October 25, 2019
Written by
James Davis
Written by James Davis
Senior Technical Writer at United Thinkers

Author of the Paylosophy blog, a veteran writer, and a stock analyst with extensive knowledge and experience in the financial services industry that allows me to cover the latest payment industry news, developments, and insights. Read more

Reviewed by
Kathrine Pensatori
Product Specialist at United Thinkers

Product specialist with more than 10 years of experience in the Payment Processing Industry. I help payment facilitators and PSPs solve their various payment processing issues. Read more

From Hosted Payment Gateway to Licensed Solution

What is better: renting accommodation or buying one? Naturally, every answer depends on the particular respondent’s situation. And each of the two options has its pros and cons. Some rent accommodations and switch from one landlord to another as often as they find it suitable. Others take burdensome mortgages, which take many years to payout. These are two extreme cases, of course. Besides them, there are, in fact, many in-between options. One of them is “lease with an option to buy.” A very similar situation is witnessed in the market of payment gateway services around a hosted payment gateway.

Many people, young and not very young, need a place to live. Similarly, many companies are looking for payment gateway solutions that they can “call their own.” These solutions allow them to provide gateway services under their own brands. However, ownership of a payment gateway solution is associated with various formal requirements and huge upfront (and ongoing) costs.

That is why many companies start from third-party or white-label gateway solutions. Then their volumes grow, and their needs become more sophisticated. So, at a certain point, they are in a position to build their own payment gateways, either from scratch or based on some ready-made licensable gateway products.

Besides, the term “your own payment gateway” has several flavors. Let us get back to the accommodation rental analogy.

  • Using a third-party gateway solution is like living in a dormitory with lots of people around.
  • Using a brandable white-label payment gateway solution is like renting a room in that same dormitory with a label bearing your name on the door. The gateway technology is yours only nominally. However, it boosts your image in the eyes of your clients.
  • A dedicated gateway instance is like a rented accommodation with a long-term lease agreement.
  • A licensed gateway solution is like accommodation you are buying from the current owner. After the purchase, you can reorganize the place as you please. And if necessary, the previous owner can consult you on how to improve it in accordance to your needs and wishes.
  • Building a payment gateway solution from scratch is like buying a land plot on which you have to build a house. Complete freedom of choice. Costs – highest possible.

But what is the meaning of “lease with an option to buy” in the payment gateway world?

How Does A Hosted Payment Gateway Work?

Well, let us assume you are a smaller company with relatively modest needs that wants to provide gateway services. The best option for you might be the so-called hosted payment gateway solution. For your customers, you are the gateway provider, and they respect you for that. But in fact, you are the gateway provider only in name. In reality, it is the “host” that handles the technical side of the process (uses its data centers, servers, infrastructure, development, and support teams, etc.). Your own control over payment processing and related aspects remain very limited.

With time your volumes grow, and your needs become more sophisticated. As a result, you experience the need to add new features to the hosted payment gateway product you are using. But this you cannot do unless you license the product. And that is when the “option to buy” comes into play. You get even more freedom to customize the product if it is an open-source-code one. If so, you can tailor the licensed product to any newly-emerging needs. And the license owner’s support and development team will still be available to help you with any necessary improvements.

Some modern enterprise payment management software vendors offer hosted payment gateway solutions “with an option to buy”. An example of a hosted payment gateway technology that can be taken in-house as a licensed open-source-code solution is UniPay Gateway. It is a gateway solution that can be the first and the only one you need. You can start using UniPay technology as a hosted gateway solution and then take it in-house and customize it. And their internal development and support team will always be there for you to offer help and advice. An additional bonus is that through integration with UniPay Gateway, you get access to a multitude of acquirers and processors, the platform is already integrated with.

Need more information on how UniPay Gateway technology can help you become a payment gateway provider in your own right? Feel free to consult the payment experts at unipaygateway.com.

Useful articles to help you: