Your marketing worked. The user clicked. The cart is full. But at the final mile checkout your payment gateway decides the outcome. In 2025, this isn’t just a technical decision; it’s a revenue strategy. With evolving consumer preferences, real-time fraud detection, and global compliance on the line, choosing the right type of payment gateway can unlock growth or quietly drain your margins.
First, what’s a payment gateway?
It’s the digital bridge between your customer’s bank and your bank securely authorizing transactions and ensuring funds flow seamlessly into your business.
But, that’s just the technical side. How do you know which option truly fits your business model, customer base, and growth goals? Let’s break down the main types of payment gateways recognized across the industry and how they stack up for your online business.
1. Hosted Payment Gateways
How it works:
The customer is redirected from your website to a third-party payment page. Once the transaction is completed, they return to your site.
What it offers:
No PCI compliance burden, the gateway handles all sensitive data
Quick setup- ideal for going live quickly
Minimal technical skills required
When to use it:
Ideal for quickly entering the market when development resources are limited and branding isn’t a top priority. Perfect for MVPs or validating business models with minimal coding knowledge.
2. Integrated Payment Gateways
How it works:
The payment process happens within your site via an embedded form or modal, but the gateway still handles processing in the background (e.g., PhonePe PG).
What it offers:
Improved user experience, customers stay on your site
Moderate customization of branding and messaging
Higher trust and conversion rates
When to use it:
When your business is growing, and you want to optimize checkout UX to reduce drop-offs, while still avoiding full compliance responsibility.
3. Self-Hosted Payment Gateways
How it works:
You host the entire payment page and process sensitive customer data before passing it to the payment processor. Requires end-to-end PCI DSS compliance.
What it offers:
Full control over UX, logic, and data
Custom workflows and routing (e.g., for multi-vendor or international payments)
Opportunity for tight integration with internal systems
When to use it:
When compliance and technical capacity are in place, and control over the entire payment experience is critical, especially for scaling or operating globally.
4. API-Based Payment Gateways
How it works:
Payments are managed via a flexible API interface. Developers integrate and customize payment flows, UIs, and responses from scratch.
What it offers:
Maximum flexibility and scalability
Custom-built checkout and flows
Easy to extend for recurring billing, split payments, wallets, etc.
When to use it:
When product experience is tightly linked to payment (e.g., subscription billing, tipping, embedded lending), and you have a tech team.
5. Platform-Based Payment Gateways
How it works:
The gateway is pre-integrated within a commerce platform like Shopify, WooCommerce, or Opencart. You activate it via settings with no coding required.
What it offers:
Zero dev time -plug-and-play
Fast launch with built-in payment support
Reliable platform support
When to use it:
When your business is built on top of a third-party platform, and you prefer simplicity over flexibility.
Payment processing is done directly via a local bank’s infrastructure, either through a proprietary gateway or a regional aggregator.
What it offers:
High trust among certain demographics
Region-specific payment methods (e.g., net banking, UPI, bank transfers)
Often lower fees, depending on the bank
When to use it:
When your customer base prefers bank-led methods, or local compliance requires bank partnerships.
7. White-Label Payment Gateways
How it works:
You lease the backend technology of an established payment provider but brand it as your own. You manage your own clients.
What it offers:
Rebrandable solution
Control over merchant onboarding, KYC, and compliance
Revenue from payment processing as a service
When to use it:
If payments are part of your product offering (e.g., B2B platforms, vertical SaaS), and you want to create recurring revenue from embedded finance.
8. Mobile Payment Gateways
How it works:
Specialized for in-app or mobile browser environments. Supports features like biometric pay, wallets, tap-to-pay, and in-app checkouts.
What it offers:
Fast, frictionless mobile payments
Support for local wallets
Essential for UX in mobile-heavy regions
When to use it:
When most of your traffic or usage comes via mobile apps or mobile browsers.
9. Crypto Payment Gateways
How it works:
Enables you to accept cryptocurrency payments directly or via a processor. You may get fiat settlement or crypto wallets.
What it offers:
No chargebacks
Lower processing fees
Borderless payments and new markets
When to use it:
When you’re selling globally, to a tech-savvy audience, or want to differentiate with crypto-friendly options.
10. Aggregator Gateways
How it works:
A payment aggregator (e.g., PhonePe PG) collects payments on your behalf under a shared merchant account. You don’t need your own license.
What it offers:
Fast, seamless onboarding
Minimal paperwork and regulatory friction
Scalable infrastructure for businesses of all sizes
Proven support for high-risk verticals and high TPV merchants
Flexible solutions for MVPs, growth-stage startups, and enterprise-grade operations
When to use it:
Whether you’re launching your MVP, scaling rapidly, or managing complex, high-volume payments, our platform adapts to your needs. Ideal for both emerging ventures and mature businesses looking for efficient, compliant, and reliable payment aggregation without the operational burden.
If you’re evaluating which type of payment gateway suits your business, PhonePe PG stands out as a trusted choice for digital payments. Built on a strong proprietary tech stack, it’s designed to support high-volume digital transactions with speed and stability, all while offering seamless integration and a trusted user experience.
For more information about getting started with PhonePe PG, check this out.
