Payment gateways make it easy to accept payments on your website or brick and mortar store. But with multiple elements involved in the process, it can sometimes be tricky to understand the role each one plays.
We will break it down for you and help explain the various components of payment processing and merchant accounts in the UK.
Let's begin by understanding how payment gateway integration works. Typically, there are three methods of payment gateway integration.
Redirects are the most commonly used type of payment gateway integration. This involves the customer being redirected away from your website to a secure external page, generally on the payment gateway's website, to input their card details and complete their purchase.
There are advantages galore when it comes to utilising a redirect method. It's simple to set up and the customer does not have to enter any card details on the website. Also, PCI compliance is greatly reduced for merchants because sensitive data is processed by the gateway rather than the merchant's server.
Self Hosted Payment gateway
In stark contrast to redirect-based solutions, self-hosted payment gateways enable merchants to securely process payments on their own site. To use this method, the merchant must have an SSL certificate and a valid PCI compliant hosting package.
That said, these are pretty standard requirements if you are engaged in ecommerce.
The main benefit of a self-hosted payment gateway is that the customer never has to leave the merchant's website while they enter their card details. This gives merchants more control and reduces any apprehension customers might feel about entering sensitive data on a third party website.
In other words, better conversion rates because you keep the customer on your website for the entire workflow.
API/ Server to Server Gateways
With an API or server to server gateway, customer's card details are entered on the merchant site, but all processing is done by the gateway. This is the most secure option and provides a seamless customer experience.
If you are looking for a bespoke checkout process, this is your best bet. The downside is that there's a lot of coding involved in order to make it work with your website. Also, you have to ensure PCI compliance as well as acquire an SSL certificate.
Picking the right payment gateway offers a seamless customer experience and often leads to improved conversions, and reduced abandoned cart rates. While it may seem cumbersome, the checklist for a good payment gateway is not too long.
You should always ensure that the payment processor you opt for is PCI compliant, offers a secure checkout process, has minimal fees and offers options like Google and Apple Pay.
Payment Gateway Providers are the companies that provide the actual gateway and infrastructure that handles the transactions. They also offer other features such as fraud detection, analytics, reporting and customer service.
Most payment gateway providers in the UK offer one-click integration with popular CMS and ecommerce platforms, allowing merchants to quickly set up a payment system on their website.
For instance, PayPal, which offers direct integration with Magento, WordPress, Shopify and a host of other CMS software.
Having said that, PayPal is not the only payment gateway provider out there. There are many others, which offer a range of services. Here's a look at the top options in UK.
Here's a quick rundown of the top payment gateway providers in the UK:
Pros and cons
Payment methods accepted: All major credit and debit cards, as well as contactless payment methods like POS, Samsung, Google and Apple Pay.
PayPal One of the most popular payment gateways, with a comprehensive suite of features for merchants of all sizes. It is one of the easiest payment solutions to integrate for small businesses and the fees are extremely competitive.
From plugins that add customisable 'Pay Now' buttons, which redirect customers to PayPal's website, to a full API integration that processes payments directly on the merchant website, PayPal offers a wide range of payment options.
That said, the transaction fees are on the higher side compared to some other payment gateways.
This can quickly add up if you're a high-volume merchant. Also, PayPal is notorious for suspending merchant accounts and limiting features without notice.
Resolutions are not immediate either, which may stall your business operations while they investigate.
Pros and cons
Payment methods accepted: Stripe accepts dozens of credit, debit cards and digital wallets including Apple Pay, Gpay, WeChat Pay & Ali Pay amongst others.
Stripe is one of the largest and most popular payment processors in the world. It offers low transaction fees in comparison with their wide range of easy integrations and a comprehensive suite of tools for merchants to completely customise the checkout flow.
If you are not looking for a bespoke solution, they have a simpler option in the hosted payment gateway called, 'Stripe Checkout'.
Stripe's flat rate pricing and built-in fraud detection makes it a great option for small to mid-sized merchants. They also offer advanced analytics and reporting, which helps you make better decisions about how to optimise your checkout process.
