Online payment gateway: what they are and how to choose one

Key takeaways

• An online payment gateway is the technology that securely transfers payment data between your customer, your website, and the financial networks that approve or decline the transaction.

• When choosing a gateway, focus on fees and pricing models, supported payment methods (cards, wallets, buy now, pay later, local methods), security standards (PCI DSS, tokenisation, 3D Secure), and how well it supports international sales.

• Airwallex's online payment gateway accepts 160+ payment methods across 180+ countries, with local acquiring in 35+ markets and multi-currency settlement to help you avoid unnecessary FX conversions.

If you sell products or services online, you need a secure way to take payments. That's where an online payment gateway comes in. It's the technology that connects your website to the banking networks that process card and digital wallet payments.

In this article, we'll walk through how payment gateways work, clear up the difference between gateways, processors, and merchant accounts, go over the main types of gateways, and help you work out what to look for when choosing one for your business.

What is an online payment gateway?

An online payment gateway is the technology that securely captures your customer's payment details and sends them to the financial networks that approve or decline the transaction. You can think of it as a secure checkpoint between your online shop and the banking system. It checks credentials, encrypts sensitive data, and passes information back and forth in real time. Without a gateway, you can't accept card payments on your website.

Global eCommerce is still growing fast, with online sales reaching trillions of dollars annually.¹ If you sell online, a reliable payment gateway isn't optional. It's the foundation of your whole checkout experience.

How an online payment gateway processes a transaction

When a customer clicks "Pay" on your website, a lot happens in a few seconds. Here's the step-by-step flow:

• Customer enters payment details: Your customer types in their card number, expiry date, and CVV on your checkout page.

• Gateway encrypts the data: The payment gateway immediately encrypts this sensitive information so it can travel securely over the internet.

• Data sent to the payment processor: The encrypted data goes to the payment processor, which acts as the messenger between your gateway and the card networks.

• Processor contacts the card network: The processor routes the transaction to the relevant card network (Visa, Mastercard, etc.), which then contacts the customer's issuing bank.

• Issuing bank approves or declines: The bank checks whether the customer has sufficient funds and whether the transaction looks legitimate, then sends back an approval or decline.

• Gateway displays the result: The response comes back through the same chain, and your gateway shows the outcome to your customer, usually within two to three seconds.

One thing to keep in mind: the funds don't land in your account instantly. Settlement, when the money actually reaches you, usually happens within one to two business days, depending on your provider and region.

Why your business needs a payment gateway

A payment gateway does more than process transactions. Here's what it lets you do:

• Accept card and wallet payments online: Without a gateway, you're limited to bank transfers, cash on delivery, or other manual methods that add friction for customers.

• Keep payment data secure: Gateways encrypt sensitive card information and handle fraud detection, so you're not storing raw card numbers on your own servers.

• Sell to customers anywhere: A good gateway supports multiple currencies and payment methods, so you can reach customers in different countries without setting up separate systems.

• Build customer trust: Shoppers expect a smooth, secure checkout. If the payment experience feels clunky or unfamiliar, you can lose the sale. Research shows that a significant portion of customers abandon their carts when their preferred payment method isn't available.²

Payment gateway vs. payment processor vs. merchant account

These three terms often get used interchangeably, but they're different parts of the payment puzzle. Once you know the difference, it's much easier to understand what providers are offering.

Here's the part that trips people up: a lot of modern providers bundle all three into one service. These are called payment service providers (PSPs), and that's why the lines between these terms have blurred. When you sign up with a PSP, you don't need to set up a separate merchant account or worry about connecting different systems. It's all handled for you.

What's a payment processor?

The payment processor is the engine that moves transaction data through the financial system. While the gateway captures and encrypts your customer's card details, the processor takes that encrypted data and routes it to the card networks and banks. It's the behind-the-scenes workhorse the gateway relies on to complete the transaction.

What's a merchant account?

A merchant account is a special type of account that holds funds from card transactions before they're transferred to your regular business account. In the past, businesses had to apply for a merchant account separately from a bank. That process could take weeks and involve credit checks.

