What is an Online Payment Gateway?
An online payment gateway is a service that processes online payments for a website. In the UK, payment gateways mostly handle credit and debit card payments, but may also support payment by PayPal or other alternative payment methods.
How Do Payment Gateways Work?
When a payment takes place, the payment gateway takes the customer's payment details and passes them to the appropriate payment network (e.g. the Visa payment network).
The network then approves or rejects the payment and, if appropriate, transfers funds from the customer's account to the merchant's account.
How Much do Payment Gateways Cost?
Payment gateway fees vary between providers and do change over time, but the following are some guidelines.
Fixed Monthly Fees
Some payment gateways have no fixed monthly fees and just charge for transactions; others charge a monthly fee (typically around £20) which includes a certain number of transactions (e.g. 300 transactions).
For each transaction they process, payment gateways usually charge a fixed amount (e.g. 10p or 20p) plus a variable amount that is a percentage of the transaction value (e.g. 2.4%). So a £100 payment might cost 20p plus £2.40, or £2.60 in total.
If a payment gateway is one which requires you to have a merchant account as well, then the per-transaction fee for the gateway will usually just be a fixed amount such as 10p. You will then also pay the merchant account provider a fee for each transaction.
We have a calculator to help you compare payment gateways.
What Else do You Need to Accept Payments Online?
Unless your chosen payment gateway is an all-in-one service such as PayPal, WorldPay or Nochex (known as third-party payment providers), you'll also need to set up a merchant account.