What is an eCommerce payment gateway and how does it work?

Summary

• An eCommerce payment gateway connects merchant websites to the bank, enabling secure card payments online.

• They streamline the checkout process, offering a safe and efficient way for customers to pay.

• By improving transaction efficiency, eCommerce payment gateways boost customer satisfaction and conversion rates.

If you’re selling online, you want to make it easy for customers to pay you. That means it should be secure, quick and familiar, wherever they are in the world. Enter: ecommerce payment gateways.

A payment gateway is the link between your online store and the banks that move money. It ensures that when a customer taps “Pay now,” the payment is encrypted, checked for fraud, authorised, and then settled into your account.

The gateway you choose can affect your customers’ checkout experience, your conversion rates, and even your international expansion. The right one helps you sell more and pay less in fees. The wrong one will annoy customers and impact your margins.

This guide explains how payment gateways work, the types available, what to look out for, and how Airwallex helps businesses scale with payments built for a global market.

What an ecommerce payment gateway does

A payment gateway is the technology that makes online payments possible. It acts as 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:

1. 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.

2. Sends information securely

It then transmits that encrypted payment data to the payment processor, making sure nothing is exposed to risk along the way.

3. 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 this happens in seconds.

4. Triggers settlement

Once a payment is approved, the gateway ensures the funds are moved from the customer’s bank to your account. Payments are usually batched and settled within one to three business days.

Without a gateway, there’s no safe or efficient way to accept online payments. 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.

How eCommerce payment gateways work

To a customer, paying online feels instant. Behind the scenes, six key steps happen in seconds:

1. Checkout

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

2. Encryption

The payment gateway encrypts the sensitive data, for example the card number, to keep it secure while it is transmitted.

3. 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.

4. 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.

5. 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.

6. 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 you only saw a “Payment successful” message on screen.

Types of ecommerce payment gateways, explained

Different businesses need different levels of control, speed, and flexibility. Here are the main types of gateways you’ll come across in 2025:

Hosted payment gateways

These redirect customers to a third-party page (think PayPal).

Pros: Easy to set up, no need to worry about PCI compliance yourself.

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

Best for: Small UK retailers who want the fastest way to start selling online.

Self-hosted payment gateways

Customers enter their details directly on your site, but the gateway still handles submission.

Pros: Smoother checkout, more control over design.

Cons: You’re partly responsible for compliance and security.

Best for: Growing ecommerce brands with modest development resources.

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: Requires development expertise and ongoing support.

Best for: SaaS companies and scaling ecommerce businesses that want customisation.

Local bank integration

In the UK, Pay by Bank powered by Open Banking is gaining traction as shoppers look for faster, lower-cost, and more secure ways to pay. Here, customers pay directly 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.

Best for: Domestic-first businesses or marketplaces targeting UK/EU shoppers.

The business benefits of an ecommerce payment gateway

A well-chosen gateway will help you sell more, stay compliant, and expand into new markets. Here’s what they give you:

1. Stronger security

With the average global cost of a data breach hitting US$4.88m in 2024 (IBM), security isn’t optional. Gateways encrypt data, use tokenisation, and deploy fraud detection systems to protect you and your customers.

2. Higher conversion rates

A lengthy or complex checkout with too many steps and form fields will frustrate customers, sometimes causing them to give up. A good gateway reduces steps, supports local payment methods, and displays prices in local currency, which keeps more customers buying.

3. Greater efficiency

Gateways automate much of the payment process, reducing manual reconciliation and speeding 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.

The challenges you should factor in

Payment gateways are powerful, but they’re not without drawbacks. The key is choosing a provider that makes these trade-offs clear, and minimises them.

Transaction fees

Even small per-transaction fees add up at scale. Check for FX markups, chargeback costs, and hidden surcharges.

Downtime risk

Like any tech infrastructure, gateways can experience outages. This can stall sales, so responsive support is vital.

Payment coverage gaps

Not every gateway supports every method or currency. If your customers can’t pay how they want, they might not pay at all.