Today, PSPs like Airwallex include this as part of their service, so you don't need to set one up yourself. This all-in-one approach works well for most businesses. If you're processing very high volumes, typically over £10,000–£20,000 per month, you might look at a dedicated merchant account with a separate gateway to get more control over rates. For most businesses, though, the PSP route is simpler and faster to get started with.

All-in-one payment service providers

A payment service provider (PSP) bundles the gateway, processor, and merchant account into one service. You sign up once, integrate once, and you're ready to accept payments. This is the main model for small-to-medium businesses because it removes the hassle of stitching together multiple providers.

There is a trade-off. You get less control over the individual parts, and pricing is usually a flat rate instead of negotiated interchange-plus rates. For most businesses, the simplicity is worth it, but it's still good to know what you're signing up for.

Types of online payment gateways

Not all payment gateways work the same way. The type you choose affects what your checkout looks like, how much technical work is involved, and what your PCI compliance obligations are.

Hosted payment gateways

With a hosted gateway, your customer clicks "Pay" and gets redirected to the payment provider's page to enter their card details. Once the payment is done, they're sent back to your site. You've probably seen this yourself. If you click "Pay with PayPal" and land on PayPal's page, that's a hosted gateway in action.

The main benefit is simplicity. Because the card data never touches your server, your PCI compliance burden is much lower. The downside is that you have less control over how the checkout looks and feels, and the redirect can sometimes feel jarring to customers.

Embedded and API-based gateways

An embedded gateway lets you show the payment form directly on your own website, so customers never leave your checkout page. That gives you a smoother, more branded experience. You'll need a bit more technical setup, and your PCI compliance requirements are slightly higher because the form sits on your site, even though the actual card data is still handled by the provider.

API-based gateways take that a step further and give you full control to build a fully custom checkout experience. This is the route for businesses with developer resources that want to design every part of the payment flow. Airwallex offers both options: no-code plugins for platforms like Shopify, WooCommerce, Magento, and BigCommerce if you want to get started quickly, plus a full Payments API and mobile SDKs if you need deeper customisation.

How to choose the right online payment gateway

With so many providers out there, how do you choose the right one? Here are the key things to look at. Think of this as your checklist when you're comparing options.

Fees and pricing models

Most payment gateways charge a percentage of each transaction plus a fixed fee. But the way that percentage is worked out can vary:

• Flat-rate pricing: You pay the same rate on every transaction (e.g., 2.9% + £0.30). Simple to understand and predict.

• Interchange-plus pricing: You pay the actual interchange fee (set by the card networks) plus a fixed markup from the provider. This can be cheaper at higher volumes but is more complex to track.

Here's a worked example. On a £100 transaction, a flat-rate provider charging 2.9% + £0.30 takes £3.20. An interchange-plus provider might charge 1.8% interchange + 0.5% markup + £0.20, totalling £2.50. As your volume grows, that difference adds up.

Also watch for hidden fees. Some providers charge monthly minimums, PCI non-compliance fees, or chargeback fees that aren't obvious upfront. Always ask for a full fee schedule before you commit.

Supported payment methods

Cards are only the starting point. Customers today expect to be able to pay with:

• Credit and debit cards: Visa, Mastercard, Amex, and regional networks

• Digital wallets: Apple Pay, Google Pay, and others

• Buy now, pay later: Klarna, Afterpay, and similar services

• Local payment methods: iDEAL in the Netherlands, Pix in Brazil, UPI in India, Alipay and WeChat Pay in China

Offering more payment methods at checkout helps reduce cart abandonment. If a customer can't pay the way they want to, they'll often leave. Research consistently shows that payment method availability directly affects conversion rates.² Airwallex supports 160+ payment methods, including cards, wallets, and local methods across different markets.

