When gateways can't handle international currencies or comply with regional regulations, you lose subscribers. Each failed transaction costs you both the immediate sale and potential future business from that customer.

The stakes get higher as you expand globally. What works for domestic payments often fails internationally due to different banking systems, currency requirements, and compliance standards. Getting your payment gateway strategy right from the start saves you from costly migrations and customer churn later.

What is a payment gateway?

A payment gateway securely transfers customer payment information from your checkout page to the acquiring bank that processes the transaction. Payment gateways act as the digital bridge in every online purchase. When a customer enters their card details, the gateway encrypts this information and sends it to your payment processor. Here's how the process works:

  • Data encryption: Gateways encrypt customer payment information using SSL/TLS protocols during transmission

  • Speed: The entire authorization process takes 2–3 seconds

  • Settlement timing: Funding typically appears in your account within 3 business days after authorization

  • Role distinction: Gateways collect and secure customer information, while processors move the actual money between accounts

The right subscription billing platform will have these features to be a beneficial partner to you:

  • Security measures: Each gateway provides fraud detection and data protection to safeguard sensitive payment information

  • Global reach: Different gateways support various currencies and regional payment methods, allowing you to serve international customers

  • Regional compliance: Gateways handle local payment regulations, from European 3D Secure requirements to emerging market payment standards

  • Payment optimization: Gateway-specific features help reduce payment declines and improve acceptance rates

  • Integration flexibility: Easy setup and configuration with subscription billing platforms lets you switch or add gateways as your business grows

  • Diverse selection: Choose from multiple reputable gateways to match your business requirements and geographic focus

Payment gateway vs payment processor

Payment gateways collect and secure customer payment data, while payment processors handle the actual money transfer between bank accounts.

The basic difference: A payment gateway captures your payment information, and a payment processor moves the actual money

What happens during a transaction:

  • Customer enters card details → Gateway collects and encrypts this information

  • Money transfers from the customer's bank to your account → Processor handles this fund movement

Gateway responsibilities:

  • Displays the checkout form on your website

  • Encrypts card numbers and sensitive data for security

  • Returns "payment successful" or "payment failed" messages to customers

Processor responsibilities:

  • Contacts the customer's bank to verify available funds

  • Receives approval or denial from the issuing bank

  • Transfers funds between the customer's account and your merchant account

Why this distinction matters for your business:

  • Both required: You need both services to accept online payments

  • Separate purchase options: Buy gateway and processor services independently (requires more technical setup)

  • Bundled solutions: Purchase both from one provider (simpler setup, often higher costs)

  • Better Integration: Poor communication between gateway and processor causes payment failures

Why are payment gateways critical for ecommerce subscription businesses?

Payment gateways determine whether customers can complete purchases using their preferred payment methods, directly affecting your acquisition and conversion rates.

The numbers tell the story of why gateway selection matters:

  • Payment method availability: 59% of shoppers abandon transactions when their preferred payment method isn't available, and specific payment methods only work through certain gateways in different regions

  • Security standards: Standardized payment gateways provide better security protocols than custom payment solutions

Modern customers expect flexible payments. Without the right gateway supporting individual regional methods, you risk losing these sales regardless of how good your product is.

How payment gateways function in transaction processing

Payment gateways coordinate a multi-step process that moves customer payment data through various financial institutions to complete transactions securely.

The transaction flow from start to finish:

  • Customer initiates payment: Enters card details on your website or mobile app checkout page

  • Gateway processes data: Encrypts payment information using SSL/TLS protocols and validates the data format for completeness

  • Data transmission: Gateway sends encrypted transaction data to your acquiring bank or payment processor

  • Network routing: Processor forwards the transaction through card networks like Visa or Mastercard to reach the customer's bank

  • Bank authorization: Customer's issuing bank verifies account status, available funds, and approves or denies the transaction

  • Response chain: Authorization decision travels back through the same network chain to your gateway and displays to the customer

  • Settlement process: Approved transactions move to settlement, where actual funds transfer from the customer's account to your merchant account

  • Fraud monitoring: Real-time fraud detection and compliance checks run throughout each step to flag suspicious activity

4 Major benefits of having multiple payment gateway solutions

Multiple payment gateways ensure that your business will keep running in case a gateway goes down. These gateways also allow you to accept payments from customers in countries your primary gateway might not serve, and allow you to route transactions through whichever gateway charges the lowest fees for various regions or card types. Some benefits of having multiple payment gateways are:

1. Global market access

Multi-currency processing and local payment method integration let you accept payments from international customers using their preferred methods. European customers can pay with SEPA direct debit, while customers in Brazil use Boleto payments, and those in India use UPI. Each region has payment preferences that single-gateway solutions often can't accommodate, limiting your addressable market.

