choosing an online payment gateway service provider
Choosing a good online payments service provider IS ONE OF THE CRITICAL DECISION YOU CAN MAKE FOR YOUR E-COMMENCE BUSINESS . MERCHANT FEES CAN EAT AWAY AT YOUR PROFIT MARGINS, AS WELL THE ADDED HASSLE AND COST OF HAVING TO SET UP, MONITOR AND ADMINISTRATE MULTIPLE PAYMENT PLATFORMS.
Below is a quick comparison of Actual Fees on a single $139 AUD standard sales transaction across popular Australian payment platforms.
| Payment Gateway |  |  |  |  |  |
|---|---|---|---|---|---|
| Sales | $139.00 | $139.00 | $139.00 | $139.00t | $139.00 |
| Fees (including handling fees) | -$3.91 | -$2.84 | -$9.50 | -$2.75 | -$3.06 |
| Net | $135.09 | $136.16 | $129.50 | $136.27 | $135.94 |
| Fee % (incl GST) | 2.8% | 2% | 6.8% | 2% | 2.2% |
| Days Paid to bank from Customer payment | Same day | 5 days | 2 days | 2 days | @2 days |
| Estimate Fee on 100 sale units | -$391.00 | -$284.00 | -$950.00 | -$273.00 | -$305.80 |
1 Paypal Fee is GST Free
2 Square estimate fee only based on advertised rate
2 Stripe Ecommerce : Initial payment is 7-14 days for 1st transaction payout. Instant payout is available for higher processing fee once account verified
| Market | Paypal | Eway | Afterpay | Stripe | Square |
|---|---|---|---|---|---|
| Domestic cards | 2.6% + $0.30 handing | 1.75% + $0.25 handling | Commission of 3%-7% (volume) + $0.30 handling | 1.75% + $0.30 handling | 2.2% for each payment through the Square eCommerce API |
| International Cards | 3.6% + $0.30 handling | 1.75% + $0.25 handling | 2.9% + $0.30 handling |
Who is THE best payment service provider based on just domestic processing fees?
- EWAY if you don’t mind waiting up to 5 days for payments, or new kid on the block Stripe. Paypal arguably offers the best fraud protection although more expensive . Afterpay is EXPENSIVE and not a great option for low value transactions, although It is expected to be offered as an option by younger buyers as they are less inclined to have credit cards. Paypal is entering the Buy Now Pay Later (BNPL) so it may be a cheaper alternative.
There are many other considerations though when choosing an ecommerce payment provider :
Questions you should consider when choosing a payment provider are:
- Who is my customer ?– If you are an online retailer then online payment options are a must . If you are a Business to Business service provider issuing 1 invoice a month to a client it may make more sense to continue with an EFT payment arrangement vs incurring unnecessary merchant fees. Younger customer may be more inclined to expect BNPL services such as Afterpay than an older customer base. This may also depend on where your sales are coming from and the demographic such as Instagram vs Facebook
- What is my Unit selling Price? If you have low unit price and haven’t quite reached volume discount incentive levels then consider one of the cheaper fee providers. BNPL options such as Afterpay may not be viable and will eat away your profit margins.CBA & Paypal are also entering the BNPL market and may offer more competitive pricing plans. You will also need to consider refund & chargeback costs which vary for each payment provider.
- Where will I sell ? You may incur different merchant fees depending on where your customer is located in relation to your business. It is important to evaluate the fee structures if you are purely a domestic based market vs a mixed / International customer base.
- Can I get a better deal ? Service providers such as Square, Stripe or Afterpay may offer a better commission structure once you have an established sales history with them and meet turnover thresholds. Ask for a better deal !
- Can I recover merchant costs from Customers?. In some instances your e-commerce platform can incorporate a Fixed fee or % fee into the sales transaction. This is generally unpopular with customers . A better option may be to gross up the sales price of your items to incorporate the merchant fees
Click here for key considerations when choosing your payment service provider
Need help integrating help your ecommerce payment gateway with XERO ? Contact Cube Bookkeeping on 0412 955 077
