Top 5 Payment Gateways for Small Businesses in 2021

For any small business, especially in today’s booming world of ecommerce, choosing how you get paid is one of the most important decisions you’ll make. It’s not just about moving money from your customer’s account to yours. It’s about trust, security, and making the buying process as smooth as possible. A clunky or untrustworthy payment system can scare customers away, while the right one can boost sales and build confidence in your brand. This is where Payment Gateways for Small Businesses come into play. They are the digital cash registers of the internet.

In this comprehensive guide, we’re going to take a detailed look at the top 5 payment gateways that are leading the pack right now, in 2021. This year is a pivotal time for online commerce, and understanding which platforms are excelling gives you the power to make the best decision for your business. For any entrepreneur, making an informed choice now is key to future success.

What Exactly is a Payment Gateway and Why is it Crucial for Your Small Business?

Think of a payment gateway as the secure middleman between your online store and the financial institutions that process the payment. When a customer enters their credit card details on your website, the payment gateway takes that sensitive information, encrypts it, and sends it securely to the payment processor. It’s the online equivalent of a physical point-of-sale (POS) terminal you see in a retail store. Its job is to safely capture and transmit payment data to verify that the customer has enough funds and then facilitate the transfer of money to your account.

Here’s why this is so critical for small businesses:

• Security and Trust: A good payment gateway handles all the heavy lifting of security, specifically something called PCI DSS compliance. This is a set of security standards designed to protect sensitive cardholder data. By using a compliant gateway, you assure your customers that their information is safe, which is a huge factor in building trust.
• Increased Conversions: A smooth, fast, and familiar checkout process means customers are more likely to complete their purchases. If the payment step is confusing or requires too many steps, many potential buyers will simply give up and abandon their carts.
• Fraud Prevention: Modern payment gateways come with advanced tools to detect and prevent fraudulent transactions, protecting you, the entrepreneur, from costly chargebacks and losses.
• Expanded Reach: The right gateway allows you to accept payments from various sources, including different types of credit and debit cards, digital wallets like Apple Pay and Google Pay, and even international currencies.

How We Chose the Top Payment Gateways for 2021

To create this list, we focused on the factors that matter most to a small business owner or a budding entrepreneur. Our criteria for ranking the best Payment Gateways for Small Businesses includes:

• Transparent and Affordable Pricing: Small businesses need predictable costs. We looked for gateways with clear, competitive transaction fees and minimal monthly charges.
• Ease of Use and Integration: How simple is it to set up and connect with popular ecommerce platforms like Shopify, WooCommerce, or BigCommerce? A solution that requires a team of developers isn’t ideal for a small operation.
• Key Features for Small Businesses: We prioritized gateways that offer features like invoicing, recurring billing for subscriptions, and a virtual terminal for taking payments over the phone.
• Security and Compliance: Non-negotiable. All the gateways on our list have to have rock-solid security and be fully PCI compliant.
• Customer Support: When something goes wrong with payments, you need help fast. We considered the quality and availability of customer support.

A Deep Dive into the Top 5 Payment Gateways for Small Businesses

Now, let’s explore the platforms making the cut this year and what makes them stand out in the current digital commerce landscape.

1. Stripe: The Developer’s Darling and Online Powerhouse

Stripe has firmly established itself as a leader in the online payment space, especially for businesses that want flexibility and customization. It is known for its powerful API (Application Programming Interface), which allows developers to build highly tailored checkout experiences.

Why Stripe is a Top Pick in 2021

Stripe’s reputation is built on its “API-first” approach. This makes it a favorite among tech-savvy entrepreneurs and businesses that want to create a seamless payment flow that is perfectly integrated into their website’s design. Instead of sending customers to another page to complete payment, Stripe allows the entire process to happen without leaving your site.

Key Features for Small Businesses

• Extensive Customization: Its powerful API offers unmatched control over the look and feel of the checkout process.
• Broad Payment Acceptance: Stripe supports a vast array of payment methods, including all major credit cards, digital wallets, and dozens of international payment options.
• Subscription Tools: Stripe’s recurring billing features are top-notch, making it ideal for the growing number of subscription-based businesses.
• Integrated Services: It offers a suite of tools beyond just payments, including fraud protection (Stripe Radar), invoicing, and business analytics.