2. Scalability and reliability

Multiple gateways provide failover protection when one gateway experiences downtime or technical issues. Enterprise-grade infrastructure handles high transaction volumes with 99.9%+ uptime guarantees while scaling automatically during traffic spikes. If a gateway drops your account or changes terms unexpectedly, you can route payments to alternative gateways without losing sales. This redundancy also reduces gateway dependency, preventing you from being locked into a single provider's tokens or proprietary systems.

3. Improved conversion rates

Diverse payment options reduce cart abandonment by giving customers their preferred checkout experience. Machine learning algorithms optimize authorization rates by routing transactions through the gateway most likely to approve them based on card type, customer location, and transaction history. A/B testing different gateways shows you which performs better for specific customer segments or transaction types.

4. Automated operations

Automated transaction processing eliminates manual payment handling while real-time reporting gives you instant visibility into transaction performance across all gateways. Integrated analytics identify patterns in payment failures, helping you route future transactions more effectively. This reduces administrative overhead while providing data to optimize your payment strategy.

Additionally, multi-gateway architecture helps reduce transaction costs by letting you select the most cost-effective gateway for each region or transaction type, optimizing your payment processing expenses.

Best practices to overcome payment gateway challenges

If your business picks a gateway based only on price, skips security checks, or chooses one that doesn't work in the countries where your customers live, you'll lose money from failed payments. Here's how to avoid these problems.

API-first integration strategy

Choose payment gateways using comprehensive APIs, detailed documentation, and pre-built integrations for popular eCommerce platforms like Shopify, WooCommerce, and Magento. Well-documented APIs reduce development time from weeks to days, while pre-built connectors eliminate custom coding for standard implementations. Look for gateways that provide sandbox environments for testing and offer SDKs in multiple programming languages to match your development team's expertise.

Unified global platform

Select providers that handle multi-regional compliance automatically and maintain local acquiring relationships in your target markets. This approach reduces the complexity of managing separate gateway relationships in each country while improving authorization rates through local processing. Unified platforms handle regional regulations like Europe's Strong Customer Authentication and PCI DSS requirements without requiring separate compliance efforts from your team.

Transparent fee structure analysis

Evaluate the total cost of ownership by analyzing setup fees, monthly minimums, transaction rates, currency conversion charges, chargeback fees, and potential volume discounts. Hidden costs like gateway switching fees, PCI compliance charges, and international transaction markups can significantly impact your margins. Request detailed pricing breakdowns and calculate costs based on your actual transaction volume and geographic mix rather than advertised headline rates.

Layered security approach

Implement fraud prevention tools including machine learning algorithms that analyze transaction patterns, velocity checking to flag unusual spending behaviors, and risk scoring based on customer location and purchase history. Balance security with user experience by applying stronger authentication only to high-risk transactions while allowing low-risk payments to process smoothly. This prevents legitimate customers from encountering unnecessary friction while blocking fraudulent transactions.

Customer-centric payment options

Research your target market's payment preferences and partner with gateways that support relevant local methods alongside global options like credit cards and digital wallets. German customers prefer direct bank transfers, while Japanese customers use convenience store payments. Offering familiar payment methods in each market improves conversion rates and reduces customer acquisition costs by eliminating payment-related barriers to purchase.

Why Recurly is the best solution for payment gateway challenges

Payment gateway selection directly affects your conversion rates, global reach, and revenue recovery. The wrong choice leads to failed transactions, frustrated customers, and lost international sales. Recurly solves these challenges by integrating with multiple payment gateways and providing subscription billing tools that maximize revenue capture.

Recurly's payment gateway features and benefits:

  • Support for 20+ payment gateways: Accepts local payment preferences across multiple regions to reduce cart abandonment and improve conversion rates

  • Automated revenue recognition: Eliminates manual accounting work and ensures compliance with international accounting standards 

  • Support for 141-currency processing: Allows customers to pay in their local currency, improving user experience and reducing payment friction

  • Dunning management campaigns: Automatically sends targeted email and SMS messages, and in-app messages to customers with failed payments to recover revenue before cancellation

  • Recurly Wallet payment failover: Automatically routes failed transactions to backup payment methods to capture revenue that would otherwise be lost

  • Subscription lifecycle management: Handles complex billing scenarios, including upgrades, downgrades, prorations, and usage-based billing automatically, and allows for price testing and experimentation

  • Global compliance management: Automatically handles tax calculations, regulatory requirements, and data protection laws across different regions

Recurly gives you the flexibility to choose and configure the ideal payment gateways for your business needs while providing the subscription billing infrastructure to maximize customer lifetime value. Instead of managing multiple gateway relationships separately, you get unified reporting, automated failover, and revenue optimization tools in one platform.

Book a demo of Recurly's Payment Orchestration