What is a Payment Gateway? (And Why You Need One if You're Selling Online)

Deanna Lee
May 22
3 min read

Updated: May 27

If you're running an online business — whether it's digital downloads, coaching sessions, or a sweet little shop full of handmade goodness — you've got to have a way to get paid. And that’s where a payment gateway comes in. ✨

Think of a payment gateway as the behind-the-scenes magic that makes online payments happen safely and smoothly. It’s the bridge between your website and the payment processor (like PayPal or Stripe) that securely handles your customer’s payment info and helps the money land in your account.

Let’s break down exactly what it does — no tech degree required.

💳 What a Payment Gateway Actually Does

Here’s what happens (in a super simplified, no-jargon way) every time someone buys something from your site:

✅ Authorizes the Payment: The gateway checks if the customer’s payment method is valid and has enough funds.
🔒 Encrypts the Info: Sensitive data like credit card numbers? Totally encrypted to keep things safe.
💸 Processes the Transaction: It moves the money from your customer’s account to yours.
🛡️ Fights Fraud: Most gateways have fraud protection tools built right in — things like verifying card details or flagging suspicious transactions.
📩 Confirms the Payment: Finally, it tells your site whether the payment was a go (or a no-go), so you and your customer both get the heads-up.

🛍️ The Two Types of Payment Gateways

Let’s talk about your options, because yes — there’s more than one way to accept a payment online.

1. Hosted Payment Gateways

This is where your customer is sent to a different site (like PayPal or Stripe Checkout) to complete the payment. Once they're done, they’re redirected back to your site.

Pros: Super easy to set up and secure — they handle all the sensitive stuff.
Cons: Your customer leaves your site for a bit, which can feel less seamless.

Examples: PayPal, Stripe Checkout, Authorize.Net

2. Integrated Payment Gateways

With these, the payment happens right on your site — no redirect needed. The checkout form is built into your pages, so it all feels smooth and on-brand.

Pros: A super clean experience for your customers — and more control for you.
Cons: A little more complex to set up, and you’ll need to make sure you’re staying compliant and secure.

Examples: Stripe, Square, Braintree

💼 Common Payment Gateway Options (aka Your Shortlist)

Here are a few popular tools that entrepreneurs and creatives love:

Stripe: Flexible, developer-friendly, and supports all the major payment types (credit cards, Apple Pay, etc.).
PayPal: Everyone knows it — and lots of customers already have an account.
Square: Great for online and in-person payments (perfect if you do markets or pop-ups).
Authorize.Net: A powerhouse with advanced fraud tools and lots of customization options.

💰 What About the Fees?

Let’s be real: payment gateways aren’t free, but the fees are usually pretty standard. Most charge something like 2.9% + 30¢ per transaction for U.S.-based payments. Other possible charges?

Monthly service fees (some platforms have them, some don’t)
Setup fees (especially for custom integrations)
Currency conversion fees (if you're selling internationally)

Pro tip: Always double-check the fine print so you’re not caught off guard later.

🧠 Final Takeaway: Payment Gateways = A Must-Have for Selling Online

Whether you're launching your first digital product or scaling your online shop, a payment gateway is what makes those "cha-ching!" moments happen. It’s how your customers pay you — securely, quickly, and confidently.

So if you’re building an e-commerce business, a membership site, or even just dipping your toes into selling online, don’t skip this step. It’s the foundation of a smooth checkout experience — and your peace of mind.

Need help choosing the right one for your site? I’ve got your back — just reach out and let’s chat options. 💛

Ready to get started? Download my free checklist for launching your website in just one day and start selling.