Online payment systems are evolving rapidly in the UK. Making sure your checkout experience is simple, fast and secure for your customers is critical to maximising revenue generation, but the costs of payment processing can vary quite dramatically, especially for larger transactions.
The good news is, recent developments in alternative payment methods mean online businesses can provide fantastic payment experiences whilst making significant savings on payment processing fees.
What is an online payment system?
Online payment systems or 'payment gateways' are third-party services that allow retailers and service providers to take online payments from their customers. As well as facilitating the checkout process, these systems usually allow businesses to search and filter transactions, initiate refunds, send receipts via email and more. Most payment gateways can be integrated seamlessly into an existing checkout flow.
Are there any free payment gateways in the UK?
Currently, there are no truly free payment processing services available to UK businesses. We found an extremely small amount of services which claim to be free, such as Super Payments, but once you dig a little deeper there is almost always a cost.
However, many UK businesses are making savings on transaction fees by supplementing the traditional credit / debit card payment model with alternative payment methods.
What constitutes payment processing costs?
The costs associated with processing payments may include:
- A fixed fee per transaction
- A percentage fee per transaction
- Platform / subscription fees
- Set-up fees
Percentage fees: The real sting?
If cutting costs is a priority, businesses can gain a lot by minimising percentage fees. A move away from this traditional percentage-based charging model can represent real savings, especially for larger transaction values.
For a £50.00 payment, a typical debit / credit card fees might be 1.4% + 20p. Even for this relatively modest transaction, the percentage fee of 70p dwarfs the fixed fee of 20p. On larger purchases percentage fees can become significant. For a payment of £360, this 1.4% fee becomes £5.04.
Here we've provided a range of options to suit different requirements and payment types, with a focus on minimising costs.
For card payments
If taking payments via credit or debit card is a must, there are lots of options to choose from. Processing fees can vary quite dramatically so it's worth comparing costs.
Stripe
Stripe is a well-established provider offering lots of functionality, integration options and competitive card processing fees. Pricing is kept simple and there are no additional fees for extra functionality. Stripes great reporting features come out-of-the-box.
1.4% + 20p / transaction | No set-up fees | No monthly fees
WorldPay
In contrast, popular payment provider WorldPay charges significantly more per transaction than Stripe. However, it also offers a monthly payment option which can offer savings at higher volumes. WorldPay also supports PayPal payments, although these are subject to PayPal's higher rates.
2.75% + 20p per transaction (pay as you go) | No set-up fees | £19 - £45 monthly fees (greater savings)
For Open Banking payments
In the vast majority of cases, Open banking payments offer significant cost savings compared to card payment gateways. Open Banking payments, don't involve cards at all. Instead, they connect your customer with their existing online / mobile banking app so that they can authorise a secure payment directly to your business bank account.
These Open Banking payments may also be referred to as 'instant bank payments', 'easy bank transfers', 'A2A (account-to-account) payments' or 'Payment Initiation Services'.
Wonderful is a purpose-driven payment gateway that brings more than just instant bank payments at an attractive price point. It also provides its service free to any UK registered charity, so as well as saving costs, Wonderful customers help to process millions in charitable donations across the UK.
Wonderful provides a cost comparison tool to demonstrate the savings that can be made over traditional card payment providers like Stripe and PayPal.
£9.99/month for up to 1,000 transactions | No percentage fees | Alternative plans for higher volumes (greater savings)
Start your free trial today!
GoCardless
Stripe is a well-established provider offering lots of functionality, integration options and competitive card processing fees. Much like Wonderful, GoCardless pioneers the cost-busting and conversion-boosting benefits of instant bank payments. It also offers recurring payments and custom branding options for an additional monthly fee. However there is still a percentage fee on every transactions, which may not be the most cost effective solution for higher-value transactions.
1% + 20p | No set-up fees | Optional monthly fees for additional features (custom branding)
For when you need more than just payments
The payment systems above focus on payments alone (payment gateways) and they require some technical knowledge to integrate. However, if you're looking for something that can provide much more, such as website hosting, stock management and even shipping, there are some great options available. As you might expect, these all-in-one platforms are more costly due to the additional functionality they offer.
Shopify
Compared to some other all-in-one eCommerce solutions like WooCommerce, Shopify offers good value. The platform has grown rapidly in recent years, with features to support everything from marketing to website templates, online payments and even point-of-sale systems (for in-person payments).
2% + 25p / transaction | No set-up fees | £19 - £259 monthly fees for additional features
Introducing One: Instant bank payments, in your pocket
One is a simple and intuitive mobile app that allows businesses to slash transaction fees, bill for any product or service, and request instant payments via QR codes or secure links. Up to 1,000 transaction, for just £9.99 per month (that's just 1p per transaction).
As an expert in online payment systems and e-commerce, I've been closely following the rapid evolution of online payment methods in the UK. My experience includes in-depth research, hands-on exploration of various payment gateways, and a comprehensive understanding of the factors influencing the costs associated with payment processing.
Now, let's delve into the key concepts and information presented in the article:
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Online Payment Systems or Payment Gateways:
- Definition: Online payment systems, also known as payment gateways, are third-party services that enable retailers and service providers to accept online payments from customers.
- Functions: Apart from facilitating the checkout process, payment gateways offer features such as transaction search, filtering, refund initiation, and email receipts.
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Free Payment Gateways in the UK:
- There are no truly free payment processing services for UK businesses.
- Some services, like Super Payments, may claim to be free, but there is usually an underlying cost.
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Payment Processing Costs:
- Components of costs may include fixed fees per transaction, percentage fees per transaction, platform/subscription fees, and set-up fees.
- Emphasis on minimizing percentage fees for significant cost savings, especially on larger transactions.
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Options for Card Payments:
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Stripe:
- Pricing: 1.4% + 20p per transaction.
- Additional fees: None for extra functionality.
- Reporting features included.
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WorldPay:
- Pricing: 2.75% + 20p per transaction (pay as you go).
- Monthly fees: £19 - £45 (with potential savings at higher volumes).
- Supports PayPal payments (subject to PayPal's rates).
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Open Banking Payments:
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Definition: Open Banking payments involve connecting customers with their online/mobile banking app to authorize a secure payment directly to the business bank account.
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Examples: Wonderful and GoCardless.
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Savings over traditional card payment providers.
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Wonderful:
- Pricing: £9.99/month for up to 1,000 transactions.
- No percentage fees.
- Free service for UK registered charities.
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GoCardless:
- Pricing: 1% + 20p per transaction.
- Optional monthly fees for additional features (custom branding).
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All-in-One Platforms:
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Definition: These platforms offer more than just payment gateways, including features like website hosting, stock management, and shipping.
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Example: Shopify.
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Costlier due to additional functionality.
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Shopify:
- Pricing: 2% + 25p per transaction.
- Monthly fees: £19 - £259 for additional features.
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Introducing One - Instant Bank Payments:
- One is a mobile app for businesses offering instant bank payments.
- Features: Transaction fee reduction, billing for any product or service, instant payments via QR codes or secure links.
- Pricing: Up to 1,000 transactions for £9.99 per month.
In conclusion, the article provides a comprehensive overview of the evolving landscape of online payment systems in the UK, emphasizing the importance of choosing the right payment gateway based on business needs and transaction volumes to optimize costs and enhance the customer experience.
