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.

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.

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.

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.

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.

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 support features such as invoicing, customer support, and subscription management have become essential to modern business operations. By reducing administrative costs and enhancing customer satisfaction, these web payment systems help businesses manage recurring payments more efficiently.

Thanks to the Financial Conduct Authority’s (FCA) register of authorised online payment service providers, UK businesses now have a wider range of trusted options to choose from. Businesses that want to scale sustainably must maintain data security, improve cash flow, and ensure regulatory compliance by implementing these online payment services.

Significance of selecting the right online payment options for your web-based business

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.

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.

Some emerging trends in online payment platforms

Online payment platforms are evolving beyond basic administrative functions to offer end-to-end solutions that enhance the digital shopping experience, enabling smoother and more efficient 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 offer a cost-effective solution that delivers secure and efficient online payment services, with the scalability to grow with the business.

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 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?

Open Banking payments enable nearly instant settlements, although this may vary based 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 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.