5 of the cheapest online payment systems for businesses in the UK

Online payment systems are evolving rapidly in the UK. Ensuring that your checkout process is easy, fast and secure for your customers is essential for maximising revenue generation. However, the costs associated with online payment processing can vary considerably, especially for high-value transactions.

The good news is, that 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 often referred to as payment gateways, are third-party services that enable merchants and service providers to receive payments from customers online. In addition to simplifying the checkout process, these systems allow businesses to search and filter transactions, process refunds, send email receipts, and perform other functions. Most online payment gateways can be integrated seamlessly into an existing checkout flow, offering both convenience and efficiency.

Why choose an online payment gateway?

An online payment gateway is essential for securing digital transactions, as it encrypts sensitive customer data throughout the checkout process. Recent insights from Shopify highlight the importance of integrating a trusted payment gateway into an eCommerce site to improve both transaction speed and security.

For UK businesses, an optimised online payment gateway offers more than just payment processing; it guarantees a seamless payment experience that facilitates online transactions while enhancing overall customer satisfaction.

Payment gateways such as Wonderful, Stripe, and Worldpay offer competitive rates, particularly advantageous to smaller businesses with high transaction volumes. Moreover, integrating an online payment gateway brings flexibility to your operations, enabling the management of various payment types — from recurring subscriptions to one-off purchases, without the need for complex infrastructure.

What constitutes payment processing costs?

The costs involved in processing online payments typically include:

• A fixed fee per transaction
• A percentage fee per transaction
• Platform or subscription fees
• Set-up fees

Percentage fees: The real sting?

For businesses focused on reducing costs, minimising percentage-based fees can lead to substantial savings. Moving away from the traditional percentage-charging model can be particularly beneficial for high-value transactions.

For example, on a £50.00 payment, standard debit or credit card fees might amount to 1.5% + 20p. While the fixed fee is just 20p, the percentage element adds 75p — more than three times the fixed cost. For higher-value transactions, this becomes even more pronounced: on a £5,000 payment, a 1.5% fee equates to £75.

Carefully evaluating these costs is crucial for improving margins, especially for businesses with high average transaction values.

How do payment processors impact online payment systems?

An online payment processor facilitates the exchange of payment data between merchant and customer, ensuring secure and reliable fund transfers. According to Small Business UK, choosing the right payment processor can significantly affect both cost efficiency and transaction speed.

Leading payment processing services offer features specifically designed for UK businesses, such as quick fund settlements and sophisticated fraud prevention measures, both of which have become increasingly important due to growing concerns over data security.

By supporting various payment methods, including direct debits and credit card payments, online payment processors are ideal for busy eCommerce sites. A reliable processor enhances a company's reputation by delivering a seamless and secure online payment experience for customers.

Why choosing the right payment gateway matters for UK eCommerce sites

Selecting the right online payment solution for your website is essential for maximising conversion rates and delivering a seamless customer experience. Platforms such as Shopify offer a range of options for configuring web payment systems that align with your brand’s eCommerce requirements.

By integrating a website payment gateway tailored to both your operational needs and customer preferences, businesses can ensure that their online payment system complements the overall functionality of the site, ultimately supporting smoother transactions, greater trust, and higher customer satisfaction.

How online payment service providers help businesses streamline operations and cut costs

Beyond simply processing transactions, online payment service providers offer a range of features tailored to different business models. These include automated invoicing, customer support integration, and subscription or recurring billing tools, all of which help streamline operations and reduce the need for manual admin work. As a result, businesses can lower overheads, improve customer satisfaction, and manage cash flow more efficiently.

For UK businesses, the Financial Conduct Authority (FCA) maintains a register of authorised payment service providers, giving companies access to a broad range of trusted, compliant solutions. By choosing the right provider, businesses can scale more sustainably while ensuring data security, regulatory compliance, and long-term operational efficiency.

Overview of online payment systems for UK businesses

Optimising processes and boosting customer satisfaction is a key priority and businesses across the United Kingdom are continually seeking cost-effective payment solutions that enhance the customer purchasing experience, particularly in an increasingly digital landscape.

Both large corporations and small enterprises benefit from online payment systems that offer secure and reliable services, low fees, and seamless integration, all of which are essential in today’s competitive market.

Choosing the right online payment system depends upon numerous key factors, including the business model, transaction volume, and customer preferences. As a result, the UK market now offers a variety of payment models, from account-to-account transfers to fully integrated online payment gateways, enabling businesses to tailor the checkout experience while maintaining control over operational costs.

Are there any free payment gateways in the UK?

At present, there are no truly free payment gateways available to UK businesses. While a few payment processing services claim to offer free solutions, a closer look almost always reveals some form of cost, whether through transaction fees or hidden charges.

However, many businesses in the UK are reducing their transaction costs by complementing the traditional credit and debit card payment model with alternative online payment systems which offer more competitive rates and additional flexibility, helping businesses optimise their payment strategy.

5 of the cheapest online payment systems in the UK

Here we've provided a range of payment systems for small businesses which suit different requirements and payment types, with a focus on minimising costs.

For Open Banking payments

In the vast majority of cases, online payment systems that leverage open banking technology offer significant cost-saving advantages compared to card payment gateways, as they don't involve the use of 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 transfers', 'simple bank payments', 'A2A (account-to-account) transactions', or 'Payment Initiation Services'.

For card payments

If taking payments via credit or debit card is a must, there are a lot of online payment platforms to choose from. Processing fees can vary quite dramatically so it's worth comparing costs.