Security and compliance

Payment security isn't optional. It's a requirement. Here's what to look for:

• PCI DSS compliance: The Payment Card Industry Data Security Standard (PCI DSS) is a set of security requirements for anyone handling card data. Your gateway should be PCI DSS certified, and using a compliant provider reduces your own compliance burden.

• Tokenisation: This replaces actual card numbers with unique tokens. Think of it like a coat check: you hand over your coat (card data) and get a numbered ticket (token). The ticket is useless to anyone who steals it, but you can use it to retrieve your coat. The benefit is that you never store raw card data, which dramatically reduces your security risk.

• 3D Secure: This adds an extra authentication step, like entering a code sent by your bank, to verify the cardholder. It reduces fraud and shifts liability for fraudulent transactions away from you.

International payment support

If you sell to customers in multiple countries, your gateway needs to support international payments properly. In practice, here's what that means:

• Multi-currency acceptance: Let customers pay in their local currency rather than forcing them to convert.

• Local acquiring: This means processing transactions through a local bank in the customer's country. If you're a UK business selling to customers in Germany, a gateway with local acquiring in the EU processes the transaction through a European bank. The result is higher approval rates and lower cross-border fees compared to routing everything through a UK acquirer.

• Multi-currency settlement: Receive funds in the original currency instead of having everything converted to your home currency. This helps you avoid forced FX conversions and gives you more control over when and how you exchange money.

Accept payments globally with Airwallex

If you're looking for a payment gateway that can handle international sales without adding complexity, Airwallex is built for exactly that. Here's what you get:

• 160+ payment methods: Accept cards, digital wallets, buy now, pay later, and local payment methods your customers actually use.

• 180+ countries and regions: Reach customers globally without setting up separate payment providers in each market.

• Local acquiring in 35+ markets: Process transactions through local banks for higher approval rates and lower fees.

• Multi-currency settlement: Receive funds in the currency you collected them in, so you're not forced into unfavourable FX conversions.

• ML-powered optimisation: Our machine learning models route transactions intelligently to maximise authorisation rates.

• AI-driven fraud prevention: Protect your business without adding friction for legitimate customers.

• Flexible integration options: Choose from no-code plugins for Shopify, WooCommerce, Magento, and BigCommerce, or use our Checkout, Payment Links, or full Payments API for custom builds.

Pricing is simple: domestic cards at 2.80% + £0.30, international cards at 4.30% + £0.30. No hidden fees, no surprises.

Beyond payments, Airwallex offers Global Accounts to hold and manage funds in multiple currencies, FX & Transfers with competitive exchange rates, and Corporate Cards to make your business spending easier.

Want to see how other businesses have grown with Airwallex? Take a look at the success stories of fashion label Ginger, vegan leather apparel brand SOULMATTE, and digital transformation consultancy DigitSense.

Ready to get started? Sign up for an Airwallex account and start accepting payments globally.

Frequently asked questions

What are the top online payment gateway providers?

Some of the most widely used payment gateway providers include Airwallex, Stripe, PayPal, Adyen, and Square. The best choice depends on your business size, where your customers are located, and whether you need strong international payment support.

Is PayPal a payment gateway?

Yes, PayPal works as both a payment gateway and a payment processor, which makes it an all-in-one payment service provider. This bundled model is common among modern PSPs, which is why the difference between gateways and processors has become less clear-cut.

Can I accept online payments without a website?

Yes, you can use Payment Links, QR codes, or digital invoices to accept payments without a full eCommerce site. Airwallex offers Payment Links and Invoices for exactly this purpose. You can send a payment link by email or messaging app and get paid without building a checkout page.

How much does an online payment gateway cost?

Most payment gateways charge a percentage of each transaction plus a fixed fee, typically ranging from 1.5% to 3.5% + £0.20–£0.30 per transaction. Some providers also charge monthly fees or setup fees. Airwallex charges 2.80% + £0.30 for domestic cards and 4.30% + £0.30 for international cards, with no monthly minimums.

Sources and references

• https://www.statista.com/topics/871/online-shopping/

• https://baymard.com/lists/cart-abandonment-rate