The German ecommerce sector is expected to generate €96.3 billion in revenue in 2026, according to forecasts from the German Retail Association (Handelsverband Deutschland, or HDE). This represents an increase of approximately €4 billion over the previous year and is further evidence that ecommerce is an integral part of the German retail sector.

However, as online commerce grows, so do the demands placed on businesses. Customers expect fast, straightforward, and secure payment processes. Even minor hurdles can cause customers to abandon their purchases.

At the same time, the rise in cybercrime in Germany has created new challenges for the security of online payments. This highlights the question of how businesses can design payment processes that are efficient, secure, and customer-friendly. Payment gateways are a key solution here.

In this article, we explain payment gateways, including how they work with the online payment process. We also explain the differences between payment gateways and payment processors and the relevant payment methods in German ecommerce. Lastly, we detail security requirements and provide tips on selecting a payment gateway.

Key takeaways

• Payment gateways link online checkouts to underlying payments infrastructure, which allows for the secure transmission of payment details.
  
• Payment gateways support a variety of payment methods and can help create smooth, customer-friendly ecommerce checkouts.
  
• Payment gateways primarily handle transmitting and securing payment details, while payment processors process the transaction in the background.
  
• In Germany, security, data protection, and Strong Customer Authentication (SCA) requirements vary depending on system design and the role of the provider.
  
• When selecting payment gateways, businesses in Germany need to consider integration, payment methods, security standards, regulatory requirements, fees, and flexibility.
  

What are payment gateways?

Payment gateways help businesses accept online payments securely. They are interfaces between checkout and underlying payments infrastructure that securely transmit payment information for transactions to the systems involved.

Payment gateways support a variety of payment methods and enable businesses to process and manage their payments efficiently.

A payment gateway offers many benefits for German businesses:

• Security: Secure and encrypted transfers of payment details, plus additional fraud protection mechanisms
  
• Efficiency: Fast and smooth processing for online payments
  
• Flexibility: Support for many payment methods, such as credit and debit cards and digital wallets
  
• Improved customer experience: Hassle-free checkouts that can reduce barriers and help improve the customer experience
  

How do payment gateways work?

Processing an online payment entails multiple steps. Below, we explain these steps and the role of a payment gateway:

• Initiate checkout and enter payment details
  The customer selects their desired products or services on the business’s website or app. Then, they proceed to the payments page where they enter the necessary payment information.
  
• Encrypt payment details
  Once the customer enters payment information, the payment details are transmitted to the payment gateway. The payment gateway uses encryption and security mechanisms to protect sensitive information from unauthorized access during the transfer. Communication between the browser or app and server is typically encrypted using Transport Layer Security (TLS) connections.
  
• Transmit transaction details
  The payment gateway transmits the relevant payment and transaction details to the downstream systems. Depending on the payments infrastructure, this information might be forwarded to a payment processor who communicates with the financial institutions involved.
  
• Transmit transaction to relevant financial institutions
  The payment processor forwards the transaction details to the relevant financial institutions via the corresponding payment network. For example, card payments involve the acquiring bank and the customer’s issuing bank.
  
• Conduct review and authorize transaction
  The issuing bank reviews the transaction against a range of criteria, such as the validity of the payment method, available funds, security flags, and indicators of fraud. Then, it authorizes or denies the transaction.
  
• Approve or deny the transaction
  The issuing bank’s response is sent back via the payment network and payment processor. The payment gateway receives a corresponding transaction status and forwards this information to the business or its payment system.
  
• Communicate payment status
  The business is notified of the payment’s authorization. If it was authorized, the business can continue processing the order. If payment was unsuccessful, the customer is informed and given the option to select an alternative payment method.
  

What are the differences between payment gateways and payment processors?

Payment gateways and payment processors perform different jobs within the online payment process. In simple terms, the payment gateway provides the technical interface for securely transmitting payment details and communicating transaction status. On the other hand, the payment processor processes the transaction in the background via the payment network and financial institutions involved.

Payment gateways

The payment gateway primarily serves as the technical interface for securely transmitting payment information and facilitating communication between the checkout flow and payments infrastructure. A payment gateway’s primary tasks include the following:

• Secure data transfer: Encrypts and securely transmits sensitive payment details
  
• Communication: Forwards payment information to the payment processor or relevant financial institutions and communicates the transaction status to the business
  
• Security checks: Runs additional reviews and authentication procedures to help identify and prevent fraudulent transactions
  
• Integration: Integrates into websites, apps, and ecommerce platforms via application programming interfaces (APIs), software development kits (SDKs), or preconfigured plug-ins
  

In other words, a payment gateway is primarily responsible for technical and security functions in the payment process.

