Procurement · 14 April 2021

Best payment gateway for small business

Best payment gateway for small business

In order to choose a payment gateway, you need to understand their purpose. A payment gateway allows businesses to accept cards and other payments from customers. It acts as a middleman between clients and payment processing company whilst checking for fraud.

As an example, these are the stages of online payment:

  1. The customer places an order
  2. They are directed to the online checkout.
  3. Encryption of the payment information is done by the payment gateway then sent to the payment processor.
  4. Validity is checked by the payment processor via digital contact with the card issuing bank.
  5. The customer’s finance sources confirm to the processor that funds are available.
  6. Authorisation from the processor is sent to the gateway and then to the site to complete the transaction.
All of this occurs in seconds.

The two main payment gateway types are hosted and integrated.

  • Hosted payment gateways redirect your clients from checkout to complete the payment and are responsible for the security, but it takes customers away from your site, which unsettles some customers.
  • Integrated payment gateways work within your website’s checkout via an API. This makes your site responsible for transaction and customer data security.
Choosing the best gateway can devour your time at a rapid rate but is critical for your business operations, costings and strategy. A bad payment gateway customer experience will break their trust.

Have you thought of all the questions that need to be asked regarding payment gateways? 

Which payment gateway is best?

To reach the ‘best’ payment gateway decision, there is a priority of features to research, such as:

1) Methodology: Do the payment methodologies offered by the payment gateway suit your clients?

2) Pricing: What are the per-transaction, monthly, and annual costs?

3) Integration: Does your e-commerce platform support your gateway? Or has an API solution?

4) Security: Are they Payment Card Industry Data Security Standard (PCI DSS) compliant. What level? Do they use 3D secure?

5) UX: What purchasing experience quality occurs? Ask for a demo of the process.

6) Reputation: What does the market say about the gateway product, its service, availability and security breaches?

7) Speed: What is the transaction and funds release speed?

8) Global reach: Will foreign currency feature in the future?  Verify if your web development company and payment gateway can handle it.

Now that you know what questions to ask. Let’s look at a shortlist of options available. 

What is the best payment method for small business?

As part of your decision process, here is an analysis per some of the gateway options available:

PayPal

Pros: It is a fully global payment service, has watertight security, integrates easily into existing website checkouts, AND customers don’t need a PayPal account to transact with it. Payments are accepted online, in-person, by phone or email, and fraud support and seller protection are supplied.

This high flexibility comes at a price. Transaction fees start at 3.4% +20p/transaction for turnover <£1,500. For >£15,000, the fees are 1.9% +20p.

Cons:  The free version is basic. The fees are high for small businesses. It takes customers off-site, reducing checkout optimisation.

Support is slow, i.e. 1 – 7 day email service. Dollar transactions are settled via a forced conversion by PayPal into Euro even if you have a legal USD account.

Worldpay

Pros:  One of the original online payment systems, it’s popular in the UK, servicing +300,000 businesses. Over 100 currencies accepted, plus debit and credit cards, and PayPal. It is reliable, with good risk management.

Cons: Various price plans include a fixed monthly package, but there are hidden fees, so request a quote. Their pay-as-you-go fees are 2.75% +20p per transaction.

3-year contract with automatic renewal clause and a USD295 penalty for early termination. A high volume of customer complaints and issues unresolved for years.

Shopify

Pros:  This easy to use, very popular option offers absolutely everything, e.g. web hosting, payment processing, integration with channels such as Amazon, etc.

Transaction fees start at 2.2% +20p for a basic service. Advanced service starts at 1.6% +20p. Additional monthly fees apply as it’s a full e-commerce solution.

Stripe

Pros:  This simple, customisable online payment system is a strong PayPal competitor.  It allows optimised checkouts, accepts all payments, including credit cards, recurring billing (subscriptions) and direct debits. SMMEs are its target market.

The flat rate fee for European cards is 1.4% + 20p / transaction and 2.9% +20p for non-European cards. No monthly or hidden fees.