Current Pricing Structure

Stripe’s pricing is famously simple and attractive to startups. For online transactions, it charges a flat rate of 2.9% + 30¢ per successful transaction. There are no setup fees or monthly fees for the standard plan, which makes it very low-risk for new businesses.

The Pros and Cons for an Entrepreneur

Pros:

• Highly customizable and flexible.
• Excellent for subscription and SaaS businesses.
• Vast global reach with extensive currency support.
• Transparent, pay-as-you-go pricing.

Cons:

• Can be overly complex for business owners without technical skills.
• Customer support can sometimes be slow or difficult to reach for non-technical issues.
• Transaction fees can add up for businesses with very high volume or very small transaction sizes.

2. PayPal: The Household Name for Trust and Simplicity

PayPal has been a giant in online payments for decades, and its biggest strength is its brand recognition. For small businesses, offering PayPal as an option is a proven way to increase customer trust and boost conversion rates, as millions of shoppers already have and trust their PayPal accounts.

Why PayPal is a Top Pick in 2021

PayPal is the go-to choice for entrepreneurs who want a quick and easy setup. You can create an account and start accepting payments in minutes. Its “Pay with PayPal” button is ubiquitous across the internet, offering a familiar and trusted option for consumers who might be hesitant to enter their credit card details on a lesser-known website.

Key Features for Small Businesses

• Unmatched Brand Trust: The PayPal logo immediately signals a secure and reliable payment option to customers.
• Simple Integration: Adding a PayPal button to a website is incredibly easy, with plugins available for nearly every ecommerce platform.
• All-in-One Solution: PayPal provides not just a gateway but also invoicing tools, subscription management, and options for in-person sales via PayPal Zettle.
• Instant Access to Funds: Unlike traditional gateways that can take days to transfer money, funds are available in your PayPal balance almost instantly.

Current Pricing Structure

PayPal’s pricing is similar to Stripe’s, with a standard fee for online transactions around 3.49% + a fixed fee (e.g., $0.49 for USD transactions). Its fee structure can become more complex with different rates for various transaction types, such as international payments or QR code payments.

The Pros and Cons for an Entrepreneur

Pros:

• Extremely easy to set up and use.
• High level of customer trust can lead to more sales.
• Good for businesses that send invoices or need a simple online payment button.
• Instant access to money in your PayPal account.

Cons:

• Account freezes and fund holds are a common complaint, often triggered by sudden sales spikes or customer disputes.
• The checkout process typically redirects customers away from your site to a PayPal page, which can be a bit jarring.
• Customer support can be difficult to navigate.

3. Square: The Best Friend for Brick-and-Mortar and Online

Square started by revolutionizing in-person payments for small businesses with its simple card reader that plugs into a smartphone. Today, it has evolved into a comprehensive ecosystem that seamlessly blends in-person (brick-and-mortar) and online sales, making it a perfect choice for businesses with a physical and digital presence.

Why Square is a Top Pick in 2021

Square’s unique selling proposition is its integrated system. A small coffee shop, for instance, can use Square’s POS system for in-store sales, and all that inventory and sales data will automatically sync with their Square Online store. This unified approach simplifies operations for the busy entrepreneur.

Key Features for Small Businesses

• Omnichannel Selling: The ability to manage both online and in-person payments, inventory, and customer data in one place is a massive advantage.
• Free POS Software: Square’s point-of-sale app is powerful and free to use, making it incredibly accessible.
• Simple Hardware: From the free magstripe reader to more advanced terminals, Square makes accepting in-person payments easy and affordable.
• Full Business Suite: Square also offers tools for appointment booking, payroll, marketing, and loyalty programs.

Current Pricing Structure

Square is known for its flat-rate, transparent pricing. Online transaction fees are typically 2.9% + 30¢, while in-person transactions are a lower 2.6% + 10¢. There are no monthly fees for its standard services.

