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

Online payment systems are evolving rapidly in the United Kingdom. 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 and how does it work?

An online payment system is a digital solution that enables businesses and service providers to accept payments from customers online. These systems typically include components such as payment providers, payment gateways, and merchant accounts, all working together to facilitate secure, real-time transactions.

Online payment systems simplify the checkout process by managing tasks such as transaction authorisation, secure data transmission, and payment confirmation. Many also offer features like transaction filtering, refund processing, email receipts, and detailed reporting to support smoother business operations.

Most systems can be seamlessly integrated into an existing online checkout, making them ideal for eCommerce websites looking to offer a convenient and efficient payment experience. For UK businesses, selecting a trusted payment provider that delivers secure and compliant processing is essential for maintaining customer confidence and operational efficiency.

One of the most important components of an online payment system is the payment gateway, the tool responsible for securely transmitting payment data between the customer, the provider, and the bank. Let’s understand why an online payment gateway matters for your business.

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 website to enhance 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 enterprises 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 UK payment gateways?

While some payment gateways may market themselves as “free,” there is no truly cost-free payment gateway in the United Kingdom. Most providers apply transaction fees, service charges, or commission-based pricing, even when setup or monthly fees are waived.

That said, businesses can minimise costs by exploring alternative payment systems that offer competitive transaction rates, flexible pricing models, and better integration options. As UK businesses weigh their options, balancing affordability with reliability and compliance is crucial for creating a scalable, sustainable checkout experience.

Why choosing the right payment gateway matters for UK eCommerce websites

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

By integrating a payment gateway tailored to your operational needs and customer preferences, businesses can ensure that their online checkout process runs smoothly, enabling fast, secure transactions and enhancing overall site functionality. A well-chosen gateway supports smoother transactions, builds trust, and improves customer satisfaction.

However, while the payment gateway plays a critical role in transmitting payment data securely, it’s only one part of the overall payment infrastructure. To ensure full payment processing capability, including authorisation, settlement, and fraud prevention, businesses must also consider their choice of payment provider.

Role of payment providers in online payment systems

Payment providers play a central role in the infrastructure of online payment systems by enabling secure, real-time transactions between businesses and customers. They manage the end-to-end flow of payment information, from initial authorisation through to fund settlement, ensuring transactions are compliant, encrypted, and efficient.

In addition to offering core payment processing services, many UK-focused providers deliver tools that enhance the reliability and security of online payments. These include fraud detection systems, PCI DSS compliance, and features like recurring billing or multi-currency support, all of which reduce operational burden for merchants.

For small to mid-sized enterprises, the right payment provider can have a significant impact on cost control and performance. Providers that offer faster settlement times and a wide range of accepted payment methods, including debit and credit cards, digital wallets, and direct debits, can increase trust and reduce checkout abandonment. A dependable provider not only ensures smooth transactions but also strengthens brand credibility by delivering a seamless and secure user experience.

How online payment providers help streamline business operations

Modern online payment providers offer far more than just transaction processing, they provide integrated tools that simplify key aspects of business operations. From automated invoicing and subscription billing to CRM and customer support integration, these features help reduce manual workload, improve accuracy, and speed up cash flow.

For UK businesses, selecting an FCA-authorised provider ensures access to secure, compliant services. By adopting the right solution, companies can cut operational costs, improve customer satisfaction, and scale with confidence.

As businesses seek smarter, more centralised solutions, the rise of all-in-one payment platforms is reshaping how online payments are managed, combining gateway functionality, analytics, and operational tools in one unified system.

All-in-one payment platforms: A smarter way to handle online payments

While payment gateways and providers form the backbone of digital transactions, all-in-one payment platforms offer a more holistic solution for modern UK businesses. These platforms combine gateway functionality, payment processing, fraud protection, analytics, invoicing, and integration tools, all under one roof.

Platforms like Stripe, PayPal, and Square go beyond simply facilitating payments. They help businesses manage growth with modular features such as real-time insights, subscription billing, multi-currency support, and open banking compatibility. Many also offer AI-driven risk management and built-in compliance with UK financial regulations.

For growing businesses, these tools simplify operations, reduce the need for multiple vendors, and deliver a consistent experience across channels. All-in-one platforms are especially valuable for SMEs looking to scale quickly while maintaining control over the customer journey.