For when you need more than just a payment system

The online payment systems mentioned above focus on payments alone (payment gateways) and they require some technical knowledge to integrate. However, if you're looking for a system that can provide more than just payments, such as web 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.

What are the advantages of an Open Banking system?

The Open Banking system is transforming online payment gateways in the UK. Here are some of the prominent benefits of this revolutionary system:

Cost-effectiveness:

One of the primary advantages of open banking is cost reduction. Compared to traditional card-based payment service providers, open banking payments generally incur lower fixed fees. This makes it one of the most cost-effective online payment gateway options available to UK businesses across a wide range of sectors. By enabling direct connections with customers’ bank accounts, enterprises can significantly reduce expenses associated with card network charges.

Transaction speed:

Unlike traditional payment methods, online payment systems which leverage the instant payment facility of Open Banking deliver faster fund settlement. This has a major impact on the cash flow management of small businesses.

Improved security:

The primary risk of data compromise occurs when sensitive card information is stored in conventional payment systems. Open Banking provides a stronger security platform, as businesses are not required to save private customer data. Advanced authentication, such as biometric verification, allows online payment gateways in the UK to secure online payments further.

Enhanced transparency and control:

Open Banking enables customers to check their real-time balance before making online payments and provides immediate confirmation for businesses to verify a transaction. This fosters greater transparency and trust between both parties.

Understanding online payment platforms

Online payment platforms are comprehensive systems that go beyond processing transactions, they provide businesses with a full suite of tools to manage and optimise digital payments. Unlike basic gateways or processors, platforms such as Stripe, PayPal, and Square combine payment acceptance with features like real-time analytics, customer insights, invoicing, fraud prevention, and third-party integrations.

These platforms are designed to simplify the payment experience for both businesses and customers, enabling scalability and flexibility. As businesses grow, platforms offer modular services that can adapt to increasing demand, multiple currencies, or new payment channels.

Importantly, many of today’s emerging innovations, from Open Banking integrations to AI-driven insights, are built on the capabilities of these platforms, making them central to the future of online payment systems.

Emerging and future trends in online payment systems

As consumer expectations evolve and digital commerce continues to expand, UK payment gateways and broader online payment systems are rapidly adapting to stay ahead. Innovations in technology, security, and user experience are reshaping how businesses and customers interact with payment gateways. This section highlights the key trends influencing the future of online transactions, from advanced API integrations and fraud prevention tools to mobile-first experiences and fintech–bank collaborations.

1. Enhanced platform capabilities

• Online payment platforms like Stripe are expanding beyond transaction processing to offer tools for analytics, customer engagement, and personalisation.
• These integrations streamline admin tasks, helping businesses optimise efficiency and customer experience.

2. Open banking and API integration

• Open Banking continues to drive innovation, powered by seamless API connectivity between banks and third-party providers.
• Businesses gain access to richer data, enabling services like personalised financial advice, tailored loans, and better transaction processing.

3. Intelligent fraud detection

• AI and machine learning are transforming fraud detection, identifying suspicious patterns in real-time.
• These technologies improve security far beyond traditional methods, protecting both businesses and customers.

4. Expansion of financial inclusion

• Open banking is helping underserved populations access modern online payment systems, widening the customer base.
• This trend supports small businesses and consumers who were previously excluded from digital finance.

5. Mobile-first payment experiences

• As smartphones become primary financial tools, payment systems are evolving to offer mobile-first solutions.
• Apps now include budgeting, voice assistants, and integrated banking features.

6. Fintech-Bank collaboration

• The future of online payments in the UK lies in collaboration, not competition, between fintech companies and traditional banks.
• Expect more hybrid solutions that combine security and innovation.

Conclusion

Open Banking is revolutionising online payment systems in the UK. It provides businesses with enhanced security, cost efficiency, and a compelling customer interface. Wonderful is leveraging these advantages to offer seamless payment services to companies using payment gateways in the UK. Wonderful provides a simple, fast, and secure instant payment platform that can transform the online payment experience for your customers. Explore Wonderful's online payment services for more details.

FAQs

Is there any difference between a payment processor and a payment gateway?

A payment processor handles the transfer of funds between banks, while a payment gateway securely authorises transactions. Both are essential for online payments, but the gateway focuses on security and approval, while the processor moves the money.

What is the process of integrating an online payment gateway into my website?

Most UK payment gateways offer detailed documentation, support, and plugins or APIs for integration with platforms like Shopify or WooCommerce. These tools guide you through setup, ensuring smooth and secure payment processing on your website.

Do online payment gateways have any hidden charges?

Yes, some UK payment gateways may apply hidden charges beyond transaction fees, such as setup, maintenance, or chargeback fees. Always review the pricing details and terms carefully to avoid unexpected costs before signing up.

What is the standard fund settlement time?

Traditional online payment gateways usually take between one and three working days to settle funds. In comparison, Open Banking payments often enable near-instant settlements, although actual times may vary depending on your payment service provider.

What happens if there’s a data breach?

You must inform the customer and the payment gateway provider of the probable anomaly. Most online payment gateways in the UK have advanced fraud detection mechanisms to handle such situations.

What are the tax implications of an online payment gateway in the UK?

Online payment gateway charges are usually subject to VAT. However, if you are VAT-registered then you can reclaim the fees. The service fees should be recorded as business expenses, while the gross sales will come under the income head.