Payment processors

The payment processor processes the transaction in the background. It establishes the connection between the business, payment network, and financial institutions involved and helps with authorization and payment settlement. Its primary tasks include the following:

• Transaction processing: Transmits and processes payment information via the relevant payment network
  
• Authorization: Forwards the transaction request to the issuing bank and transmits the response to downstream systems
  
• Payment settlement: Facilitates the transfer of funds between the parties involved
  
• Security and compliance: Implements security measures and complies with relevant standards for processing payment details
  

What payment methods do payment gateways in Germany need to support?

Customers have different preferences, so it’s important that German ecommerce businesses offer them the right choice of payment methods. Therefore, a payment gateway needs to support as many relevant payment methods as possible.

In Germany, the most popular payment methods for online purchases include specialized online payment services, payment on invoice, Single Euro Payments Area (SEPA) Direct Debits, credit card payments, and debit card payments. Digital wallets are also gaining popularity in Germany in both ecommerce and brick-and-mortar retail. Therefore, payment gateways also need to support this method. Depending on the business model, businesses might also want to choose payment gateways that support other popular payment methods in Germany, such as girocard.

The benefit of supporting different payment methods is that it allows German businesses to satisfy various customer groups and their payment habits. A payment gateway can make it easier to integrate and process these payment methods, which means businesses don’t need a separate connection for each type of payment. Businesses in Germany need to decide which specific payment methods to offer based on their target groups, business models, and specific requirements.

What are the security requirements for payment gateways in Germany?

Online payments in Germany are subject to a variety of security and data protection requirements. One of the key regulations is the EU’s revised Payment Services Directive (PSD2), which was implemented in Germany as the Payment Services Supervision Act (ZAG).

Section 53 of the ZAG stipulates the appropriate risk mitigation measures and control mechanisms that payment service providers (PSPs) must implement to manage operational and security risks. In addition, Section 55 of the ZAG contains provisions on Strong Customer Authentication (SCA). According to these provisions, SCA is generally based on at least two independent factors. Exceptions apply to certain transactions.

PSD2 for payment gateways

Payment gateway solutions can help PSPs and businesses integrate the necessary security and authentication procedures into their payment processes. These procedures include encrypted transfers of payment details, fraud detection measures, and support for SCA.

The specific obligations that apply depend on the provider. Purely technical services can be excluded from the definition of a payment service if they satisfy the requirements of Section 2, Paragraph 1, No. 9 of the ZAG. However, according to Section 10 of the ZAG, if a business in Germany performs regulated payment services itself, then it must obtain a license from the Federal Financial Supervisory Authority (BaFin).

Data protection and security of payment details

In addition to the laws on payment services, payment gateways also fall under the scope of the General Data Protection Regulation (GDPR) because online payments involve the processing of personally identifiable information. According to Article 32 of the GDPR, controllers and processors must implement appropriate technical and organizational measures to ensure a level of security appropriate to the risk. These measures can include encrypting personally identifiable information and implementing measures to ensure confidentiality, integrity, and availability.

Therefore, when choosing a payment gateway, German businesses need to ensure that their providers support the relevant regulatory and technical security requirements. Providers also need to clarify how they maintain the security of payment details and how they implement authentication and fraud prevention.

What do businesses in Germany need to consider when choosing a payment gateway?

When choosing a payment gateway, businesses in Germany need to consider more than just technical functionality.

They can start by ensuring that their chosen solution can integrate easily into their existing ecommerce systems. The solution also needs to support the payment methods relevant to their target groups. In addition, businesses in Germany need to verify reliable security and fraud prevention measures, as well as support for relevant regulatory requirements.

Finally, it is important to look for transparent fee plans, ability to grow, and reliable support. This ensures that the payment gateway can be used long term, even as transaction volumes rise and requirements change. Businesses looking to offer crypto payments can also verify that their provider supports this option or has crypto payment gateway capabilities.

How Stripe Payments can help

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Learn more about how Stripe Payments can power your online and in-person payments, or get started today.

FAQs about payment gateways in Germany