What is a payment gateway and how does it work?

A payment gateway is the service that takes your customer's card or wallet details at an online checkout. It encrypts them and passes them on so the payment can be approved. It does mostly the same job as the card machine in a high street shop, only for your website. When a customer clicks to pay in your online shop, the gateway gets their details safely to the banks and tells your shop whether the payment went through.

How does a payment gateway work?

A card payment passes between your shop, the gateway, a payment processor and two banks. Your acquiring bank receives card payments on your behalf, and the card issuer is the bank that gave your customer their card. This is what happens to one payment, from the checkout to approval:

1. Your customer goes to the checkout and enters their card details or picks a digital wallet.
2. The payment gateway encrypts the details so they're protected from unauthorised access on the way.
3. The gateway passes the transaction to the payment processor and your acquiring bank.
4. The customer's card issuer checks the card and the available funds.
5. The issuer approves or declines the payment, and the answer travels back through the gateway.
6. Your shop shows the customer the result: on approval it confirms the order, on a decline it tells them and may ask them to try another way to pay.

An approved payment doesn't mean the money has arrived yet. It moves later, in a step called settlement. Your payment provider, the company you sign up with such as Stripe or PayPal, transfers the money from the customer's bank to your business account, minus the processing fees. How soon it arrives depends on your provider's payout schedule, so check it before you choose.

Payment gateway vs payment processor

The payment gateway carries the payment details securely and returns the answer. The payment processor handles the transaction itself: it checks it, approves or declines it together with the card issuer, and moves the money between the customer's bank and yours. Think of the gateway as the messenger and the processor as the cashier who deals with the money.

The processor works with your acquiring bank. Before the money reaches you, it goes into a merchant account. That's an account just for customer payments, which holds the money until it moves on to your main business account. With a provider such as Stripe, you don't need to open a separate merchant account at your bank. The provider gives your business that function as part of its service.

Some providers handle both roles in one service. PayPal, for example, runs its own payment gateway and processes the payments too. You sign up once and don't have to arrange the parts yourself. If you're just starting out, choose a provider that covers both roles.

Do you need a payment gateway to sell online in the UK?

Yes. Any business that takes card or wallet payments on its website needs a payment gateway to process them. In a physical shop, the card terminal does mostly the same job, but for payments made in person.

You rarely have to build a gateway from scratch, though. A shop platform usually connects you to a payment provider, and the provider brings the gateway with it. Our online shop works this way. You choose payment methods such as cards, Apple Pay and Google Pay, Klarna or a manual option like bank transfer, and the payouts go straight to your own account. In our shop, card payments run through Stripe or PayPal.

How much does a payment gateway cost in the UK?

With Stripe and PayPal, a payment gateway in the UK costs a percentage of each payment plus a small fixed fee. Stripe's standard UK plan, for example, has no setup fee or monthly fee, so you only pay when you sell.

Stripe's UK pricing page, as of October 2026, puts a standard UK card at about 1.5% of the payment plus a small fixed fee. PayPal's UK fee page was last updated in October 2026. For payments from UK customers, it puts a standard PayPal payment at checkout at about 2.9% plus a fixed fee, and a card payment without a PayPal account at about 1.2% plus a fixed fee. If your customers pay by card, compare the card rates too. Check which rate applies to the way your shop will take card payments before you pick one. Add PayPal for customers who would rather pay with their PayPal account.

What you pay also depends on where the card comes from. Some providers, Square for example, charge an extra fee for cards issued outside the UK. Currency conversion, chargebacks and disputes come with fees of their own as well.

Fees change, so check each provider's current UK pricing page before you sign up. With our online shop, we don't add a commission on top of your payment provider's processing fees.

Which payment methods should a small UK online shop accept?

Our advice: start by offering debit and credit cards and digital wallets. Wallets let phone shoppers pay with those same cards. Add other payment methods when your customers ask for them, or when your orders are large enough that splitting the payment helps people buy. Each method suits a different kind of customer or order.

• Debit and credit cards: the core of your checkout. Set them up first, before you add any other method.
• Digital wallets: Apple Pay and Google Pay let customers pay with a card they've already saved, on their iPhone or in their Google Account. With Apple Pay, the shop never sees the actual card number.
• PayPal: customers can pay with their PayPal account instead of typing in their card details. Offer it for people who would rather not share their card with a shop they don't know yet.
• Buy now, pay later: services like Klarna let UK customers pay in 3 instalments, and you receive the full payment upfront. Check what your provider charges for it before you add it.
• Bank transfer: offer it for larger or business orders, and send the order once the money has arrived in your account.

When customers can pay the way they want, fewer of them abandon their shopping cart. That makes your payment methods one of the first things to check in an optimised checkout process.

Add your products, choose how customers pay and start selling. We don't take a commission on your sales.

Is it safe to take card payments on your own website?

Yes, as long as the card details go through a secure payment gateway that meets the PCI DSS standard and your site uses an encrypted connection. HTTPS protects the connection between your customer's browser and your site, and the gateway encrypts the card details with SSL or TLS.

UK card payments have one more layer of protection. Under Strong Customer Authentication (SCA), banks check that it's really their customer paying. So your customers may have to confirm a payment through their bank when they shop online.

Card payments also follow a security standard called PCI DSS. It sets the technical and operational rules for every business that stores, processes or transmits card details. You can keep your own share of those rules small. Some providers, Stripe among them, offer a payment form that sends the card details straight to the provider. The details never pass through your server. That reduces how much of PCI DSS you have to meet yourself. In our online shop, all payments are encrypted and PCI-compliant, and every plan includes an SSL certificate.

Some of the work stays with you, though. With Stripe, for example, PCI compliance is a responsibility shared between Stripe and your business. Eligible merchants report their part with a PCI DSS Self-Assessment Questionnaire (SAQ), a form for recording the results of their own check. Keep your shop's logins secure as well, and watch for orders that look wrong. Our guide on how to prevent credit card fraud covers the warning signs.

Start selling with payments built in

Once you've picked a provider and the payment methods your customers want, the next step is a shop that takes them. Build your online shop with us and connect the payment methods you chose, ready for your first order.