Hosted vs Self-Hosted Payment Gateway: Which Integration Fits Your Business?

Highlights:

• Understand the four main types of payment gateway integration and their technical requirements
• Learn how hosted gateways reduce PCI compliance to SAQ A versus SAQ D for self-hosted
• Discover RBI Payment Aggregatorauthorisation requirements for operating gateways in India
• Compare security responsibilities, checkout control, and compliance burden across integration types

Introduction

Your developer flags a question during sprint planning: should we redirect customers to a hosted payment page or build payment processing directly into our checkout? The decision seems technical, but it affects everything from your PCI compliance costs to customer conversion rates.

India processed 21.70 billion transactions in early 2026. Your gateway choice determines whether you can scale with this growth whilst maintaining security and compliance.

What are the Types of Payment Gateway Integration?

Payment gateways connect your business to payment networks through four main integration models.

Hosted (redirect) gateways send customers from your website to the payment provider's secure platform. Customers enter card details there, then return to your site after payment.

Self-hosted (integrated) gateways let you collect payment information directly on your website or app. You control the entire checkout experience, but you handle sensitive payment data.

API-hosted integration combines both approaches. You build a custom payment interface using the gateway's APIs whilst the provider manages backend processing.

Local bank integration connects directly to your bank's payment infrastructure, bypassing third-party aggregators.

Each model has different PCI compliance requirements, security responsibilities, and technical complexity.

Hosted Payment Gateway: Redirect Model

When a customer clicks "Pay," hosted gateways redirect them to a PCI-compliant payment page managed by your gateway provider.

How it works:

1. Customer initiates payment on your website
2. System redirects to gateway's secure domain
3. Customer enters card details on gateway's page
4. Gateway processes payment and sends customer back
5. Your site receives payment confirmation

Key advantage: You qualify for SAQ A, the simplest PCI DSS compliance level. No sensitive card data touches your servers, drastically reducing security infrastructure costs.

Trade-off: Redirection interrupts checkout flow. Some customers abandon transactions during the redirect journey, affecting conversion rates.

Self-Hosted Payment Gateway: Integrated Model

Self-hosted gateways embed payment forms directly into your checkout page. Customers never leave your website.

Security requirements:

You must comply withRBIdigital payment security directions. This includes encryption, Web Application Firewall (WAF), DDoS mitigation, and full PCI DSS compliance at SAQ D level.

Payment data must be stored only in India per theApril 2018 RBI directive. If you're building self-hosted infrastructure, ensure India-based servers.

Why businesses choose this: Complete checkout control, custom branding, customer data ownership. Critical for D2C brands optimising conversion funnels.

Resource requirement: Dedicated security team, ongoing compliance audits, infrastructure investment. Best suited for enterprises with technical capability.

Comparison: Hosted Vs. Self-Hosted Gateway

Comparison as of March 2026. Verify current requirements with your gateway provider.

RBI Compliance: What Indian Businesses Must Know

All payment gateways in India must have RBI Payment Aggregator authorisation under the Payment and Settlement Systems Act, 2007.

Critical:As of December 2023,RBI returned 71 out of 116 payment aggregator applications. Only authorised gateways can legally operate.

Before choosing any gateway:

• Verify RBI Certificate of Authorisation
• Confirm India-only data storage compliance
• Check security audit certifications

If you're building a self-hosted solution that aggregates payments from multiple customers, you may need PAauthorisation yourself. Consult RBI guidelines published inSeptember 2025.

The Bottom Line for Your Business

Gateway choice affects three critical areas: compliance costs, technical resources, and customer experience.

Hosted gateways reduce security overhead, letting small teams launch quickly. Self-hosted gives you checkout control but requires dedicated security infrastructure.

Match your integration type to your business stage, technical capability, and compliance readiness. Verify RBI authorisation before onboarding any payment provider.