As the payment landscape continues to evolve, adopting a comprehensive platform is a competitive advantage.

What are the costs involved in online payment processing?

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.

Benefits of choosing the right online payment system for UK businesses

Selecting an online payment system is no longer just a technical decision; it’s a strategic one. As UK businesses prioritise efficiency, cost savings, and customer experience, the right payment setup can streamline operations, reduce fees, and improve checkout performance.

From traditional gateways to all-in-one platforms and Open Banking solutions, today’s landscape offers a range of systems that suit different business models, transaction volumes, and customer behaviours. Understanding your operational needs and aligning them with scalable, secure payment solutions is key to staying competitive in the UK’s fast-moving digital economy.

The benefits of making the right choice extend well beyond the checkout page. Businesses gain increased trust from customers through secure transactions, access better financial visibility with real-time reporting tools, and reduce the burden on internal teams with automated features. Ultimately, a well-chosen payment system becomes a growth enabler, improving customer retention, increasing conversion rates, and supporting expansion into new markets with ease.

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 (payment gateways), and they require some technical knowledge to integrate. However, if you're looking for a system that can provide more than just a payment gateway, 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 enterprises.

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, enables online payment gateways in the United Kingdom to further secure online payments.

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.

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 transforming 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 enterprises and consumers who were previously excluded from digital finance.

5. Mobile-first payment experiences

• As smartphones become primary financial tools, online 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 your customers' online payment experience. Explore Wonderful's online payment services for more details.

Online payment system FAQs

What are the main types of online payment systems used in the UK?

Card processors (like Stripe), open banking systems (like Wonderful), direct debit providers (GoCardless), and full-stack platforms (Shopify Payments) are the types of online payment systems used in the UK.

What are the cheapest online payment systems for UK businesses in 2025?

Costs vary, but low-cost options include Wonderful (1p bank payments, zero % fees), GoCardless (for direct debits), and Stripe for cards. Choose based on payment type and volume.

Which online payment gateways are best for UK eCommerce websites?

For eCommerce, Stripe, Shopify Payments, and Worldpay offer strong integrations. Wonderful is a great low-cost option if you're using WooCommerce and want instant bank payments.

What services do payment gateway providers offer?

Payment gateway services include fraud detection, real-time transaction processing, multi-currency support, and refund handling, all essential for smooth, secure online payments.

Can UK businesses take online payments without card fees?

Yes. Open Banking providers like Wonderful enable UK businesses to take online payments with no card fees and near-instant settlement, ideal for saving on processing costs.

What is the fastest way to receive online payments from UK customers?

Open Banking systems like Wonderful offer instant bank transfers. Stripe and Square offer fast settlement for card payments, but usually take 1 to 2 working days.

Which online payment systems integrate with Xero or QuickBooks?

Wonderful integrates with Xero, while Stripe, GoCardless, and Shopify offer Xero and QuickBooks support. Choose based on whether you need card, direct debit, or bank payments.

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. The payment gateway focuses on security and approval, while the processor transfers the money.

What’s the difference between merchant accounts and payment gateways in the UK?

Merchant accounts hold funds before payout; gateways route payments online. Wonderful, unlike traditional providers like Worldpay or Opayo, bypasses these layers using open banking, enabling instant bank payments without a merchant account.

What features should a UK business look for in a payment gateway?

Look for low fees, instant settlement, Xero or accounting integration, mobile compatibility, support for subscriptions, and fraud protection.

How does online payment gateway integration work?

Online payment gateway integration links your checkout to a provider via API or plugin, enabling secure payments on ecommerce platforms like Shopify, WooCommerce, or Magento.

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 the setup process, 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.

How long does it take for funds to settle through a UK payment gateway?

Most UK payment gateways settle funds in one to three working days. Open Banking payments can be near-instant, depending on your payment provider and the payer’s bank systems.

What happens if my payment provider has a data breach?

If your payment provider suffers a data breach, your customers’ card or personal data could be at risk. Providers must notify affected users and regulators, and may freeze transactions. Choose providers with strong security and PCI DSS compliance.

What are the tax implications of using 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.