ecommerce website.

Choose MONEXgroup as Your Merchant Services and Ecommerce Solutions Provider

With MONEXgroup, your company will have the tools and expertise to deploy a robust, full-featured ecommerce platform that provides an intuitive online shopping experience for your customers to accelerate your success. We will work directly with you to configure and optimize your ecommerce store for maximum effect, and deliver the finest in customer support and 24/7/365 technical service to keep things running at peak performance. Whether you are in need of a direct payment gateway integration with your existing ecommerce website, or wish to utilize a hosted third-party payment gateway, our team is standing by to provide the info and assistance you need to elevate your online store with the best in payment processing technology.

Get started with a powerful ecommerce website by contacting MONEXgroup today for your free quote!

Author: Layal Scheirich, Head of Sales at MONEXgroup
Bio: With 18 years of experience in payment processing and merchant services, Layal has seen in-store POS technology evolve from its humble beginnings to contactless, unattended, mobile and online alternatives. Today, Layal is an inspiration to the MONEXgroup’s team and a go-to source of information related to payment processing. She is enthusiastic to share her knowledge with audiences interested in cutting-edge technologies available today, such as unattended payment for self-serve kiosks, e-commerce online payment gateways, virtual terminals, and contactless and mobile payment solutions.
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Contact Info: insights@monexgroup.com