The Pros and Cons for an Entrepreneur

Pros:

• The best all-in-one solution for businesses that sell both online and in-person.
• Very easy to set up and use, with intuitive software.
• Predictable, flat-rate pricing with no hidden fees.
• A wide range of affordable hardware options.

Cons:

• Less customizable for pure-ecommerce businesses compared to Stripe.
• Like PayPal, it’s a payment aggregator, which comes with a risk of account holds or terminations for businesses deemed high-risk.
• Transaction fees can be higher for established businesses with large transaction volumes compared to a traditional merchant account.

4. Authorize.Net: The Veteran for Reliability and Security

Authorize.Net is one of the oldest and most established names in the payment gateway industry. Unlike the all-in-one solutions like Stripe or PayPal, Authorize.Net is primarily a pure “gateway.” This means you need a separate merchant account from a bank or processor to use it.

Why Authorize.Net is a Top Pick in 2021

Its longevity is its strength. For over two decades, Authorize.Net has been a trusted name for secure and reliable payment processing. Businesses that prioritize stability and have more complex needs, or those that want the security of a traditional merchant account, often choose Authorize.Net.

Key Features for Small Businesses

• Advanced Fraud Detection: It offers a highly customizable suite of fraud prevention tools that gives merchants granular control.
• Wide Compatibility: As a veteran player, it integrates with a massive number of merchant account providers, shopping carts, and business tools.
• Customer Information Manager: A key feature is its ability to securely store customer payment data (tokenization) for repeat purchases and subscriptions.
• eCheck Processing: It’s one of the leading gateways for accepting electronic checks (ACH payments) in addition to credit cards.

Current Pricing Structure

Authorize.Net’s pricing is different from the flat-rate models. It has a monthly gateway fee of $25 plus a per-transaction fee of 10¢. It is important to remember that this is in addition to the processing fees charged by your merchant account provider.

The Pros and Cons for an Entrepreneur

Pros:

• Extremely reliable with a long history of stability.
• Excellent, customizable fraud protection tools.
• Gives businesses the flexibility to choose their own merchant account provider, allowing them to shop around for the best rates.
• Strong customer support.

Cons:

• More complex to set up, requiring both a gateway and a merchant account.
• The combined cost of the monthly gateway fee and merchant account fees can be higher for very small businesses.
• The user interface is often considered more dated compared to modern competitors like Stripe.

5. Braintree (A PayPal Service): The All-in-One Developer-Friendly Option

Braintree, which is a PayPal service, occupies a unique space in the market. It aims to combine the developer-friendliness of Stripe with the trust and reach of PayPal. It offers a full-stack payment platform that includes its own gateway and merchant account services.

Why Braintree is a Top Pick in 2021

Braintree’s big advantage is providing the best of both worlds. Businesses can access PayPal’s massive user base and popular payment methods like Venmo, while also getting a powerful, customizable gateway that can be integrated directly into their website or app, similar to Stripe.

Key Features for Small Businesses

• PayPal and Venmo Integration: Seamlessly offers PayPal and Venmo as checkout options right alongside credit and debit cards.
• Customizable Checkout: Provides a Drop-in UI for quick setup or a more customizable API for a tailored checkout experience.
• Strong Security: Offers robust fraud protection tools and handles PCI compliance for its users.
• Global Reach: Supports payments in over 130 currencies and is available in more than 45 countries.

Current Pricing Structure

Braintree’s pricing is very straightforward and competitive, mirroring the industry standard. It charges a flat rate of 2.59% + 49¢ per transaction for cards and digital wallets. There are no monthly fees for the standard plan.

The Pros and Cons for an Entrepreneur

Pros:

• Offers the power of Stripe with the reach of PayPal.
• Great for businesses that want to offer PayPal and Venmo without redirecting customers.
• Simple, flat-rate pricing with no monthly fees.
• Provides its own merchant account, simplifying the setup process.

Cons:

• Customer support is sometimes criticized, with users reporting long wait times.
• While powerful, some find its interface and documentation not quite as polished as Stripe’s.
• As a PayPal service, it is subject to similar risks of account holds and freezes.

