By Nicholas Larsen, International Banker
With mobile payments sharply on the rise and smartphones and mobile applications continuing to facilitate greater volumes of digital transactions, it should come as no surprise that the digital payment-gateway market is enjoying stellar growth. With the likes of Apple Pay, Google Pay and Samsung Pay becoming standard features for businesses seeking to expand their digital-payment credentials for customer service, moreover, the integration of secure payment gateways in support of these mobile wallets will only further swell this burgeoning market in the years to come.
A payment gateway is a digital service that enables businesses to facilitate secure, encrypted payment transactions with a bank or card-processing company after a purchase has been made using methods such as credit cards, debit cards and payments through mobile apps. Similar to how a point-of-sale (POS) terminal in a brick-and-mortar store in the real world validates a card’s chip, a payment gateway in the online world validates payments by securely encrypting payment information, acting as a bridge between the merchant and the bank—and ultimately ensuring that e-commerce purchases are both safe and seamless.
The basic payment-gateway process typically begins with the customer entering key payment details, such as credit-card information, and commencing the payment process for the transaction. The payment gateway securely sends the payment information to the payment network, which processes, verifies and approves the payment before the gateway transmits the results from the network back to the merchant’s website or application to confirm the transaction’s success. Some of the main types of payment gateways that facilitate such a process include:
- Hosted payment gateways, whereby payment transactions are conducted on the payment-gateway provider’s platform rather than within the merchant’s infrastructure. Once a customer engages in a payment transaction, it is processed by the hosted payment gateway before being returned to the business’s website or app.
- Self-hosted payment gateways, whereby the payment gateway is integrated within the merchant’s infrastructure such that the merchant can manage the entire payment process without it having to be transmitted externally. The merchant is wholly in charge of managing the process and securing the payment data.
- API-hosted payment gateways, whereby the payment-transaction process is supported by the service provider through an application programming interface (API), enabling customers to remain on the merchant’s website to complete the transaction.
- Local-bank integration payment gateways are more basic options that enable the merchant to connect with banks to complete the payment processing. The gateway in this instance sends the payment-transaction data to the bank, which completes the payment processing before returning the completed transaction data to the merchant.
“As you consider to opt for the best payment gateway for your website or app, think about your business needs and infrastructure,” according to Indian payments firm Razorpay. “The main difference between the four types of payment gateway is how you integrate them [in]to your website. Some may require continuous maintenance and technical support, while some may offer support from the host right away.”
Given the rapid expansion of e-commerce and shifting consumer trends in the direction of online purchases over the last decade, it should come as no shock that the global digital payment-gateway market has enjoyed significant growth during this time. On the consumer side, key underlying factors for this market growth include the:
- fast-growing preference for online shopping,
- greater need for mobile-banking services to facilitate online payments and the broad movement towards cashless societies—a trend that massively accelerated during the COVID pandemic,
- benefits of instant payments,
- cost savings that online retail can deliver to consumers through lower prices and reduced transportation costs,
- time savings that online retail generates: no queues and no need to travel to the store, with much easier product browsing across different stores,
- convenience that customers can now experience—not only from purchasing online but also through prompt home-delivery services,
- increasingly favourable and safe regulatory environment for consumers wishing to engage in online retail.
On the merchant side, continuous developments in online-payment infrastructure are pushing retailers to integrate mobile-payment services from the likes of Apple Pay, Samsung Pay, PayPal and Alipay into their businesses. As such, payment gateways are expanding their presences within this infrastructure.
“Retailers are developing new strategies to profit from the at-home delivery and online shopping convenience economies,” according to a report from Mordor Intelligence. “Payment gateways are playing a bigger role in the infrastructure of payments. For online shopping carts, point-of-sale systems, and virtual terminals to link to the payment process, they are a necessary connection point in the modern economy. This factor is expected to drive the growth of the payment gateway market.”
With e-commerce’s growth set to continue driving more advanced digital-payment solutions, the demand for more sophisticated payment-gateway integrations will only further rise in the years to come. For instance, gateways are increasingly opting for biometric technology as a convenient way to bolster security. By leveraging each customer’s unique physical characteristics, such as facial features and fingerprints, to prevent unauthorised access and minimise fraud threats, biometric authentication is significantly more difficult for malicious actors to replicate for nefarious purposes than traditional methods, such as personal identification numbers (PINs) or passwords.
“As payment gateways integrate biometric authentication methods, they can offer merchants and consumers peace of mind, fostering trust in digital transactions and reducing the incidence of chargebacks and identity theft,” stated the “Payment Gateway Market Size” report published by Global Market Insights (GMI) in October 2024, adding that 74 percent of consumers globally have been estimated to have positive attitudes toward biometric technologies. The report found that four out of five respondents in Poland were either using or had previously used biometric technology.
A separate January 2025 report published by Research and Markets, meanwhile, pegged the current value of the digital-payment gateway market at $106.2 billion as of 2024, projecting it to reach $205.9 billion by 2030 at a compound annual growth rate (CAGR) of 11.50 percent. The report noted that the market’s significant growth in recent years has been mostly driven by the rapid expansion of e-commerce and the increasing consumer preference for online transactions. “Digital payment gateways facilitate seamless and secure payment processing for businesses and consumers, enabling transactions through various methods, including credit cards, digital wallets, and bank transfers,” the report from the market research firm also stated. “As businesses continue to adapt to the digital landscape, the demand for reliable and efficient payment solutions has surged.”
The report cited rising penetrations of smartphones and internet connectivity as crucial for improving online shopping’s accessibility, thus boosting market growth, while the COVID-19 pandemic expedited the global shift towards digital and contactless-payment methods. “Innovations in technology, such as blockchain and artificial intelligence, are further enhancing payment security and user experience,” the report observed. “Furthermore, regulatory support and government initiatives promoting cashless transactions are fuelling market expansion. As a result, the digital payment gateway market is poised for continued growth, with a diverse range of players emerging to meet the evolving needs of businesses and consumers alike.”
Mordor Intelligence, meanwhile, has projected China as the source of much of the growth in the payment-gateway market. “Chinese giants, such as Alibaba and Tencent, have pioneered digital merchant payments and are instrumental in the shift away from cash in the Chinese economy. The companies’ mobile payments products, Alipay and WeChat Pay, have rapidly reshaped China’s payments landscape. They are also among the largest in the world,” the report noted. “China UnionPay debit and credit cards are the most used card brand[s]. Mobile and digital wallets, such as Alipay and WeChat Pay, currently dominate the country’s online market and increase physical stores. The mobile and digital wallets led by Alipay and WeChat Pay account for 71 percent of e-commerce transactions in the country.”