A payment gateway is a technology service that securely transmits payment information from a customer to a merchant’s bank account. Think of it as the digital equivalent of a point-of-sale (POS) terminal in a physical store. It’s the critical link that connects your website or application to the payment networks required to process transactions, ensuring that customer data is encrypted and handled safely.

For software, SaaS, and AI businesses, the choice of a payment gateway is more than a simple utility—it’s a foundational piece of your financial infrastructure that directly impacts revenue, customer experience, and your ability to scale globally.

Understanding the payment process helps clarify the gateway’s role. While it feels instantaneous to the user, a single transaction involves several key players and steps.

Here’s a simplified breakdown of the process:

1. Initiation: A customer selects a product or subscription on your site and enters their payment details (e.g., credit card information).
2. Encryption: The customer’s web browser encrypts this information and sends it to your web server, which then securely forwards it to the payment gateway.
3. Authorization: The payment gateway sends the transaction details to the appropriate payment processor, which in turn routes it to the card network (like Visa or Mastercard). The card network communicates with the customer’s issuing bank to verify that the funds are available and the transaction is legitimate.
4. Response: The issuing bank sends an approval or decline message back through the same chain. The payment gateway receives this response and forwards it to your website.
5. Confirmation: Your website displays a confirmation message to the customer. If approved, the gateway arranges for the funds to be transferred from the customer’s bank to your merchant account in a process called settlement.

Selecting the right payment gateway requires balancing several factors. For SaaS and AI companies, recurring revenue models and global customer bases add extra layers of complexity.

Here are the most important criteria to consider:

• Pricing and fees: Gateways typically charge a percentage fee plus a fixed fee per transaction (e.g., 2.9% + $0.30). Be sure to look for hidden costs like setup fees, monthly charges, chargeback fees, and fees for international transactions.
• Global reach and multicurrency support: If you plan to sell internationally, your gateway must support the currencies and preferred local payment methods of your target markets. This includes digital wallets like Apple Pay and Google Pay, and regional methods like SEPA in Europe or iDEAL in the Netherlands.
• Integration and developer experience: A well-documented API, modern SDKs, and a seamless integration process are non-negotiable for a software business. A poor developer experience can lead to costly delays and maintenance headaches.
• SaaS and subscription features: Look for built-in support for recurring billing, subscription management, automated invoicing, dunning (handling failed payments), and metered (usage-based) billing. These features are critical for managing the customer lifecycle in a SaaS model.
• Security and compliance: The gateway must be PCI DSS compliant to handle card data securely. Advanced fraud detection tools are also essential to minimize chargebacks and protect your business.

Every business has unique needs, but this comparison provides a starting point for evaluating the top contenders.

• Pros: Widely regarded as the gold standard for developer experience. Its API is flexible, well-documented, and easy to integrate. Stripe Billing is a powerful, dedicated solution for SaaS subscriptions, offering features like smart retries and usage-based billing.
• Cons: Can become expensive at scale, and its all-in-one simplicity may not suit complex enterprises needing more granular control over their payment stack.

• Pros: A unified platform that combines gateway, processing, and acquiring services. This can lead to better data insights and higher authorization rates. Excellent for large, global businesses with both online and offline sales channels.
• Cons: The platform is complex and better suited for enterprise-level companies with the resources to manage it. The pricing model (Interchange++) is transparent but can be harder to forecast than flat-rate models.

• Pros: Owned by PayPal, it offers seamless integration with both PayPal and traditional card payments. Its fraud protection tools are top-notch. The user interface is clean and easy to navigate.
• Cons: While it has recurring billing features, they are not as advanced or flexible as Stripe Billing. Customer support can be inconsistent.

• Pros: Operates as a Merchant of Record (MoR). This means Paddle takes on the responsibility for processing payments, managing sales tax, and ensuring global compliance. This is a huge advantage for businesses that don’t want to handle financial admin. Its platform is built specifically for selling software and SaaS.
• Cons: The all-inclusive fee is higher than other gateways, but it covers the cost of tax compliance. You have less direct control over the payment stack since Paddle acts as the reseller.

Choosing a gateway isn’t just about picking the one with the lowest fees. Many businesses overlook critical challenges that can arise later.

• Vendor lock-in: Migrating from one payment provider to another can be technically challenging and expensive, as it often involves moving sensitive, tokenized payment data. Plan for the long term.
• Hidden costs: Don’t just look at the percentage fee. Factor in potential costs for chargebacks, currency conversion, international transactions, and premium support.
• Compliance overhead: If your gateway isn’t a Merchant of Record, you are responsible for calculating, collecting, and remitting sales taxes and VAT wherever you have customers. This is a significant operational burden that grows with your business.
• Technical debt: A complex or poorly documented integration can slow down development and become a maintenance nightmare. Prioritize a gateway with a strong developer focus.

Instead of requiring you to integrate and manage a payment gateway directly, Kinde simplifies the entire process. Kinde’s billing engine is built on top of Stripe, one of the world’s most trusted and powerful payment processors.

This approach gives you the best of both worlds:

• Simplified setup: You connect your business to Stripe through Kinde, and Kinde handles the complex logic of subscription management, invoicing, and plan changes. You don’t need to write custom code to integrate with a payment gateway API for billing.
• Secure payment processing: Kinde does not store sensitive credit card information. All payment details are managed exclusively within Stripe’s secure, PCI-compliant environment.
• Focus on your product: By abstracting away the complexities of billing and payment integration, Kinde allows you to focus your engineering resources on building your core product features, not on developing and maintaining a billing system.

Kinde’s billing model leverages Stripe to handle the financial transactions, while Kinde manages the subscription lifecycle, providing a seamless experience for both you and your customers.

• Connect payment processor (Stripe)
• Manage Stripe connection
• The Kinde billing model