If your business doesn't accept digital payments, you’re missing out. And, if your business processes transactions online, whether through a website, emailed invoices, or text-to-pay platforms, you'll need a solid payment gateway to run them. While there are some payment gateway fees, the value often outweighs the costs. Statista projected the total transaction value for digital payments to reach over $11 trillion in 2024, so using a payment gateway is a smart move if you want access to this payment method.
Your choice of a payment gateway will dictate much of your customer's experience with your company and receiving reliable cash flow. It's a non-trivial decision that should be handled with care. Thankfully, you're a step ahead because you landed on this article.
Today, we’ll walk you through how to make a good choice for a payment gateway and what to expect from the associated fees. Ultimately, you want a gateway that can scale and grow with your business as transaction volume increases without paying an arm and a leg for the service. These choices can substantially impact your business, income, and expenses, so let’s dive in.
A payment gateway is a piece of technology that securely processes online transactions, allowing customers to securely pay for your products or services. You can think of it as the digital version of the machine you’re used to seeing at checkout. A gateway securely tokenizes or encrypts payment information into a digital package and moves that package between your customer’s and your business' bank accounts. Each payment processor offers some form of payment gateway, some with more features than others. However, the principle of a payment gateway remains the same, regardless of the vendor through which you choose to get yours.
Your business will incur charges when using a payment gateway. These include access to the fee, account setup, and ongoing account use. A gateway gives you secure back-end access to the payment networks that route transactions, and each transaction uses bandwidth. This bandwidth costs a few pennies per transaction, so you can expect to pay additional fees.
These transaction costs vary depending on the vendor and payment method your customer chooses. Here are some examples of the types of gateway fees you can expect to pay with most vendors:
These gateway fees are added to your overall processing costs. So, for example, if you process debit and credit cards regularly at an average effective rate of 2.5%, add these fees to your overall cost for processing online transactions through a payment gateway. In other words, you’ll still be subject to the standard payment processing fees, including interchange, association fees, PCI compliance fees, annual fees, refund fees, chargeback fees, etc. Gateway fees just get added on top.
You may encounter many competing solutions when looking for a payment gateway and trying to find the lowest pricing. These solutions offer various compatibilities, integrations, and price structures. Let’s break down some of the most popular payment gateway options by price so you can make a good comparison.
Note: All prices are listed as of the date of publishing but may be subject to change over time.
Authorize.net is one of the most popular gateways. Visa owns it and offers a few ways to use its services:
Gateway only. If you have a merchant account with a different provider, you can contact Authorize.net to create a payment gateway-only connection. Because of its popularity, many merchant account providers integrate with Authorize.net. If you choose this plan, there is a $0.00 setup fee, a $25.00 monthly fee, and a $0.10 per transaction fee. As mentioned, these fees are on top of the processing rates you pay through your merchant account.
Payment gateway with a merchant account. If you don’t have a merchant account with another provider, you can use Authorize.net as your merchant account provider and payment gateway provider. You will pay the same $25.00 payment monthly gateway fee, $0 set up fee, and a processing rate of 2.90% on all volumes and $0.30 per transaction.
NMI is compatible with many devices and providers and offers one of the most robust payment gateways on the market. To use NMI, you must set up a merchant account with a compatible provider before contracting them for services. For clarification, providers like Stripe, Square, and PayPal do not work with NMI because you do not have access to a standalone merchant account through these providers. Instead, they are payment aggregators that give you access to their merchant account instead of your own.
To use NMI, the costs for the gateway are an additional (roughly) $20 per month and $0.13 per transaction. Note that the actual cost will vary depending on the vendor you contract through.
Stripe is an incredibly popular and rapidly growing payment gateway provider that integrates with many existing website platforms, such as WooCommerce and Shopify. Here are the costs.
To use Stripe, you can expect to pay no specific gateway fees but a processing rate of:
Almost everyone has heard of PayPal, as it offers excellent payment gateway functionality for merchants and a trusted and secure service for customers. To use the PayPal gateway, you can expect to pay no specific gateway fees but a processing rate of:
Square is another popular payment solution provider primarily designed for in-person transactions. Its primary functionality caters to small businesses operating in person, such as pop-up shops and farmer’s market vendors. However, Square now offers online support, which may be an exciting option if you already use Square.
To use the Square payment gateway, you can expect to pay no specific gateway fees but a processing rate of:
Slightly less common, but an equally viable option for your payment gateway needs is Adyen. It’s much more common internationally (note that its base prices are in Euros). With Adyen, you can expect to pay no setup or monthly fees for the gateway, just €0.11 per transaction plus pass-through costs as listed on their website.
Base gateway costs will vary depending on your provider. However, other factors may affect your overall payment gateway charges. These include foreign transaction fees, the different card types your customers present, additional third-party integrations, features, and add-ons.
