eCommerce payment gateways: what are they and how do they work?

Key takeaways

• An eCommerce payment gateway encrypts, authorises, and settles online payments between your store and the financial institutions that move money.

• The gateway you choose affects checkout conversion, transaction costs, and your ability to accept local payment methods in new markets.

• Airwallex supports 160+ payment methods with like-for-like settlement in multiple currencies, so you can sell globally without unnecessary FX costs.

If you're selling online, you want customers to be able to pay you easily. It needs to feel secure, quick, and familiar, wherever they are in the world. That's where eCommerce payment gateways come in.

An eCommerce payment gateway is the link between your online store and the banks that move money. When a customer taps "Pay now," it makes sure the payment is encrypted, checked for fraud, approved, and then settled into your account. The gateway you pick can shape your customers' checkout experience, your conversion rates, and even how easily you expand internationally.

In this article, we'll walk through how payment gateways work, the types you'll come across, how to choose one, how the top UK providers compare, and how to boost conversion through payment method coverage.

What an eCommerce payment gateway does

A payment gateway is the technology that lets online payments happen. It works like a secure bridge between your customer, your website, and the financial institutions that move money. Every time a shopper clicks "Pay now," the gateway does four jobs:

• Captures and encrypts details. The gateway protects sensitive card or wallet information from the moment it's entered, encrypting data so it can't be intercepted or misused.

• Sends information securely. Next, it sends that encrypted payment data to the payment processor, making sure nothing is exposed to risk on the way.

• Gets approval in real time. The processor routes the request through card networks such as Visa or Mastercard. The issuing bank checks the account balance, validates the card, runs fraud checks, and either approves or declines the transaction. All of this happens in seconds.

• Triggers settlement. Once a payment is approved, the gateway makes sure the funds move from the customer's bank to your account. Payments are usually batched and settled within one to three business days.

Without a gateway, you can't accept online payments securely or at scale. With one, you can offer customers local currencies, preferred payment methods, and a smooth checkout, while you focus on growth instead of fraud, compliance, or manual admin.

Before we get into the step-by-step process, it helps to clear up a common point of confusion: the difference between a payment gateway, a payment processor, and a merchant account.

What is the difference between a payment gateway, payment processor, and merchant account?

These three terms often get used interchangeably, but they do different jobs. Think of it like ordering food at a restaurant. The payment gateway is the waiter who takes your order and brings it to the kitchen. It captures your payment details and passes them along securely. The payment processor is the kitchen that prepares the meal. It routes the transaction through card networks and communicates with the issuing bank to approve or decline the payment. The merchant account is the till where the money ends up. It's the account that holds your funds before they're transferred to your business bank account.

Here's the good news: modern payment service providers (PSPs) like Airwallex bundle all three into one platform. That means you don't need separate contracts with an acquiring bank, a gateway provider, and a processor. You sign up once and can start accepting payments within days. Without a PSP, you'd need to apply for a merchant account with a bank, integrate a separate gateway, and connect to a processor. That can take weeks.

Now let's look at what happens when a customer clicks "Pay now."

How eCommerce payment gateways work

To a customer, paying online feels instant. But, behind the scenes, there are six key steps that happen in seconds. Here's what happens, on the backend, during the payment process:

• Checkout. The customer chooses a payment method such as a card, digital wallet, or bank transfer and submits their details through your checkout page or app.

• Encryption. The payment gateway encrypts the sensitive data, for example the card number, to keep it secure whilst it's being transmitted.

• Routing. The gateway sends the encrypted details to the payment processor. The processor then routes the request through the relevant card network such as Visa, Mastercard, or American Express, or through another payment rail.

• Authorisation. The issuing bank checks whether the customer has sufficient funds, whether the card is valid, and whether the transaction looks legitimate. The bank then returns an approved or declined response. This usually takes less than two seconds.

• Merchant notification. The processor relays the response back to the gateway. The gateway updates your checkout page instantly so the customer sees either "Payment successful" or an error message.

• Settlement. For approved transactions, funds move from the customer's bank to your acquiring bank or payment provider. Transactions are usually batched at the end of the day, and the money reaches your business account within one to three business days. Some providers, including Airwallex, can offer faster settlement.

Every successful eCommerce purchase you've ever made has followed this flow, even if all you saw was a "Payment successful" message on screen. The flow is the same regardless of gateway type, but the way you integrate it into your store changes.

What are the different types of eCommerce payment gateways?

Different businesses need different levels of control, speed, and flexibility. Here are the main types of gateways you'll come across:

Hosted payment gateways. These send customers to a third-party page (think PayPal).

• Pros: Easy to set up, and you don't need to worry about PCI compliance yourself.

