To make an Ecommerce Store successful, you need a way of getting paid and while there are lots of options out there, not all of them are suitable for new businesses.
When I started selling online, there were very few options to choose from but now there are some great options and in this post, I list the 5 best options for new online stores.
The reason why these 5 are best suited to new online stores is that they all operate a pay as you go business model, meaning that you only pay a transaction fee when you make a sale. You do not have any fixed monthly fees, like you do with the likes of Worldpay and SagePay.
The one that every business owner loves to hate but as they are one of the biggest payment gateways in the world. PayPal have grown massively over the last few years and has spread from being the way you paid on Ebay to being one of the most widely used gateways.
If you are going to be using PayPal on your website, I would recommend using the Express Checkout rather than the standard PayPal as it offers a better experience for the customer.
PayPal do have a bit of reputation of siding with buyers when it comes to disputes but you can take some steps to alleviate this. Using a tracked service or having proof of postage can protect you against unauthorised use claims.
The one most people get frustrated about is item not as described, however you can win these by just making sure that your product description and images are air tight. It is not a guarantee but I have won a couple of these by sending a screenshot of the product listing.
PayPal do have fee’s that are on the higher side and they updated their fee structure in 2019. Their base rate starts at 2.9% + 30p transaction fee. If your business grows to more than £20,000 a month, then you can join their tiered system that will see your rates decrease.
The company that disrupted the whole credit processing industry. Prior to Stripe, being able to accept credit cards on your website was very difficult. You either had to try and get accepted by one of the big payment processors, who had long and expensive contracts or go with a company that kind of offered credit card payments.
Stripe changed all that, they created a pay as you go solution that allowed businesses large and small to accept credit cards. They integrate with pretty much every ecommerce platform you can think of and have also introduced more advanced fraud protection, which they call Radar as well as 3D Secure compatibility here in the UK.
The one slight downside that can effect your cash flow in the early days is that deposits to your bank account are done every 7 days, so make sure you have enough money in the bank to cover your bills!
Stripe’s fees are really competitive, starting at a really low 1.4% + 20p transaction fee. For new businesses, this is often better than what you can get from more ‘traditional’ gateways.
You can also add extra’s as well if you want to add more protection on your transactions. You can add their advanced Radar for an additional 2p per transaction and one I really like, which is Chargeback Protection at 0.4% per transaction.
Klarna are a relatively new payment gateway but just like Stripe, they have really shaken things up in the industry. They did what Stripe did to credit card payments to flexible payments and retail finance.
Prior to Klarna, to even be considered by retail finance companies, you needed to have a significant online turnover. With many requiring a minimum of £1 million annual turnover and the smallest requirement I saw was £250,000 and both of these are way out of the scope of any new ecommerce store.
That is where Klarna come in, they offer a variety of different payment options such as pay after 30 days, pay in 3 instalments or finance options up to 36 months. You do still have to be approved by Klarna but the requirements are much lower and many new businesses do get approved.
Finding out Klarna’s fees is not that straight forward as they don’t advertised their fees on their website. The only set fees I could find were courtesy of my friends at EKM, according to them fees start at around 2.49% but to get exact fees, you do need to contact Klarna directly.
One payment gateway that is starting to gain popularity is Amazon Pay and that is simply down to the popularity of the Amazon retail site. Amazon Pay allows you to leverage this popularity on your own site as people can pay using their Amazon account.
This makes the customers checkout process extremely easy for your customers to buy from you as they use the credit card information that they already have stored on their Amazon accounts.
Amazon Pay might not be your most popular payment gateway but giving people multiple options to pay is never a bad thing.
Amazon Pay fees are pretty much the same as the old PayPal fee structure, with fees starting at 3.4% + 20p transaction fee. As you start getting more sales and pass certain benchmarks such as £1500 and £6000, your fees will reduce.
An often overlooked payment gateway is the UK based Nochex. In the early days of Ebay, Nochex was on one of the most popular payment options along with PayPal. Following the breakdown of the Ebay/Nochex relationship, they focused on creating an ecommerce payment gateway.
The offering from Nochex is very good, you get a fully PCI compliant payment gateway that offers 3D Secure as standard. To get access to the full merchant account, you do need to pay a £50 set up fee but then you only pay when you use the platform.
The one thing that does hold Nochex back is that that unlike many other payment gateways is that your business name does not appear on the bank, instead it says Nochex and this has led to some chargebacks/disputes being raised.
This is also why Nochex has a poor rating on trustpilot as nearly all of the complaints are about merchants who use Nochex, rather than the company itself. Many merchants who use the gateway are very satisfied with the service.
As I mentioned above, to have a full merchant account, you do need to pay a £50 one off set up fee. Once you are set up, the fees are pretty much in line with the rest of the industry at 2.9% + 20p transaction fee.
So there you go, my five top choice of payment gateways for new online businesses. The good thing is that nearly all ecommerce platforms such as Shopify, ShopWired and EKM all offer integration with these platforms so you get them set up really easily.
I honestly do recommend sticking with pay as you go gateways to start with as you don’t know how consistent your sales levels are going to be until you have been going for a while. Once you are established then it might be worth considering something like Worldpay or Sagepay as you generally do get better rates, especially if you have good sales volumes.