The top payment gateways in the UK

These are some of the best-known options:

Airwallex

More than a gateway, Airwallex provides global payment processing alongside multi-currency business accounts, international transfers, corporate cards and expense management. 

It supports over 160 payment methods, has like-for-like settlement to reduce foreign exchange costs, and integrates with platforms such as Shopify, WooCommerce and Magento. 

For businesses looking for one platform to manage payments, banking and FX, Airwallex is one of the most complete options.

Stripe

Stripe is liked by developers and tech-focused businesses. It is customisable and has deep API integrations, making it useful for companies that have technical resources to build tailored checkout experiences. 

It has features like subscription billing, invoicing and advanced reporting. While powerful, it often requires engineering time to unlock its full potential, so it is best 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 is easy to set up and can quickly boost conversion rates by allowing customers to pay with a familiar method. 

However, businesses often find that transaction fees and foreign exchange markups are higher than with other providers. For merchants who want instant familiarity with customers, it is useful, but for those who process 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, and offers a wide range of payment methods, fraud protection tools and reporting options. 

Its scale and experience make it attractive for larger businesses and established retailers. Smaller businesses may find the setup and contracts less flexible compared to newer providers.

GoCardless

GoCardless specialises in recurring payments and direct debit. It is used by SaaS platforms, utilities and subscription businesses that rely on automated billing. It integrates with accounting and invoicing software and supports international direct debit schemes. 

While it is not designed for one-off eCommerce payments, it’s one of the best solutions for predictable recurring revenue models.

Questions to ask before choosing a provider

Before signing up with a provider, ask yourself:

• Are the fees transparent, including FX and settlement charges?

• Does it support the payment methods my customers actually use?

• How quickly will payouts reach my account?

• Does it meet PCI DSS and SCA compliance requirements?

• Can it integrate with my ecommerce and accounting stack?

• Will it scale with me if I expand internationally?

Airwallex is the platform for modern eCommerce

For eCommerce businesses, the payment gateway you choose directly affects 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 get like-for-like settlement in multiple currencies, which means no unnecessary FX costs eating into your margins.

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

Unlike other providers that only process payments, Airwallex connects the dots: Global Accounts, payments, global transfers, cards, and expenses all in one platform. That means no more juggling multiple systems and just one dashboard for 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 100,000 businesses trust Airwallex to process over US$200 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 

Which is the best ecommerce payment gateway?

The best gateway depends on your business model, but Airwallex is designed for companies that sell internationally or want an all-in-one financial platform.

Do I need an eCommerce payment gateway?

If you sell online and accept card or wallet payments, you need a gateway to encrypt data, process payments, and keep transactions compliant.

How much does a payment gateway cost in the UK?

Most providers charge per transaction (1–3% + fixed fee). International payments often carry extra FX markups. Airwallex offers transparent rates and like-for-like settlement to cut costs.

How long do payments take to settle?

Typically 1 to 3 business days. Some providers offer instant settlement for an extra fee.

What payment methods do gateways support?

It varies. Airwallex supports 160+ methods including Visa, Mastercard, Apple Pay, Google Pay, and local options across Europe, Asia, and beyond.

Sources:

• stripe.com/use-cases/ecommerce

• stripe.com/gb/resources/more/payments-in-the-united-kingdom-an-in-depth-guide

• paypal.com/uk/business/business-types/ecommerce

• paypal.com/uk/business/accept-payments/checkout

• worldpay.com/en-GB/products/worldpay-ecommerce

• worldpay.com/en/products/online

• gocardless.com/en-uk/guides/posts/ecommerce-payment-system-for-small-business/

• gocardless.com/partners/category/e-commerce

Disclaimer: The information in this article is based on our own online research in Q3 2025. Airwallex was not able to manually test each tool or provider. The information is provided for educational purposes only and a reader should consider the specific requirements of their business when evaluating providers. This research is reviewed annually. If you would like to request an update, feel free to contact us at [[email protected]]. This information doesn’t take into account your objectives, financial situation, or needs.