• Cons: Checkout takes shoppers off your site, which can reduce trust and increase cart abandonment.

Self-hosted payment gateways. Customers enter their details directly on your site, but the gateway still handles the submission.

• Pros: Smoother checkout, more control over design.

• Cons: You're partly responsible for compliance and security.

API payment gateways. You integrate payments directly into your site or app via APIs.

• Pros: Full control, flexible checkout flows, recurring billing, subscription logic.

• Cons: You'll need developers to build and maintain it.

Local bank integration. Here, Customers pay straight from their bank account using online banking or "Pay by Bank" options.

• Pros: Lower fees, increasingly popular in the UK and EU.

• Cons: Limited reach for international customers.

Whichever type you choose, it also helps to understand how payment gateway fees work. Most gateways use one of two models: interchange-plus or flat-rate.

Interchange-plus passes through the card network's fee plus a fixed markup, so on a £100 transaction, you might pay £0.80 in interchange plus a £0.20 markup, totalling £1.00. Flat-rate pricing charges a single percentage regardless of card type, say, 2.9% on that same £100 transaction, which comes to £2.90.

At higher volumes, interchange-plus usually works out cheaper, but flat-rate is easier to predict. Whichever type you choose, the right gateway should give you a few core advantages.

Benefits of an eCommerce payment gateway

A well-chosen gateway helps you sell more, stay compliant, and reach new markets. Here's how:

Stronger security and fraud prevention. With the average global cost of a data breach hitting US$4.88 million in 2024 (and declining 9% in the 2025 report),¹ security isn't optional. Gateways encrypt data, use tokenization, and deploy fraud detection systems to protect you and your customers. Look for tools like 3D Secure (which adds an extra authentication step), Address Verification Service (AVS), and real-time fraud scoring. PCI DSS compliance is the baseline. Any reputable gateway will handle this for you.

Higher conversion rates. A long or complicated checkout with too many steps and form fields will frustrate customers, and sometimes they'll just give up. A good gateway cuts down the steps, supports local payment methods, and shows prices in local currency, which helps more customers complete the purchase. Here are four tactics that can lift your conversion rate:

• Digital wallets like Apple Pay and Google Pay. Customers don't need to type in card details manually, which speeds up checkout and reduces friction.

• Buy now, pay later options like Klarna. BNPL can increase average order value and appeal to customers who prefer to spread payments.

• Local payment methods for international shoppers. If you're selling into the Netherlands, offering iDEAL matters. In China, it's Alipay and WeChat Pay. Airwallex supports 160+ payment methods so you can meet customers where they are.

• Guest checkout and saved payment details. Forcing account creation drives abandonment. Let customers check out as guests, and offer to save their details for next time.

Greater efficiency and lower costs. Gateways automate a lot of the payment process, which reduces manual reconciliation and speeds up settlement. With the right provider (such as Airwallex!), you can also accept 100+ currencies and settle like-for-like, cutting costs and admin when you go global.

Platform integration. A good gateway plugs into your existing eCommerce and accounting tools without forcing you to rebuild anything. Look for ready-made payment gateway integrations with platforms like Shopify, WooCommerce, Magento, and BigCommerce. Airwallex offers plug-and-play integrations with all of these, so you can start accepting payments without heavy development work.

Those benefits matter, but gateways come with trade-offs too.

Challenges of an eCommerce payment gateway

Payment gateways are powerful, but they do have drawbacks. The key is choosing a provider that makes those trade-offs clear and minimises them.

• Transaction fees. Even small per-transaction fees add up at scale. A 0.5% difference on £1 million in annual sales is £5,000. Check for FX markups, chargeback costs, and hidden surcharges.

• Downtime risk. Like any tech setup, gateways can have outages. If your gateway goes down during a peak sales period, you lose revenue. Responsive support and strong uptime guarantees matter.

• Payment coverage gaps. Not every gateway supports every method or currency. If your customers can't pay the way they want, they might not pay at all. Check coverage before you commit.

• Compliance complexity. PCI DSS certification is mandatory for handling card data. In the UK and EU, Strong Customer Authentication (SCA) adds another layer. Make sure your gateway handles these requirements so you don't have to.

How to choose an eCommerce payment gateway

With those trade-offs in mind, here's what to look for when choosing a provider:

• Fees and pricing transparency. Are the rates clear, including FX and settlement charges? Watch for hidden costs that only show up in the fine print.

• Payment method coverage. Does it support the methods your customers use, like cards, wallets, BNPL, and local options?

• Settlement speed. How quickly will payouts reach your account? One to three days is standard, but some providers offer faster options.

• Security and compliance. Does it meet PCI DSS and SCA requirements? Is fraud prevention built in?

