5 of the cheapest online payment systems for UK businesses

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 platforms 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 gateways available to UK businesses. We found an extremely small amount of payment processing services which claim to be free, 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 platforms.

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 1.5% + 20p. Even for this relatively modest transaction, the percentage fee of 75p dwarfs the fixed fee of 20p. On larger purchases percentage fees can become significant. For a payment of £5,000, this 1.5% fee becomes £75.

5 of the cheapest online payment systems in the UK

Here we've provided a range of options to suit different requirements and payment types, with a focus on minimising costs.

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'.

For card payments

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

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.

What are the advantages of an Open Banking payment system?

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

Cost-effectiveness:

One of the main advantages of Open Banking is cost reduction. In comparison to traditional card-based transactions, open banking typically has lower fixed charges. This makes it the cheapest online payment gateway option in the UK for businesses across various sectors. Enterprises can save significantly on card network fees as it connects directly with customers’ bank accounts.

Transaction speed:

Unlike traditional payment methods, the instant payment facility of Open Banking leads to faster fund settlement. This has a major impact on the cash flow management of small business payment systems.

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 payment gateways in the UK to secure online transactions further.

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

How do online payment systems facilitate international payments?

Business enterprises in the UK looking to expand beyond borders must be able to accept international payments. However, international transactions are exposed to probable cyber thefts, regulatory challenges, and currency conversion fees. This is where payment gateways facilitate cross-border payments over secure platforms that comply with international and local regulations.

Downsides of using payment gateways for international transactions

For foreign transactions, you need to use a leading payment gateway like PayPal or Stripe. However, these gateways have shortcomings, like high currency conversion fees and complicated rules and regulations. Businesses may find these extra costs and regulatory compliance to be additional burdens.

How do payment gateways support subscription-based models?

Management of recurring subscription-based payments

From streaming services to software-as-a-service (SaaS) platforms, subscription-based business models are booming in many different industries. Payment gateways play a crucial role in the success of these models since they create a framework for the effective management of recurring payments. Automated billing, safe data storage, and easy payment re-attempts in the event of failed transactions all contribute to a positive user experience, resulting in consistent revenue growth for the enterprise.

Limitations of subscription-based payments

Subscription-based payments, while useful for handling recurring charges, frequently encounter issues such as refused transactions due to expired or insufficient amounts on cards, as well as complex billing cycles that might confuse buyers. Additionally, organisations must handle sensitive payment data, which raises the risk of security breaches. Wonderful's instant payment services provide a more streamlined alternative by allowing direct transactions from bank accounts. This method lowers the probability of denied payments and simplifies invoicing processes, making it one of the more dependable and secure online payment systems for both businesses and customers.

What are the future trends in online payment systems?

Technological advances and altering consumer preferences are driving the evolution of payment gateways in the UK. Some of the redefining future trends are:

Augmented API integration:

The backbone of Open Banking is API integration, which allows seamless data transfer between third-party services and banks. You will witness a more robust API ecosystem that will enable businesses to expand their service offerings. This includes smoother payment processing, customised financial advice, tailored loan products, investment plans, etc.

Better fraud detection and prevention:

Artificial intelligence (AI) and machine learning (ML) are two major technological breakthroughs that are augmenting fraud detection and prevention. They can identify probable fraudulent intent based on transaction patterns in real time. Open Banking platforms are adopting these advanced security measures that are more potent at mitigating threats than traditional methods.

Expanding the reach of the digital economy:

With the increased adoption of Open Banking, the underserved population has better access to banking services. This enables individuals and small enterprises to reap the benefits of the digital economy, thus expanding the potential customer base for online payment providers in the UK.

Mobile-first payment gateways:

The smartphone revolution is opening the door for mobile-first payment solutions. Open Banking applications with sophisticated financial management tools go beyond simple commercial transactions. Small business payment systems are leveraging this trend to attract mobile-savvy customers.

Redefining the customer experience:

Open Banking is gradually embracing new-age technologies like chatbots and voice-activated payments that are within regulated frameworks. These integrations are increasing the overall functionality of the UK payment gateway by providing an enriched user experience.

Coexistence of banks and fintech organisations:

The new era of online banking is moving toward a synergistic relationship between banks and fintech companies. The reliability of the traditional banking system is all set to merge with the technical agility of online payment providers in the UK, leading to the development of more customer-centric products and services.

Why is a strong payment service pivotal to the success of online stores?

When it comes to running successful online stores, payment services are crucial. A streamlined payment process goes a long way towards enhancing customer satisfaction, which in turn increases conversion rates and the likelihood of repeat business. You can adapt to unique consumer preferences with advanced payment gateway features like one-click payments, integration with digital wallets, and support for numerous payment methods. The checkout process becomes simple with these improvements, which means less friction and fewer cart abandonments.

Additionally, advanced payment services provide online retailers with valuable resources for the analysis of consumer behaviour and transaction data. This data has the potential to improve the overall purchasing experience, customise promotions, and personalise marketing efforts. Additionally, payment gateways guarantee secure transactions by employing encryption and fraud detection, which in turn cultivates client confidence and trust. In order to remain competitive and satisfy the changing needs of consumers, online stores in the United Kingdom must implement a reliable payment service.

Conclusion

Open Banking system is revolutionising the online payment system in the UK. With enhanced security, cost efficiency, and a compelling customer interface, it brings several benefits for medium and small businesses. Wonderful is leveraging these advantages to provide seamless service to enterprises using UK payment gateways. We provide a simple, fast, and secure instant payment platform that will transform your online banking experience. Check out our services for further details.

FAQs

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

A payment processor primarily manages the transaction data, while a payment gateway authorises the transfer of funds between customers and enterprises. Choosing an appropriate payment gateway is critical for small business payment systems for cost-effectiveness and efficiency.

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

Generally, detailed documentation and customer support from your selected payment gateway in the UK will act as a guide. They usually provide plugins or APIs that facilitate hassle-free integration with your existing eCommerce platforms, like Shopify or WooCommerce.

Do payment gateways have any hidden charges?

One of the key factors in selecting a payment gateway in the UK is to verify if there are any charges levied beyond the transaction fees. Setup fees, maintenance charges, chargeback fees, etc., are potential add-on expenses. You must read the fine print carefully before signing up.

What is the standard fund settlement time?

Open Banking payments usually provide instant settlements, though it may depend on your service provider. Traditional payment methods, typically take between 1 and 3 business days for fund transfers.

What happens if there’s a data breach?

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

What are the tax implications of a 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 transaction fees should be recorded as business expenses, while the gross sales will come under the income head.