The only downside is that there are complaints galore of funds being frozen and accounts being suspended. The customer support is also often unhelpful or slow to respond.
Full Payment Service providers are the companies that offer both a merchant account, as well as the payment gateway. This is ideal for merchants who may not have a merchant account or those who want to switch to a new provider.
Here are the top full payment solution providers in the UK:
Pros and cons
Trust Payments has quickly become one of the top go-to payment processing companies for SMBs in the United Kingdom, Europe and USA. They offer merchants a comprehensive suite of services, such as customisable checkout pages, POS terminals and MOTO payments to name a few.
As part of their vision to expand to a global omnichannel solution, Trust Payments has continued to innovate and develop their product offering. This includes the addition of new currencies, in-game mobile payments, digital wallets, 3D Secure V2 as a standard and local European payments such as SOFORT & Giropay.
Integrations include popular CMS and eCommerce platforms such as Magento, WooCommerce, and Shopify, as well as lesser known ones such as Mal's ecommerce and Red Technology.
Pros and cons
Total Processing is a full-service payment processor operating in the UK and Europe. Their core offering is a merchant account and payment gateway that provides access to card-based payments, SEPA Direct Debit, and invoice payments.
Total Processing is especially useful for merchants that need global payment solutions, such as international credit cards or ACH payments. Total Processing’s merchant accounts also support auto-billing, recurring payments and subscription management.
They happen to be one of the few companies in the industry that work with high risk merchants, such as those in the gambling and adult entertainment industries.
That said, there's a lack of clarity regarding their pricing, with merchants being required to contact Total Processing directly for more information.
Pros and cons
Nochex markets itself as the leading alternative payment solution for PayPal and Stripe for UK merchants. They offer a combination of a payment gateway and merchant account services, which means, you are only dealing with a single provider.
Nochex is particularly useful for merchants with low transaction volumes, as they offer competitive rates. They also offer a wide range of integrations, and support multiple payment methods such as credit and debit card payments.
One of their advantages is that customers can pay you using Nochex even if they do not have an account with you. Also, their customer support is UK-based.
However, they do not accept digital wallets such as Apple Pay and Google Pay, making them a less attractive option for those looking for such payment solutions.
Pros and cons
Opayo has consistently been recognised as the leading payment processor in the UK, and its services are available across Europe. Formerly known as Sage Pay, it is a full-service merchant account provider, offering secure payment processing services and PCI-DSS compliance.
Opayo is rated highly for its encryption capabilities, fraud screening tools and the ability to accept more than one currency.
They offer a wide range of services, including mobile payments, recurring payments and subscription management. They also have a range of integrations, including popular shopping carts such as Magento, WooCommerce, Shopify and BigCommerce.
There are multiple UK-based customer support channels such as email, phone and live chat that are available 24/7.
However, their pricing structure is more expensive than some of their competitors. Since the rebrand after being acquired by Avalon in 2020, the pricing structure has been revised leading to a slew of customer complaints.
Buy Now, Pay Later (BNPL) services such as Klarna and Clearpay are quickly becoming popular among UK customers. Most of these services allow customers to split their purchases into interest-free, manageable payments over several weeks.
BNPL service providers are integrated with most modern payment gateways and checkout solutions, allowing merchants to easily accept these payment methods.
Here's a look at the most popular options.
Pros and cons
Klarna is one of the most popular BNPL services and is available to merchants across Europe. Their core feature is their dynamic payment solution that allows customers to pay for their purchases in instalments.
This helps merchants increase conversions for high-value purchases and reduces cart abandonment. It is integrated with most major payment gateways, such as PayPal and Stripe, allowing customers to pay using their Klarna account at checkout.
Klarna also offers a range of services such as fraud protection and customer insights, helping merchants to optimize their sales.
However, there is a fee involved for merchants when customers use Klarna for payment, which includes a flat rate fee as well as a variable fees up to 5.99%.
Pros and cons
Clearpay is the European version of Afterpay and is a popular BNPL service in the UK. It allows customers to pay for their purchases in four interest-free instalments, with no additional fees involved.
