If you are a regular online shopper, the most common click for you would be the ‘pay online’. With the raging COVID pandemic, everybody wants to go cashless and opt for making online payments. These payments are made through online payment gateways.
But most of us believe that some providers assist us with their payment gateways without involving any payment gateway charges. But this is not the complete picture. There are different types of charges involved in every payment gateway which a merchant should always be aware of. Click here to know more about these payment gateway charges
Payment gateway charges also involve a fair percentage of the amount and is never free of cost
What is a Payment Gateway?
Before understanding what payment gateway charges are, let’s have a fair understanding of what a payment gateway is. Payment gateway is a third-party software as a service that is run by a particular payment gateway service provider. These service providers charge money to cover operating expenses, software maintenance, and technology up-gradation costs. These costs also come under the banner of payment gateway charges. Some payment gateway service providers also provide additional security against fraud and risk prevention. Normally, each payment service provider charges 1.75% of the transaction value as a gateway charge. The highest security provided is 128-bit encryption.
A payment gateway is a device or a channel that enables sellers or merchants to make and receive payments. It works in integration with the e-commerce platform. The procedure requires the customer to fill in a form that has the details of the self. The customer has to mention his or her details like credit or debit card number, expiry date, and CVV. After this, the customer confirms to make the payment and receives an OTP from the concerned bank and the payment is then transferred to the seller/ merchant/ receiver’s account.
What are the elements of payment gateway charges?
The processing of payment includes some fees which are considered as the costs that business owners incur upon the customers. The amount of fee charged on payments to a seller/ merchant/ receiver’s account depends upon several factors like the transaction type: if it is business or corporate or a reward, the pricing model chosen by certain payment processors, the level of risk, and so on.
Here are the elements of payment gateway charges:
Set up Fee
This is a one-time, singular payment gateway charge when a user integrates a payment gateway into his or her website or application. This is a non-recurring fee and covers all the expenses like KYC (Know Your Customer) of the business, document verification, physical verification, etc. This fee is incurred by every new onboarding merchant. The set-up fee also includes the infrastructure cost. For example, each time an internet banking option is enabled, the service provider of the payment gateway needs to share the merchant details with the bank in question. After which the bank activates the account. There might be charges asked for by the bank for this. These charges are also included in these one-time payment gateway charges.
Transaction Discount Rate or TDR
Just according to the name, a Transaction Discount Rate or TDR is a fee that is charged on every transaction via the payment gateway a particular website has. The rate of a TDR differs and depends on the payment mode used by the customer. The choice of payment mode dictates the payment gateway charges. If a customer pays via an international credit card, the TDR will be higher than if he or she chooses to pay via net banking.
The payment gateway service provider does not, however, get all the money. It is well split up in percentages by other sources involved during the payment. The payment gateway service provider gets only 0.25% of the TRD fees. The issuing bank or the card holder’s bank gets the highest percentage that is 1.25%. The acquiring bank or the payment gateway’s bank gets 0.25%.
Annual or Monthly Maintenance
In the case of maintenance charges, the owner of the website has to pay a certain amount of fee. This amount is fixed priorly in almost all cases. This is an essential part of the payment gateway charges as it is a monthly or annual basis of payment. The cost of the annual or monthly maintenance depends and varies according to the types of integration. If, for example, the owner chooses a web checkout, he will be charged less. Whereas, on the other hand, if he or she chooses any form of advanced integration option, such as seamless integration, he will be charged more.
We can see clearly that a merchant is not directly linked to the payment gateway. It is a third-party service that needs to be available for securely transferring money. On their part, the third-party payment gateway service providers require payment gateway charges for the maintenance and operating costs. Hence, the payment gateway is not free but is rather a chargeable service. Zero payment gateway charges are only a myth and one should avoid those who claim so.