Payment Hub

Comparing Hosted & Non-Hosted Payment Solutions

July 13, 2022  |  4 min read

Many questions confront eCommerce companies when they create their websites and checkout processes. One of the most important decisions to make is whether to employ a hosted or non-hosted payment gateway on the checkout page.

Why Is Hosting So Important?

The customer experience is influenced by how your online business takes payment. You must choose how you will move money from the customer to your business, whether it's through donations, membership fees, or goods sales on the internet.

According to Baymard Institute research, 17 percent of customers abandon purchases because they believe the checkout procedure is too time-consuming or difficult, and 9 percent specify that there weren’t enough payment methods.

It is up to merchants to make sure that any bottlenecks in the checkout flow do not get in the way of customers completing a transaction.

This implies it's critical to choose the correct payment gateway for your online store or website's checkout process.

What Is a Payment Gateway?

payment gateway

A payment gateway is a service that validates and authorizes the transfer of credit and debit card payments between buyer and seller for a website or online store that collects payments. A payment gateway is essentially the link between buyer and vendor, ensuring a successful transaction. It ofen works in conjuncution with a payment hub.

There are two main payment gateway options: hosted and non-hosted. The type of experience you want to provide your consumers and the degree of control you wish to retain over the transaction process will determine which one you choose.

What Is a Hosted Payment Gateway?

A hosted payment gateway is a third-party checkout system that redirects the user to the payment service provider's (PSP) website.

This means that after completing payment, the customer will be sent away from your website to complete the purchase process before being returned to your site for the conclusion of the checkout process.

The merchant benefits since (for a charge) the payment service provider takes care of everything and provides additional security and data protection.

Hosted payment gateways are quick and easy to set up, often using ready-made templates that just require data input. Because the payment service provider (PSP) manages the process, hosted payment gateways are also maintenance-free for merchants.

The majority of the top-rated PSPs allow you some degree of control over your checkout page, which may include displaying your company's logo. This is a significant visual indicator to let clients know they're not being fooled into giving away their credit card information.

In reality, one of the most common mistakes with hosted payment gateways is jeopardizing consumer faith. When customers are sent to a different page for payment, hesitant buyers may become frightened and abandon the purchase.

hosted payment gateway

That’s why when using a hosted payment gateway, you want to connect with well-known and established payment processors. Some good examples are PayPal, Google Pay, Square, and Amazon Pay. You also want to give customers several options, so that they’re more likely to already have an account with a provider you connect with.

If you fail to establish trust through your checkout procedure, customers won’t buy from you. In fact, 18 percent of people abandon their cart because they didn’t trust the shopping cart security. However, that could also include non-hosted payment gateways, which we’ll get to shortly.

Using a hosted payment gateway also entails ceding some of the transaction management processes to the provider. Yes, you may personalize the checkout page and pick which PSP to utilize, but in the end, it's still up to the PSP.

What Is a Non-Hosted Payment Gateway?

The alternative is for your consumers to complete the checkout process on your website. A non-hosted or onsite payment gateway is an example of this. Your clients don't have to go anywhere else to finish the transaction with this method. They provide their payment details straight on your website rather than going somewhere else.

With a non-hosted payment gateway, merchants have complete control over the customer experience. Because buyers are only dealing with a trustworthy brand—yours, this may lead to better conversions. There's no confusion about where the payment is going because the checkout page appears exactly like the rest of your branded, customized website.

non-hosted payment gateway

However, some customers prefer to have a trusted and known payment provider process their payment, so for first-time visitors to your site, it might be a good idea to have an option for something like PayPal. However, whether it’s worth it or not to add that depends on your customer base.

With a non-hosted payment gateway though, you can keep track of client data that you can utilize in future marketing efforts. You may link a purchase made through a non-hosted gateway with a customer's account and follow their purchasing habits.

That level of control, on the other hand, has its drawbacks. Using a non-hosted payment gateway implies you're in charge of ensuring secure transaction execution and data protection throughout the whole checkout process, which may be difficult. Many merchants may not have access to them.

If a merchant uses a non-hosted payment portal, they may face difficulties with customer support. You'll be responsible for troubleshooting any issues with the checkout page if there are any. This might necessitate the hiring of a professional, which may be costly.

These are the four important questions to ask yourself while determining whether a hosted or non-hosted payment collection solution is best for you:

  • How does your site's gateway add to the customer checkout experience?
  • Is the gateway compatible with your current website platform?
  • Is it possible for the gateway to develop as your company expands?
  • What role will the gateway play in improving conversion rates and increasing sales?

Understanding these answers, as well as your client and company demands, will assist you in selecting between a hosted vs. non-hosted gateway, whether it's a B2C, C2C, or B2B payment gateway.


Need Assistance Finding the Perfect Solution?

Our team at Clarity is here to help. We offer a free discovery session where we help you find the best solution for your business. There are no strings attached and no risk to you, so why not give it a try? Click the button below to get started.

payment gateway expert

Related Posts

Autumn Spriggle is a Content Writer at Clarity Ventures with experience in research and content design. She stays up to date with the latest trends in the tech industry so she can write content to help people like you realize the full potential for their business.