What is a payment gateway?

Posted by Jonathan Davison on Aug 11, 2017 1:13:24 PM

Over the last few months there have been many discussions around the different types of fees that banks and third party providers charge.  A recent article by Optomany - wrote about rip off card charges coming to an end.  The interesting aspect of this article is the effect on small businesses - who's main business is around low value transactions.  A £2 contactless transaction could see fees increase from around 2.6p at present to 5p or 6p.

So lets take a deeper look into payment gateway and the costs incurred - A payment gateway is the infrastructure that allows people to pay for goods and services from an e-commerce retailer. The service is added to an e-commerce retailer’s site through a third party. A payment gateway authorises credit and debit cards for online merchants, processing the payments into the merchant’s account.

Difficult to come by this information and it is highly variable but bearing in mind these are gateway charges – but hope it helps as a guide. And in addition Merchants have to pay for a credit card terminal at an average of £20.00 per month per device.

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PayPal

PayPal is the most famous payment gateway brand, perhaps because of its ties with its parent company, eBay. However, PayPal is more than an eBay tool, spreading throughout the web.

PayPal operates a staggered rate of payment for merchants depending on how many transactions are made each month. It is easy to integrate with most sites and is a highly trusted brand for most users. However, PayPal can work out expensive for retailers with high volume and there are many forum posts around which berate the way that PayPal favours customers over retailers, leading some to move away from the payment gateway claiming it has having poor customer service as well as being tyrannical in their account suspensions.

SagePay

SagePay are the biggest independent payment gateway service provider in Europe, and a well respected brand throughout the UK.

For e-commerce businesses with a reasonable turnover, their fees of 1,000 transactions per quarter plus 10p for each additional transaction are very enticing. Along with their free customer support which can help you deal with any small niggle or issue, they are a great option for businesses  looking to partner with a company with the experience required for e-commerce, without having to pay through the nose for it. 

Worldpay

Worldpay were one of the first payment systems on the internet in 1994. Quarter of a century later (really? That long?), they still process millions of pounds worth of payment transactions each month.

The experience that Worldpay bring to the world of online payment comes at a hefty cost, however.  They charge 2.75% transaction fee for credit cards and 39p for debit card, which soon adds up to a lot for popular e-commerce stores.

HSBC

HSBC, ‘The World’s Bank’, changed the name of their online merchant services to Global Payments in 2012. They partner with Realex Payments to provide e-commerce businesses with a flexible payment gateway suitable for their individual needs.

The set up fee depends on your business type and your turnover. There is a 1.6% charge for each credit card transaction and 17p for each debit card transaction can seem quite steep, especially as their customer service is reportedly decidedly average.

Barclays

Barclays’s payment gateway is called ePDQ and comes in a variety of packages to suit different businesses. 

As the service is run as part of the Barclaycard arm of Barclays, this option can be difficult to get if you have CCJs or poor credit. The fees are also high, but the customer service from Barclays is excellent. If you already bank with them, it can be easier to simply add this onto your business banking package.

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Topics: Payment gateways