5 of the cheapest online payment systems for businesses in the UK
Kieron James
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With the wide variety of online payment systems available today, we take a look at some of the most cost-effective payment gateways in the UK.
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 online 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 payment 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 online 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 online payment platforms.
What constitutes payment processing costs?
The costs associated with processing payments online 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 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, 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
Wonderful is a purpose-driven online 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)
GoCardless
GoCardless is a well-established online payment 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 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.
Stripe
Stripe is a well-established online payment 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.
1.5% + 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 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.
Shopify
Compared to some other all-in-one eCommerce solutions like WooCommerce, Shopify offers good value. This online 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
Overview of online payment systems for UK businesses
Businesses in the United Kingdom are perpetually in pursuit of cost-effective payment options that improve their purchasing experience, given the ever-changing landscape of online payment systems. Both large and small enterprises derive value from solutions that integrate secure payment services, low fees, and easy integration as a result of the growing digitalisation. In the current competitive market, it is imperative to optimise processes and enhance consumer satisfaction through the use of online payment systems.
The selection of the appropriate online payment system is contingent upon the business model, transaction frequency, and consumer preferences. This diversity is the reason why UK payment systems now include a variety of models, such as account-to-account payment options and online payment gateways, which provide businesses with the ability to customise their purchasing process and manage costs.
Why choose an online payment gateway?
An online payment gateway is essential for protecting online transactions because it encrypts critical client information throughout the checkout procedure. Recent Shopify insights emphasise the need to incorporate a reputable payment gateway into an eCommerce site to improve transaction speed and security. For UK businesses, having an optimised online payment gateway means more than just payment processing; it means maintaining a smooth flow that supports both online payments and service enhancements for customer satisfaction.
Online payment gateways such as Wonderful, Stripe, and WorldPay charge reasonable fees, especially for small firms with significant transaction volumes. Integrating an online payment gateway also adds flexibility to payment processing, allowing businesses to manage various payment kinds, such as recurring or one-time charges, without requiring complex infrastructure.
How do payment processors impact online payment systems?
An online payment processor manages the data communication between the client and the merchant, providing secure fund transfers. Small Business UK asserts that selecting an appropriate online payment processor influences both cost-effectiveness and transaction efficiency. Prominent payment processing services provide features specifically designed for UK enterprises, like expedited fund settlement and fraud prevention mechanisms, which are becoming increasingly essential due to rising apprehensions regarding data security.
Online payment processors enhance enterprises by providing many payment choices, including direct debits and credit card payment services, rendering them optimal for high-traffic eCommerce platforms. A reliable payment processor enhances a business's credibility by ensuring customers secure online payment processing services.
Some of the emerging trends in online payment platforms
End-to-end solutions that improve the digital shopping experience are being offered by online payment platforms, which are progressing beyond basic administrative functions to facilitate smoother online payment services. Stripe and other online payment systems now provide businesses with supplementary assistance, such as analytics tools and customer engagement features that extend beyond online payment processing. This integration of these tools with an online payment platform enables businesses to personalise the purchasing experience, optimise transaction rates, and analyse customer behaviour.
Many online payment platforms now offer a variety of integrations that streamline administrative processes, thereby simplifying the management of payment infrastructures for companies, as noted by Stripe's developer resources. For businesses in the United Kingdom, these payment platforms are a cost-effective solution that strives for secure and quick online payment services, with the potential to expand as the business expands.
Online payment service providers for businesses: Optimising efficiency and cost control
Beyond simply processing transactions, online payment services offer solutions that can be tailored to various business types. Online payment service providers that facilitate invoicing, customer assistance, and subscription management are now essential to business operations. By lowering administrative costs and improving customer satisfaction, these web payment systems assist businesses in managing recurring payments.
Businesses now have more options thanks to the Financial Conduct Authority's (FCA) list of online payment service providers that have been granted licenses to operate in the UK. Businesses that want to scale sustainably must maintain data security, enhance cash flow, and assure regulatory compliance by implementing these online payment services.
Significance of selecting the right online payment options for your web-based business
Integrating the appropriate online payment method into your website is critical for maximising conversions. Online payment platforms such as Shopify offer a variety of alternatives for setting up web payment systems that are compatible with a brand's online shop requirements. Businesses may ensure that their online payment system is in sync with the functionality of their website and client preferences by using a website payment gateway that is tailored to their needs.
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 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 payment service providers, 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, 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.
What are the future trends in online payment systems?
Technological advances and altering consumer preferences are driving the evolution of online 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 online payment service providers and banks. You will witness a more robust API ecosystem that will enable businesses to expand their service offerings. This includes smoother online 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 in the case of pay online systems. 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 online payment service providers. 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 online payment systems. Open Banking applications with sophisticated financial management tools go beyond simple commercial payment service providers. Modern online 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 online payment providers 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 payment services.
Conclusion
Open Banking is revolutionising the online payment system in the UK. It provides businesses with enhanced security, cost efficiency, and a compelling customer interface. Wonderful is leveraging these advantages to provide seamless payment services to enterprises using payment gateways in the UK. Wonderful provides a simple, fast, and secure instant payment platform that can transform your online payment experience. Check out Wonderful's online payment services for more details.
FAQs
Is there any difference between a payment processor and a payment gateway?
An online payment processor primarily manages the online payment data, while an online payment gateway authorises the transfer of funds between customers and enterprises. Choosing an appropriate payment gateway is critical for an online payment system to be cost-effective and efficient.
What is the process of integrating an online payment gateway into my website?
Generally, detailed documentation and customer support from your selected online payment gateway in the UK will act as a guide. Payment systems online usually provide plugins or APIs that facilitate hassle-free integration with your existing eCommerce platforms, like Shopify or WooCommerce.
Do online payment gateways have any hidden charges?
One of the key factors in selecting an online 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 levied by several online payment systems. 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 payment service provider. Traditional online payment systems 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 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.