It offers merchants the ability to accept payments via credit and debit cards, PayPal, Apple Pay and Google Pay. The integration process is simple and straightforward and customers can quickly set up payments using their existing payment methods.
Merchants are charged a flat fee for each transaction and have access to analytics, data and insights to help them better understand customer behaviour.
The downside is that Clearpay is not available in all countries, making it difficult for merchants with an international customer base to accept payments.
Some fintech companies only offer a payment gateway without any merchant accounts, such as iZettle and Cardstream. It allows merchants to accept credit and debit cards in-store and online, as well as digital wallets such as Apple Pay, Google Pay and Samsung Pay.
Cardstream is a white label payment gateway, meaning merchants can integrate it with their existing payment solutions and have a fully branded checkout experience.
It is integrated with all major payment processors and merchant accounts practically allowing merchants to accept payments from anywhere in the world. The company also offers fraud screening tools as well as a suite of features that help merchants optimize their sales.
The fees are £18 per month for up to 350 transactions and a flat rate of 9.9p per transaction over 350.
Merchants are required to sign up for their annual contract with no monthly billing option.
A payment gateway is a service provider that acts as an intermediary between the merchant and the customer's bank, allowing merchants to accept payments online and in-store. It is different from a merchant account as it only facilitates the payment processing, not the funds transfer.
For instance, Cardstream is a payment gateway only, while Trust Payments offers both a merchant account and payment gateway services.
Payment gateways are essential for any business that wants to accept payments online or in store. Choosing the right one can save you time and money, as well as give you the features and flexibility you need to scale your business.
To choose the best one, consider the following factors:
The Payment gateway you select should provide robust security features to protect customer data and prevent fraud. Look for one that is Level-1 PCI DSS and GDPR compliant.
The payment gateway should offer flexibility to accept payments from a variety of methods, such as credit and debit cards, digital wallets, and local payment methods.
A merchant will incur a total cost for using the payment gateway. This includes setup fees, monthly fees and transaction fees. Compare different gateways to find one that offers the best value for money.
The gateway you select should be easy to integrate with your existing infrastructure and business systems. This will ensure a seamless customer experience and reduce development time for integration.
A robust customer support system should be in place to address any queries or issues that may arise. Look for a gateway with 24/7 customer service technical support.
Payment gateways usually charge a setup fee, monthly maintenance fees and transaction-based fees. Setup fees may range from £100 to £200, while monthly fees may be anywhere from £15 to £50.
Transaction fees vary depending on the payment processor, but generally range from 1.0% to 3.5%. Additionally, there may be a fee of around 9p per transaction.
Merchants can also expect to pay additional fees for features such as fraud screening, currency conversion and 3DS authentication. It is important to check with the provider for details on all costs involved.
Merchant accounts are different from payment gateways as they are the actual bank accounts where transaction funds are deposited. Payment gateways act as an intermediary between the merchant and the customer’s bank, while merchant accounts facilitate the transfer of funds.
Payment gateways are usually integrated with merchant accounts, allowing merchants to accept payments from customers and transfer the funds to their merchant account.
We recommend having multiple payment gateways to ensure the best customer experience and reduce risk. Having more than one gateway allows you to accept payments from a variety of sources and get the best terms and rates.
For example, Trust Payments offers excellent rates for credit and debit cards, but have limited options with digital wallets like Google Pay & Samsung Pay.
Stripe on the other hand offers a wide range of payment options including digital wallets, but their rates for credit and debit cards may not be as competitive.
By having multiple payment gateways, you can accept payments from multiple sources and get the best possible terms.
Similarly, compare and shop for recurring payments as well as BNPL, so you can choose the payment options that suit your business needs.
Payment Gateways are pivotal to a successful payment process. Selecting the best one for your business will improve the overall customer experience, boost conversion rates and help minimise costs.
When choosing the right payment gateway for your business, consider factors such as security, flexibility, total cost and customer support. Additionally, having multiple gateways will help ensure the best terms and rates for your business.
If you would like further advice on selecting the best payment gateway for your business, get in touch with our team of payment experts. We can provide tailored guidance to help you make an informed choice.