Hosted vs. Non-Hosted Payment Gateways: Key Differences & How to Choose

Confused between hosted and non-hosted payment gateways? Compare features, security, and ease of use to pick the best option for your business.

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Hosted vs. Non-Hosted Payment Gateways: Which One Should You Choose?

Selecting the right payment gateway is crucial for security, user experience, and conversions. One of the biggest decisions businesses face is whether to use a hosted or non-hosted (API-based) payment gateway.

Both options have advantages and limitations, depending on your business needs. This guide breaks down the key differences, pros, cons, and best use cases to help you make the right choice.

1. What Is a Hosted Payment Gateway?

A hosted payment gateway redirects customers to the payment provider’s checkout page to complete transactions.

How It Works:

  1. Customer clicks “Pay Now” on your website.

  2. They are redirected to the gateway’s secure payment page (e.g., PayPal, Razorpay Hosted).

  3. After payment, they return to your site.

Examples:

  • PayPal

  • Razorpay Hosted Checkout

  • Stripe Checkout (hosted option)

2. What Is a Non-Hosted (API-Based) Payment Gateway?

 

A non-hosted gateway allows payments to be processed directly on your website via API integration.

How It Works:

  1. Customer enters payment details on your checkout page.

  2. Data is securely transmitted to the payment processor via API.

  3. Transaction is completed without leaving your site.

Examples:

  • Stripe Elements

  • Paynet API Integration

  • Razorpay API

3. Key Differences Between Hosted & Non-Hosted Gateways

 

 

Feature
Hosted Gateways
Non-Hosted Gateways
User Experience
Redirects users away from your site
Seamless, stays on your site
Customization
Limited branding options
Fully customizable UI
Security
PCI DSS handled by provider
You handle partial PCI compliance
Setup Complexity
Easy, minimal coding
Requires developer expertise
Control Over Checkout
Less control
Full control
Best For
Small businesses
Enterprises

4. Pros & Cons of Hosted Payment Gateways

✅ Pros

✔ Easy to set up – No deep technical knowledge needed.
✔ PCI DSS compliant – The provider handles security.
✔ Lower maintenance – Updates are managed by the provider.

❌ Cons

✖ Redirects customers – Can increase cart abandonment.
✖ Limited branding – Less control over checkout design.
✖ Fewer payment options – May not support all local methods.

Best for: Startups, small businesses, low-tech merchants.

 

5. Pros & Cons of Non-Hosted (API) Payment Gateways

 

✅ Pros

✔ Seamless user experience – No redirections.
✔ Full customization – Match checkout to your brand.
✔ More payment options – Supports multiple methods.

❌ Cons

✖ Higher PCI compliance burden – Requires SAQ-A or SAQ-D.
✖ Complex integration – Needs developer resources.
✖ Ongoing maintenance – Updates may break integrations.

Best for: E-commerce stores, SaaS platforms, enterprises.

6. Which One Should You Choose?

 

Choose a Hosted Gateway If You…

  • Want a quick, no-code setup.

  • Don’t have developer resources.

  • Prefer hands-off security compliance.

Choose a Non-Hosted Gateway If You…

  • Need a branded, seamless checkout.

  • Have in-house developers.

  • Require advanced payment features (subscriptions, tokenization).

7. Hybrid Approach: The Best of Both Worlds

 

Some businesses use a combination:

  • Hosted for one-time payments (simpler).

  • API for subscriptions & recurring billing (better UX).

Example:

  • A SaaS company uses Stripe Checkout for new signups (hosted) but Stripe Billing for subscriptions (API).

8. Security & Compliance Considerations

 

Hosted Gateways

  • PCI DSS Level 1 compliant (handled by provider).

  • No card data touches your server.

Non-Hosted Gateways

  • You must ensure PCI compliance (SAQ-A or SAQ-D).

  • Tokenization is a must to reduce PCI scope.

9. Future-Proofing Your Payment Strategy

 

  • Hosted gateways are great for quick launches.

  • Non-hosted gateways offer long-term flexibility.

  • Consider scalability – Will your payment needs grow?

Final Decision Checklist

Factor
Hosted
Non-Hosted
Easy of Setup
5
3
Customization
2
5
Security
Provider
You
Checkout Experience
Redirect
On-Site
Best For
Small businesses
Enterprises

Final Thoughts

 

There’s no one-size-fits-all answer—it depends on your business size, tech capabilities, and UX priorities.

  • Startups & small businesses → Hosted gateway (fast, secure).

  • E-commerce & SaaS → Non-hosted API (better conversions).

Can I switch from hosted to non-hosted later?

Yes, but it requires reintegration and PCI compliance adjustments.

Which is cheaper?

Hosted gateways often have higher per-transaction fees but lower setup costs.

Does a non-hosted gateway improve conversions?

Yes—reducing redirects can lower abandonment rates.

What’s the most secure option?

Both are secure, but hosted gateways reduce your PCI burden.

Expand your reach with a gateway built for scale.

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