Choosing a payment gateway is a major consideration for any business that processes transactions online or accepts electronic payments. The payment gateway that a business selects will define much of its payment experience, both for the business and for its customers—but it also determines how much the business will pay to accept payments.

Payment gateway fees can significantly impact the profitability and cost structure of a business. Since every transaction incurs a cost, the choice of a payment gateway and the associated fees can make a substantial difference in net revenue.

As businesses grow and scale, their transaction volume increases, which can amplify the impact of these fees. Below, we’ll cover the fees associated with using a payment gateway. These costs are subject to change, so when you’re ready to begin your search, make sure to double-check the fees for every provider.

What’s in this article?

• What is a payment gateway?
  
• What are payment gateway fees?
  
• How Stripe Payments can help
  

What is a payment gateway?

A payment gateway is a service that processes credit card transactions for online and brick-and-mortar stores. Think of it as a digital version of a point-of-sale (POS) terminal you might see in a retail store.

When a customer pays for a product or service, the payment gateway encrypts the sensitive payment information and sends it between the bank that issued the card and the business’s bank. The payment gateway acts as an intermediary, ensuring that the transaction is carried out securely and promptly.

Any online business that wants to accept credit card or direct payments needs a payment gateway. Payment gateways are a key component of the ecommerce transaction process because they keep customer information secure as it moves between the business and the payment processor. There are a variety of payment gateways for businesses to choose from, each with their own features that fit the needs of different business types. The demand for reliable payment gateways is only growing: Global transaction value from digital payments is expected to total almost $14.8 trillion by 2027.

What are payment gateway fees?

Payment gateway fees are the costs businesses incur while using a payment gateway’s services, specifically for processing credit card transactions. While there’s no way to avoid payment gateway charges, businesses can reduce them by selecting a pricing structure that aligns best with their goals and by choosing a payment gateway with competitive pricing. These fees can be broken down into several types:

• Setup fees
  This is a one-time cost that a business pays when it first creates an account with a payment gateway. This fee covers the initial configuration and integration of the payment gateway with the business’s sales system.

• Transaction fees
  Payment gateways charge these fees every time a transaction is processed. They can be a fixed amount for each transaction, a percentage of the sale amount, or sometimes both. This fee typically ranges from around 1.10% to 3.15% and compensates the gateway for processing the transaction.

• Monthly fees
  Some payment gateways charge businesses a recurring monthly fee for access to their services, regardless of the number of transactions processed.

• Chargeback fees
  When a customer disputes a charge and a transaction is reversed, the business may incur a chargeback fee. This fee covers the administrative work involved in managing the dispute.

• Refund fees
  If a business issues a refund, some gateways might charge a refund fee. This fee covers the cost of returning funds to the customer.

• PCI compliance fees
  Payment Card Industry Data Security Standard (PCI DSS) compliance is mandatory for businesses that handle credit card transactions. Some gateways might charge a fee for maintaining this security standard.

• Termination fees
  If a business decides to cancel their account before the end of a contract term, they may need to pay a termination fee. This compensates the gateway for the early end of the service agreement.

• Miscellaneous fees
  Payment gateways may charge other fees for additional services, such as international transactions, currency conversion, or using premium services such as advanced fraud protection. These fees can vary from one payment gateway to the next.

Different payment gateways have their own fee structures, and businesses typically select a service based on how these costs align with their sales volume and business model. Some payment gateways might have lower transaction fees but charge higher monthly fees, making them more suitable for businesses with a high number of transactions. Other payment gateways might have no monthly fee but higher transaction costs, which could be more economical for businesses with lower sales volumes.

When choosing a payment gateway, it’s important to consider how your provider will affect customer satisfaction and conversion rates. For instance, a gateway that provides an intuitive and secure checkout experience can lead to higher customer retention and more sales. While costs do matter, choosing the right payment gateway for your business means looking at more than just the costs.

How Stripe Payments can help

Stripe Payments provides a unified, global payments solution that helps any business—from scaling startups to global enterprises—accept payments online, in person, and around the world.

Stripe Payments can help you:

• Optimize your checkout experience: Create a frictionless customer experience and save thousands of engineering hours with prebuilt payment UIs, access to 125+ payment methods, and Link, a wallet built by Stripe.
  
• Expand to new markets faster: Reach customers worldwide and reduce the complexity and cost of multicurrency management with cross-border payment options, available in 195 countries across 135+ currencies.
  
• Unify payments in person and online: Build a unified commerce experience across online and in-person channels to personalize interactions, reward loyalty, and grow revenue.
  
• Improve payments performance: Increase revenue with a range of customizable, easy-to-configure payment tools, including no-code fraud protection and advanced capabilities to improve authorization rates.
  
• Move faster with a flexible, reliable platform for growth: Build on a platform designed to scale with you, with 99.999% historical uptime and industry-leading reliability.
  

Learn more about how Stripe Payments can power your online and in-person payments, or get started today.