Cons:  Not cheap, requires coding knowledge, you need your own shopping cart, holds payments for up to 7 days, support is email only which can be a 24hour reply time.

Amazon Pay

Pros:  A globally trusted brand that integrates easily. Customers don’t need an account to transact. It works as a stand-alone, simplified checkout solution or compliments your existing online payment system. Optimised and fully integrated with Amazon website. Offers strong fraud protection.

Pricing is volume dependent. Fees start at 3.4% +30p for <£1,500 turnover. The lowest fees are 1.4% +20p for >£55,000.

Cons:  Fees are expensive for smaller businesses. Money is held for 3 to 5 days. 

GoCardless

Pros:  Directli has partnered with GoCardless and suits businesses with unfixed pricing or services, e.g. pricing might be time or usage factored like gaming. Great interface design, easy setup of recurring payments and a portal for customer signup.

It has a low fee of 1%, min 20p, capped at £2 / transaction.

Cons:  Direct debit requests are slow to activate. There is an inadequate integration with Xero. Credit cards have to go via different providers.

Reviews have stated that customer support can take 4 days, and the support is limited. Worryingly, users advise new users to ignore the banner stating “put payments in” and to NOT add any customers until setup is fully verified; otherwise, the money from payments is stuck in the GoCardless’ account.  

Skrill

Pros: An online wallet that offers payment flexibility and a payment gateway that’s simple to set up. Suitable for beginners to e-commerce. Integrates well with major shopping carts

Pricing is listed as 1% for local and international transactions, but there are lots of hidden fees, so get a full quote. Their fund transfer fees vary, so obtain a quotation.

Cons:  There are fees for chargebacks and refunds Eur 25, prohibited transaction Eur150 and more. Get a full quote! Some businesses have commented on excessive fraud prevention procedures and funds being held by Skrill for long periods or permanently.

Braintree 

Pros:  The fee structure isn’t tricky, has no hidden surprises, and is economical at 1.9% and 20p / transaction – no other charges.  It is part of Pay Pal.

It accepts Google Pay and Apple Pay plus credit and debit card payments and recurring payments.

Cons:  The API needs coding knowledge. The fraud structure is super strict, with funds being withheld from merchants for extensive periods. Customer support is US-based, so that it can take longer. Users advise it suits online stores, not physical store usage. Dollar transactions are settled via a forced conversion by Braintree/PayPal into Euro even if you have a legal USD account.

Cybersource

Pros:  Offline transactions, online and in-person payments are supported in 190 countries and credit cards via Authorize.Net.  Good fraud management.  Apple/Google Pay, PayPal and Klarna also supported.

Strong fraud protection, including 3D Secure 2.

Super good search functionality for transactions.

Cons:  Transaction fees have to be requested directly from them.  There can be long contractual agreements that are difficult to exit. Reviews have labelled it outdated with highly complex supporting tech documents. Customer support is fast.

Users complain of Amazon Pay transactions not showing up easily, and reversed transactions take 3 days to reflect in accounts.  Declined authorisations do not send a notification to the merchant.

Nochex 

Pros:  Simple set up from scratch, easy to integrate, payment pages and checkout can be customised to align with the existing site. It’s UK-based, which means faster customer support. Does gateway and processing services AND a merchant account.

Offers fraud protection.

Cons:  It is pricey at 2.9% +20p / transaction for online and invoice transactions. Telephone transactions are 3.2% +20p / transaction, + £10 fee / month.

Only credit and debit card payments are feasible, but there are worrying complaints about fraud, customer service and the withholding of funds.

Which payment gateway is cheapest?

Having read through the above overviews, you can see that the lower price is not always the best solution.  Reviews show that overzealous fraud management can freeze your funds until a court case can ensure (which is never; thus, your funds are lost permanently).

The bigger picture is very important. Larger fees from a trusted brand might convert more sales as well as support and customer service.

There are complaints about almost all payment gateway providers, but some handle issues better than others.

 

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