Cards issued in another country generally have a different base currency than US dollars. To successfully process those cards, your payment provider usually has to convert the native currency to US dollars. This conversion incurs additional fees due to processing work and foreign exchange fees, including the exchange rate differential, wiring costs (potentially), and a buffer to account for fluctuations. As such, processing many cards from another country often results in significant additional fees. If your gateway is also your payment provider, you can expect to pay foreign transaction fees through them.
It may cost more to accept extra payment options. Simple basic payment gateways accept credit and debit cards manually entered through the portal. However, you may want to add functionality to make payments as easy as possible for your customers, including options like Apple Pay and Google Wallet, QR codes, etc.
Adding extra functionality often incurs additional fees. The exact additional fees and whether or not they’re applicable will depend on your payment gateway provider. For example, adding a text-to-pay or invoicing service may incur further costs.
Some card types also incur additional fees. Every payment gateway can accept Visa and MasterCard, and almost all can accept Discover. However, additional card types like American Express, for example, may require additional agreements and fees.
Most payment gateway providers also offer additional functionalities through branded add-ons. For each provider, these offerings will vary. For example, some gateway providers can add compatible accounting software for an extra charge. Others can offer membership functionality or paid customer portal integration with your website.
When combined with third-party integrations, your payment gateway's options are endless. However, these supplemental functionalities often come with additional fees, so it’s important to choose wisely.
3rd party integrations
Finally, most payment gateway providers work well with others. This means that you can potentially integrate your gateway with your accounting software, website, appointment-setting program, merchant services provider, shipping company, manufacturing company (in some cases, like drop shipping), and more.
Most third-party integrations add an extra cost because you’ll need to compensate the third party for its services. Adding integrations adds functionality that can benefit you and your customers; however, this functionality is rarely free.
Evaluate anticipated usage to get the lowest payment gateway pricing. Plan to use a payment gateway very infrequently for low dollar-amount transactions. It may make sense and be more cost-effective to go with the payment gateway that charges no fees on a monthly or per-transaction basis. This is because they build the cost of the gateway into the processing rates you pay, meaning that your processing cost is likely higher per transaction but lower overall.
If, on the other hand, you process a large number of transactions or a high dollar volume, it may make more sense to choose the gateway with a monthly and per-transaction fee but lower overall processing costs per transaction.
To explain this concept with an example, using PayPal or Stripe gives you access to their payment gateway for free; you have to pay their processing costs of roughly 3.50% and $0.30 per transaction (this is an estimation).
If, on the other hand, you have a merchant account through a full merchant services provider and process a large number of transactions each month, you'll pay an average of 1.95% and $0.10 for a transaction but have an additional $25 a month and $0.10 per transaction for the gateway. This latter option is much cheaper despite the added gateway costs.
If you’re unsure which applies to your situation, you can ask customer support from each vendor you're considering to calculate your average estimated monthly processing cost.
Remember a few things when considering the best payment gateway option for your business. Including fee transparency, the add-ons you need, the integrations your company and its customers could benefit from, and the overall costs. Let’s break these down a little further.
One of the best places to look to understand a company's fee transparency practices is online review sites. Trust Pilot, Merchant Maverick, Yelp, BBB, and others offer an overview of most businesses through the perspective of prior customers. These reviews can give you a unique insight into things like fee transparency. If companies mark up or add hidden fees, there’s likely a complaint about it somewhere. This can be the first indication that you’ll need to dig into the terms and conditions you’re agreeing to a little bit deeper.
Overall, the best thing to do to understand the gateway fees you’ll be expected to pay is to review the agreement you’re signing thoroughly. Click to open privacy policies, terms and conditions pages, and any other attachments with the agreement. These can be a great place to spot unexpected fees. If you have a digital version of these pages, you can do a Control (or Command) + F and type in “$” or “%” to see what pops up.
One of the most important things to understand when choosing a payment gateway provider is your business needs and your ideal processing environment. For example, suppose you process transactions in the field (i.e., at pop-up stores, flea markets, farmers markets, or on-site like an HVAC, plumber, or general contractor). In that case, you’ll have a use case for add-ons relating to in-person payments, like a mobile card reader.
Another example: If you have a retail store looking for a payment gateway to fulfill online orders, you likely need compatibility between your point-of-sale software, accounting software, inventory management system, payroll, etc. You may want to consider gateways compatible with existing systems you already use.
Similarly, your ideal client may have different desires for your payment options. For example, younger demographics in urban areas prefer mobile wallet compatibility. Older demographics in more rural or wealthier communities may prefer American Express compatibility. Considering your customers' needs and business environments can help you tailor your payment solution.
As we just touched on, if you already have systems for many aspects of your business, you’ll want to find a payment gateway that integrates with as many of them (if not all) as possible. So, evaluating your current environment is important when choosing a payment gateway provider.