• Platform integration. Can it connect to your eCommerce platform and accounting stack without heavy development?

• International scalability. Will it grow with you if you expand into new markets? Check currency and country coverage.

Here's how some of the most popular providers in the UK compare.

Top eCommerce payment gateways in the UK

Airwallex

Airwallex is more than a gateway. It gives you global payment processing alongside multi-currency Business Accounts, international transfers, Corporate Cards, and Expense Management.

• Supports over 160 payment methods

• Like-for-like settlement to reduce foreign exchange costs

• Integrates with Shopify, WooCommerce, and Magento

• One platform for payments, accounts, and FX

If you're looking for one platform to manage payments and financial operations, Airwallex is one of the most complete options.

Stripe

Stripe is popular with developers and tech-focused businesses. It's customisable and has deep API integrations, which makes it useful for companies with the technical resources to build tailored checkout experiences.

• Subscription billing, invoicing, and advanced reporting

• Extensive documentation and developer tools

• Flexible checkout customisation

It's powerful, but it often takes engineering time to get the most out of it, so it's better suited to companies that want control and flexibility.

PayPal

PayPal is one of the most recognisable payment brands in the world and has a high level of consumer trust. It's easy to set up and can quickly improve conversion rates by letting customers pay with a familiar method.

• Instant brand recognition

• Quick setup for small businesses

• Buyer protection builds customer confidence

But, businesses often find that transaction fees and foreign exchange markups are higher than with other providers. For merchants processing large volumes or cross-border sales, the costs can add up.

Worldpay

Worldpay is a long-established provider in the UK and one of the largest payment processors in Europe. It has strong relationships with banks and enterprises.

• Wide range of payment methods

• Fraud protection tools and reporting

• Established enterprise relationships

Its scale and experience make it attractive to larger businesses and established retailers. Worldpay has increasingly tailored its eCommerce offering for small businesses, with online signup and published standard pricing, though larger businesses may benefit from bespoke pricing and dedicated account management.

Adyen

Adyen is an enterprise-focused global payment provider used by large brands like Uber, Spotify, and eBay.

• Global acquiring with local payment method support

• Unified commerce across online, in-app, and in-store

• Advanced data and risk management tools

Adyen is usually better suited to businesses with high transaction volumes. Smaller merchants may find the pricing and onboarding process geared towards enterprise needs.

Why Airwallex for eCommerce payments

For eCommerce businesses, the payment gateway you choose has a direct effect on your sales, costs, and ability to grow globally. Airwallex is built to give you an edge at every step.

With Airwallex, you can accept 160+ payment methods, from Visa and Mastercard to Apple Pay, Google Pay, and local wallets, so customers can always pay the way they want. You also get like-for-like settlement in multiple currencies, which means no unnecessary FX costs eating into your margins.

Payouts can land in as little as one business day, which gives you faster access to cash flow to reinvest in stock, ads, or growth. Fraud prevention is built in, so you can reduce chargebacks and protect revenue.

Unlike providers that only process payments, Airwallex brings everything together: Global Accounts, payments, global transfers, cards, and expenses, all in one platform. So instead of juggling multiple systems, you get one dashboard with a clear view of your sales and cash flow across markets.

It scales with you. Whether you're a Shopify store in the UK selling across Europe, or a marketplace expanding into Asia or the US, Airwallex gives you transparent pricing, FCA regulation in the UK, and ready-to-go integrations with Shopify, WooCommerce, and Magento.

That's why more than 150,000 businesses trust Airwallex to process over US$150 billion in payments volume every year.

If you want to convert more customers, cut fees, and expand globally with less hassle, Airwallex is the gateway that grows with your business.

Frequently asked questions

What is an eCommerce payment gateway?

An eCommerce payment gateway is the technology that encrypts, authorises, and settles card and wallet payments between your online store and the financial institutions that move money. Any business accepting online payments needs one to process transactions securely and compliantly.

Which is the best eCommerce payment gateway?

That depends on your business model, transaction volume, and where your customers are. Airwallex is designed for businesses selling internationally or wanting payments, accounts, and FX in one platform.

How much does a payment gateway cost in the UK?

Most providers charge per transaction, usually 1–3% plus a fixed fee. International payments often come with extra FX markups. Airwallex offers transparent rates and like-for-like settlement to cut costs.

What's the difference between a payment gateway and a payment processor?

A payment gateway encrypts and transmits payment data; a payment processor routes the transaction through card networks and communicates with the issuing bank. Many modern providers bundle both into one service.

How long do payment gateway settlements take?

Most gateways settle funds within one to three business days. Some providers, including Airwallex, offer faster settlement options.

Sources and references

• https://www.ibm.com/reports/data-breach