Critical Factors to Consider When Choosing a Payment Gateway

The world of payment gateways is always changing. However, the core principles of choosing the right one remain the same. Here are the critical factors every entrepreneur should consider.

Understanding the True Cost: Beyond Transaction Fees

It’s easy to get fixated on the main percentage fee, but the true cost can be hidden. Look out for:

• Monthly Fees: Does the gateway charge a recurring monthly fee just for using the service?
• Setup Fees: Is there a one-time cost to get started?
• Chargeback Fees: What is the penalty if a customer disputes a charge? This can often be $15 or more per incident.
• PCI Compliance Fees: Some providers charge extra fees if you are not PCI compliant, or they may charge a fee for helping you maintain compliance.

Integration is Everything: Will it Work with Your Platform?

Your payment gateway must work seamlessly with your ecommerce platform (like Shopify, WooCommerce, BigCommerce), invoicing software, and any other tools you use. Before committing, always check for pre-built integrations or plugins. A gateway that requires complex custom coding to work with your store will cost you time and money.

The Customer Experience Matters Most

Think about your customer’s journey. There are two main types of gateway experiences:

• Hosted Gateway: This is when the customer is redirected from your website to a separate, secure page hosted by the payment provider (like PayPal Standard) to complete their payment. It’s simple and secure but can feel disjointed.
• Integrated Gateway: This allows the customer to enter their payment details directly on your website’s checkout page without ever leaving. This provides a much smoother and more professional experience, which can lead to higher conversion rates.

A mobile-first checkout experience is no longer a luxury; it’s a necessity. Ensure your chosen gateway works flawlessly on smartphones and tablets.

Frequently Asked Questions (FAQ) about Payment Gateways for Small Businesses

What is the cheapest payment gateway for a small business?

There’s no single “cheapest” option, as it depends on your sales volume and average transaction size. For very new businesses with low volume, a gateway with no monthly fees and flat-rate pricing (like Stripe or Square) is often the most cost-effective. For businesses with higher volume, a traditional merchant account paired with a gateway like Authorize.Net might offer lower overall processing costs, even with a monthly fee.

Do I need a payment gateway for my Shopify store?

Shopify has its own built-in payment gateway called Shopify Payments, which is powered by Stripe. It’s the easiest and most integrated option for Shopify users. While you can use other third-party gateways with Shopify, they often come with an additional transaction fee from Shopify, making Shopify Payments the most economical choice for most store owners.

What’s the difference between a payment gateway and a payment processor?

This can be confusing! Think of it like this: the payment gateway is the secure virtual terminal that connects to your website, collects the card data, and sends it on. The payment processor is the financial institution in the background that actually communicates with the banks (the customer’s and yours) to approve the transaction and move the money. Some companies, like Stripe and Square, act as both a gateway and a processor, which simplifies things greatly.

How long does it take to set up a payment gateway?

It varies. All-in-one providers like Stripe, PayPal, and Square can often be set up in a matter of hours, allowing you to start accepting payments the same day. Setting up a solution like Authorize.Net with a separate merchant account takes longer, as you need to go through an underwriting and approval process with the bank, which can take several days or even weeks.

Conclusion: Making the Right Choice for Your Business

Choosing from the many Payment Gateways for Small Businesses is a foundational decision for your success as an entrepreneur. As we’ve seen by looking at the leaders of 2021—Stripe, PayPal, Square, Authorize.Net, and Braintree—each platform offers a unique set of strengths and is tailored for different types of business needs.

The “best” gateway for you depends entirely on your specific circumstances. Are you a pure ecommerce startup that needs deep customization? Stripe might be your answer. Are you looking for the quickest, most trusted way to get started? PayPal is a strong contender. Do you run a local shop with a growing online presence? Square’s integrated ecosystem is likely the perfect fit. Do you prioritize stability and want the flexibility to choose your own merchant bank? Authorize.Net remains a rock-solid option.

Use this guide as a starting point. Analyze your business model, consider your technical comfort level, and, most importantly, think about what will create the most secure, seamless, and trustworthy payment experience for your customers. That is the ultimate key to unlocking growth and building a successful business.