Payment Providers and Online Payment Gateways

A payment gateway is a mechanism that communicates transaction information between the customer and the merchant. Payment gateways enable the capability for credit card and digital payment processing. Online payment gateways are cloud-based software while in person retail gateway's are often included in POS systems.

You need a payment gateway in order to securely accept credit and debit card payments from your customers, both online and in person. The payment gateway ensures payment data is securely transmitted from the customer to the merchant, protecting all entities involved.

There are three types of payment gateways:

1. Hosted: The payment gateway takes customers off your site to the payment gateway page. Once payment has been made, the gateway redirects them back to your site to the appropriate step in the checkout process. Hosted payment gateways are also called redirect payment gateways.
2. Self-hosted: Merchants collect payment information from customers on their site and send that data to the third-party payment gateway in the backend. The payment processing happens off-site.
3. Non-hosted: Merchant both collects and processes the payment on-site. Typically utilized by larger enterprises, as it requires a lot of technicality and maintenance.

Payment gateway fees depend on the provider. Each payment gateway sets its own pricing, and fee structures vary. There are no fees to integrate a payment gateway with Shopify.