When deciding which payment gateway is right for your business you should be aware of the challenges payment gateways can have. Although all gateways are not the same, they do still all have similar concerns a merchant should consider.
Expensive Processing Rates
All payment gateways charge a pretty penny for processing a merchant’s credit card transactions with an average rate of 2.9% + 30c per transaction for online/card-not-present purchases. The alarming concern is that as payment gateways and consumer behavior to online purchases have evolved the cost and risk of processing payments has actually decreased but the gateways are constantly increasing their rates to merchants. As a merchant you may think that you can achieve a lower interchange rate but this is not possible as interchange is set by the card networks for all gateways. However you should always compare the variable rate of +.30c and seek to negotiate the best variable rate you can achieve.
Lengthy Application and Onboarding Times
Being able to quickly take online payments at the launch of your ecommerce site is critical. However the application process and activation of your chosen gateways can put a hard stop for your go live date. Many payment gateways have lengthy application, background and credit checks, and a long approval hierarchy to go through. Once you complete the application it can take days or even weeks to have your payment gateway activated. When choosing the right payment gateway make sure to question the application process, how long it normally takes and what pitfalls a merchant like yourself can experience during the onboarding process. Asking these questions will ensure you are provided with a more realistic timeline on when your site will be ready to accept payments.
Unclear Fees
When seeking to compare payment gateways, an understanding of the full fees incurred is critical but this is one of the most difficult things for a merchant to understand. Payment gateways are renowned for hiding fees which makes comparison almost impossible. These fees are how the gateways profit from your ecommerce transactions. As stated before interchange rates are the same for all gateways but a merchant should always ask about the following fees; Setup Fees, PCI Fees, Early Termination Fees, Batching Fees, Monthly Minimum Fees, Statement Fees, IRS Report Fees, and Required Reserves. If you do not know the full fees that will be levied you will not have a clear understanding of the cost to process the transactions.
Pricing Models
Not only are the fees confusing but all gateways have complex pricing models that even leave a seasoned merchant will find it hard to decipher. There are blended pricing, interchange + pricing, tiered pricing and high risk pricing. Which of these pricing models is right for your business?
Interchange Pricing is the most transparent, and cost-effective model. However it is normally only available for larger merchants with high processing volumes.
Tiered pricing has been the traditionally pricing model yet it is most difficult to understand the hidden fees. These pricing models vary by the amount of volume you will do. This model is normally good for a merchant that has high seasonal sales and very low sales the rest of the year.
The newest pricing model is a blended model which provides simple pricing yet the fees can be high for merchants that have a high transaction volumes.
In summary make sure when choosing a payment gateway that you understand the challenges and ask lots of questions to ensure you have a transparent payment gateway relationship.
