Merchant services: Choosing the right online payment system for your website
A website introducing items for sale without an online payment system is not an e-commerce, it’s just a virtual shop window on the internet.
As online payment systems provide the necessary software tools to actually sell goods and services on the web, they’re a must to turn the website into a true e-commerce. However, not all retailers have sufficient technical knowledge to install these solutions, or even to understand their basic principles and how to choose them.
Selecting the best payment system for small businesses is an indispensable task to jump on the bandwagon of online commerce and it starts by understanding what online solutions are and how they work.
Different solutions are available, accepting different online payment methods, offered by different online payment services providers.
So here’s a quick guide to understand all these essential aspects and help nurture an enlightened choice. With, of course, the answer to a crucial question: what are the prices of these online payment systems,?
Online payment systems basics
Online payment systems bring credit or debit card payments to e-commerce websites. They actually represent a full package of software and service items.
What is an online payment system?
An online payment system is quite basically the software and service package allowing a website to accept payments online.
Usually provided by merchant banks or specialized institutions, they include the following components:
- A merchant account,
- A virtual card terminal,
- A payment gateway,
- A payment processor.
How online payment processing solutions work
A merchant account is essential to start any e-commerce project.
Provided by high-street banks, specialised merchant banks or specialised subsidiaries of online payment software vendors, these accounts are used to accept electronic payments (online or offline) before the funds coming from these payments are transferred to the retailer’s regular business account.
Now, let’s see how an online transaction unfolds to understand how online payment systems work:
- A customer selects items on the retailer’s website, puts them in his basket, and hits “checkout” or “proceed to payment”,
- At this point, there are two options, the choice of which has heavy consequences on security certifications like PCI-DSS. The online shopper either stays on the website or is taken to the payment services provider’s servers. In the first case, the retailer is responsible for nearly all of the security steps necessary to gain PCI-DSS certification. In the second one, the online payment services provider bears most of that burden. Whatever the option selected by the retailer, the customer then finds...
- ... a virtual card terminal, the piece of software which allows online shoppers to key in their credit card details,
- Once these details have been entered, the transaction request is encrypted and routed to the payment gateway,
- The payment gateway forwards the authorisation request to the payment processor,
- The payment processor connects with the customer’s bank server to authorize the transaction,
- Transaction authorisation is forwarded to the payment gateway,
- The payment gateway forwards this authorisation to the website and the retailer’s merchant account servers,
- The customer is informed of the authorisation (or the failure thereof),
- Funds are transferred to the retailer’s merchant account from the shopper’s account,
- After a few working days (3 to 5 generally), funds are transferred to the retailer’s business account.
Identifying the best online payment system for your specific business needs
Selecting the right payment solution for the specific needs of a given business starts with finding the answers to a series of key questions regarding both the payment system itself and the payment services provider.
A comparison of online payment solutions...
A few objective criteria greatly help selecting the right solution, such as:
- What is the level of security offered by the solution?
This is easy to check as the PCI-DSS certification is defined and awarded independently. Several levels of PCI-DSS security standards exist, and another good thing is that they encompass the whole online payment solution, not just the sum of its parts;
- How user-friendly is the system?
This question goes for both the business user – the retailer – and the end customer. The retailer must be able to easily setup the solution, without being a technology nerd, and the customer must be able to use it effortlessly within the e-commerce website framework.
- Does the solution integrate seamlessly with the rest of the website and e-commerce solution?
This is an essential question for the webmaster or developer taking care of the website. Standard e-commerce platforms (the actual software running the website) must be proven to be compatible with the payment services solution. In fact, some e-commerce platforms even make their own payment systems, like Shopify, or vice-versa. External payment gateways may or may not be supported, with or without additional fees.
- What payment methods are accepted?
This include different credit card or debit card types (Visa, Mastercard, Amex or foreign credit card issuers) or other e-wallet or online payment systems like Apple Pay or Google pay. Extensive customer research must be done prior to the selection by the retailer to know what the customers are more likely to use.
- What currency should be accepted?
Similarly, retailers should first ask themselves what currency they will be accepting in online transactions. Are they really ready to pay the premium required to accept transaction in Chinese Renminbi or New Zealand dollars? It’s also important to check whether the merchant account will accept these currencies or foreign card payments.
- Will recurring payment be supported?
Recurring payments allow online payment in several instalments, which is a form of credit managed by credit card issuers and is increasingly popular among e-shoppers.
... and a comparison of online payment services providers
Checking the software features and services offered by the solution is not the only task required to choose the best payment solution for a business, as it’s also essential to select the right provider. Selecting the right provider is all the more important as it’s about entrusting a business partner who will be responsible for thousands of pounds worth or revenue for the retailer.
Online payment system providers can be selected based on the following interrogations:
- Where is the provider based? Solution providers can be based anywhere in the world, and many of them tend to cater for the needs of specific national markets, notably the US. As online shopping preferences greatly differ from one country to another, it’s essential to know whether the provider has a strategy for the Irish market. Where the provider is based brings a hint. Checking whether they have active business customers in Ireland gives another strong hint.
- Is the provider reputed? Online reviews are a good way to start getting an idea of the provider’s reputation, but it’s never as good as directly contacting business customers to ask for their feedback.
- Does the provider offer Irish-based customer service? In case the solution breaks down for some reason, the toll can quickly add up for e-commerce retailers. It’s essential that quick, smart customer service can be reached anytime to solve the mess and Irish-based customer service is a sign of quality, though not the only one.
- What fees do they charge? This is naturally an essential question. Even more than the amount of fees, the fee structure itself needs to be transparent, which is really not always the case with anything related to payment services.
Price comparison of major online payment solutions
This last criterion does indeed require further developments. The following table includes the names of some of the major online payment system providers, as well as their fee breakdown by type of fee (some websites do not provides pricing in euros).
(3 different plans)
Request quote + 10p
Request quote + 10p
£19 (gateway fee)
2.49% + 15p
€0 to €20
1.9% + €0.25
to 3.4% + €0.25
1.4-3.4% + 20p (depending on card issuer)
.4 – 1.5%
£29 to £299 (includes website, blog and SSL)
1.6% + 20p to 2.2% + 20p
.5% to 2% extra fee for external gateway
2.4% + $.30
1.4% + 20p (EU cards) to 2.4% + 20p (non EU cards)
Minimum invoice of €100
.90-3.95% + €.10
1.99% - 2.49%
We highly recommend that you compare as many quotes as you can before selecting a provider. You can request quotes in online payment systems for free on Companeo.ie and receive offers from several providers.