What is a Payment Gateway?
A payment gateway is a technology merchants use to process cashless transactions securely. It ensures the security of cardholder data entered by customers during these transactions. They are involved in processing each type of cashless transaction, including credit, mobile, debit, or digital wallet, and more.
Why Does Your Business Need Payment Gateway?
All types of businesses in the UK need payment gateways to process cashless transactions. “Cash-only” stores are rare, and businesses—whether small, SMEs, or established—offer multiple payment options such as credit, debit, digital, and online payments. To handle these cashless transactions, businesses must manage critical data, including account numbers, PINs, and CVVs.
This sensitive information is prone to theft, so businesses use payment gateways to ensure security through PCI DSS compliance, SSL certification, and other measures.
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Cost Breakdown of Payment Gateways in the UK
Two common pricing models
In the UK, the payment gateways operate on these two common pricing models:
Monthly Subscription: In this type of payment plan, you pay a fixed monthly fee, with additional charges added accordingly. Usually, with the monthly fee, the fee per transaction is lower, making this plan suitable for businesses with a high volume of transactions.
Usage-Based: In this type of payment plan, you only pay the charges per transaction and any additional types of charges accordingly. There is no monthly fee, which is why the fee per transaction tends to be higher. This payment plan is preferred by businesses with a low volume of transactions.
Setup and integration fee
Range: £0 – £250
This fee is the first cost you incur when you sign up with a payment gateway. The setup fee includes integrating the payment gateway with your existing system. There are several ways to integrate it: API, redirection, or self-integration.
API integration connects the payment gateway directly to your system. Redirection sends customers to the payment gateway’s site to complete transactions. Self-integration allows you to manually incorporate the gateway into your system. The payment gateway will handle the integration based on the method you choose.
Monthly fee
Range: £10 – £45
This monthly fee is what we mentioned earlier when discussing the pricing models. Some payment gateways charge this monthly fee regardless of the number of transactions. It is a fixed fee.
Transaction fee
Range: £0.00 – £0.25 or 1% – 5%
This transaction fee is related to the number of cashless transactions processed by the payment gateway each month. Payment gateways charge this fee either by a fixed amount a fraction of the transaction amount or sometimes both.
Chargeback fee
A chargeback fee is charged when there is a disputed transaction. It is different from a refund because the customer’s bank initiates a chargeback. In case of an issue, the customer requests a chargeback through their account. The money is then transferred from the merchant account back to the customer’s bank account.
Refund fee
When the merchant has to issue a refund to the customer, some payment gateways charge a fee for it. A refund is initiated by the merchant itself, that’s how it differs from a chargeback.
Security compliance fee
Our goal in using a payment gateway is to ensure security, and these gateways need resources to meet industry standards. A payment gateway must be PCI DSS compliant to authorise transactions. PCI DSS compliance, SSL certificates, and other security tools require funding, which the merchant must cover.
The cost of these security measures can vary depending on the level of protection needed.
Other fees
Now that we have covered the basic fee of the payment gateways, let’s talk about some other fees that payment gateways charge if needed. Payment gateways can charge a termination fee if you want to cancel your contract before time, or a fee for international transactions since it requires managing and converting international currency and much more.
5 Best Tips for Selecting a Payment Gateway Provider
We have listed some useful tips for you to remember before you start looking for a payment gateway provider.
- The best way to avoid being startled by unexpected charges is to openly discuss all types of fees with your payment gateway provider.
- Before you start looking for a provider, ensure you understand your business type, transaction volume, budget, and scale.
- Gain a thorough understanding of the payment gateway’s pricing model, the types of additional fees they charge, and how they manage client relationships before signing the contract.
- Consider the provider’s customer support availability and reputation, as responsive support can be crucial in resolving issues quickly.
- Check for compatibility of the payment gateway with your existing systems and software to ensure smooth integration and avoid any technical difficulties.
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