The payment processor is basically the intermediary between your website and the merchant bank account, they authorise payments with the banking network and manage the transfer of funds from the customer’s account to your own.
The workflow basically works like this:
Checkout process > Payment processor > Banking network > Payment processor (funds received > Settlement to merchant account
There are costs attached to handling any payment so it’s important to make an informed decision when choosing a provider. Costs can be incurred by the following:
- Transaction fee (generally a fixed charge)
- Interchange fee (a variable percentage, dependant on card used)
- Drawdown charge (cost of settling funds to your merchant account)
- Management charge (monthly cost from payment processor)
The rates you receive will be dependant on the quantity and value of the transactions. The general rule of thumb is that the more business you’re doing, the lower overall rates you’ll pay per transaction – simple economies of scale. To this end it’s worth shopping around and trying to compare based on your estimated sale profile. This may get more difficult with some providers as they’ll potentially need to know the breakdown of credit / debit cards, these can carry different charges.
Often new sites start with Paypal as it offers a very easy integration path for nearly every possible platform. Paypal has no management fee for the account and the costs vary depending on the amount of business you’re doing, however there are some extra considerations when considering Paypal.
- Paypal normally has higher transaction charges so you’ll keep less of the total transaction value
- Buyers have greatly increased protection which puts you at increased risk enforced buyer protection, it’s made intentionally easy for buyers to raise a dispute and a refund
- Online shoppers are lazy, it’s a fact. People like to pay by Paypal as it means they don’t have to find their card. Details and addresses are normally saved on their device and they can checkout in seconds.
In the UK, you’ll commonly come across the following:
- Worldpay: great prices for larger customers, well established.
- Shopify: an obvious choice if you use the Shopify platform, tight integration with related services
- Paypal: Extremely easy integration, well liked by customers, more expensive per transaction
- Stripe: A great option for new stores, keen rates with an option for no monthly cost / PAYG
- Sagepay: A good choice if you use Line 50 or another Sage solution as you can pull payments into your accounts package
If you need help getting your online store live, or would just like some advice regarding payment processing agents, please get in touch. We’ve handled a wide variety of integrations from individual products to high turnover stores with thousands of products.