Best online payment systems for small UK & Irish retail businesses

In 2020, as high as 87% of UK & Irish households made purchases online. Today, we’re taking a deep dive into online payments, payment gateways and payment service providers, as well as our top 5 recommendations for retailers.

default author avatar image
Mark Allen
13 min read

In 2020, as high as 87% of UK & Irish households made purchases online.

The retail landscape is ever-changing and with the global pandemic shifting customers to online purchases, now is the time to get set up with an ecommerce store to help boost your retail sales.

Today, we’re taking a deep dive into online payments, payment gateways and payment service providers.

We’ll cut through the jargon and explain exactly what you need to know as a retailer, how to choose a payment provider and our unbiased recommendations.

But first, let’s take a look at the terms and what they mean for your retail business.

What is a payment gateway?

Every time you shop online, you use a payment gateway, whether you realise it or not.

A payment gateway is a type of software that captures a customer’s card payment data and shifts it to a merchant’s account (the acquirer).

This process happens in real-time and leads to either an approval or disapproval decision sent back to the customer.

This means that a cardholder’s bank will only settle payments after receiving approval from the payment gateway.

stripe payment gateway
stripe payment gateway example (source:stripe.com)

What is a payment service provider?

As we mentioned earlier, there’s a lot of confusing terms in the retail world.

As a result, you’ll likely have questions about what each means and, most importantly, what it means for your retail business.

First, let’s get the terminology out of the way.

Payment service providers (PSPs) are also known as merchant service providers, payment processors or ISOs (Independent Sales Organisations).

Secondly, let’s understand what they are by understanding who they are.

Examples of popular payment service providers include Stripe, Braintree and PayPal.

Thirdly, you’ll want to understand what these PSPs do.

Okay, so PSPs are companies that help you (the merchant) accept payments from customers online, and in some cases in-store, it’s not the interface where you add information, it’s the software that does all the heavy lifting in the background to transfer information between your website and your merchant account securely, checking for fraud and providing PCI DSS compliance.

And as we mentioned earlier, some of the big hitters in the industry, like PayPal, can combine both a payment gateway, payment services and merchant accounts into one bundle.

Of course, you’ll pay a premium for the convenience you enjoy from this bundling together.

Also note, you can expect to pay higher fees for online sales as these are deemed higher risk than in-person card payments.

How does a payment gateway work?

In simple terms, a payment gateway is a middle man between a customer buying something and the company selling something.

In layman’s terms, it’s the interface needed to collect debit and credit card information online. This could be on Amazon, eBay, or any ecommerce store.

But it provides another vitally important task too; securing sensitive customer data and preventing fraud through encryption.

Some of the big hitters in the payment gateway and payment processor industry include Amazon Payments, WePay, PayPal, Stripe and Worldpay.

So how does a payment gateway work?

Example of a payment gateway

payment gateway example
Payment gateway example

Let’s use an everyday example to explain it.

1. John visits a retailer’s website, adds a couple of items to his basket and clicks on the ‘checkout’ button.

2. At this stage, John arrives at the payment gateway page, which - depending on the provider - can be a highly customisable, branded web page.

3. John ruffles through his wallet and takes out his visa debit card.

4. He then enters all of his debit card details on the web page, including his name, long card number, expiry date and CVV number.

5. This data is encrypted and sent to the merchant’s payment gateway using the payment service provider.

6. Lightning quick fraud checks are carried out, and the payment gateway sends John’s debit card details to the acquiring bank.

7. The acquiring bank then sends the information to John’s visa debit card.

8. Another quick fraud check occurs before the payment data is sent to the issuing bank (John’s bank).

9. After another fraud screening (yes, there’s lots of them, but they’re essential!), John’s debit card sends the payment data to John’s bank.

10. Another fraud screening is performed, and then John’s bank takes one of two decisions: approve or decline the purchase.

11. If the payment is approved, the acquirer collects the payment from John’s bank and holds the money in your merchant account.

12. John’s payment has been accepted, and he now sees a web page that confirms his purchase.

13. After a few days, the money will clear and be sent to your business account.

What should I look for when choosing a payment gateway?

When choosing a payment gateway, make sure to ask the following questions.

How soon do I need to start accepting online payments?

Setting up payment gateways and merchant accounts can take up to one month. If you want something quicker, look to use Stripe, they have a quick and easy onboarding process and you can be selling in no time compared to a traditional retailer.

How much can I afford to spend on a payment gateway?

Every retailer has its own unique circumstances and requirements.

Cost, unsurprisingly, is something to factor in.

Get to know each of your option’s T&Cs and transaction fees structure and breakdown to avoid costly surprises further down the line.

Look out particularly for set-up costs, administration costs, and transaction costs.

How long can I wait from the initial sale to money in my business bank account?

This differs from one retailer to the next.

Some are happy to wait a couple of days for payments to clear, while others need it for cash flow and more stock.

How long it takes until payment clears varies significantly between providers.

Some can even hold on to your money for up to a month.

We’d recommend choosing a payment gateway provider that pays out daily, or every few days.

Will my online retail business be able to accept international payments?

Most payment systems will offer international payments.

We live in a globally connected world, so accepting international payments is important and worth considering.

Will the payment gateway be secure?

Security should always be your number one priority when selling anything online.

By that we mean, security for you and security for your customers.

When weighing up your payment gateway options, always err on the side of caution and choose one that is PCI DSS level 1 compliant and has a tokenisation process.

Will my payment gateway provider offer support when I need it?

You won’t appreciate the value of good customer support until you really need it.

And while it’s underappreciated, it’s critical to choose a payment gateway that’ll be there to advise and guide you when things go wrong.

Find out whether your option offers email support (and how long it’ll take to get a reply), whether they have live chat options and where the customer service team are based.

And of course, will customer support cost you extra or is it part of the package?

Ask these questions now to save yourself any hassle later.

Does my payment gateway accept all major cards?

Imagine walking into a shop with cash and finding out they don’t accept it.

Well, it’s kind of like that, but in reverse, if your payment gateway doesn’t accept a major credit or debit card, then your customer will go elsewhere to a competitor that will.

Does my payment gateway provider offer recurring payments automatically?

Subscription models are all the rage these days and offer sellers guaranteed income reliably every month while offering customers a handy way of paying without having to do anything.

If you’re thinking about providing subscriptions, make sure your payment gateway can assist you with setting up recurring payments.

Top 9 features to consider when choosing a payment gateway

Here are some of the main things that you should look for with a payment gateway in a little bit more detail.

1. Integration capabilities.

Everything in the online world is interconnected, and one piece of software needs to complement another to fulfil its role.

As a result, your chosen payment gateway should be easy to integrate with other software that runs on your website.

Before choosing a payment gateway, research online how it will work alongside your content management system (WordPress, Magento etc.) and your shopping cart.

2. Reliability and uptime.

Online selling is 24/7, and your payment gateway should be available too.

When your website or payment gateway is down, you’re not making money and potentially losing money.

So, inevitably, you’ll want a payment gateway that is reliable and has a track record for uptime.

Don’t be afraid to ask for an uptime guarantee; the more reputable companies out there will sing from the rooftops about it anyway.

3. Security for you and your customers.

We’re living in the age of data leaks, hacks, unethical data mining and DoS attacks.

Naturally, you’ll want your payment gateway to treat you and your customer’s financial security and private data as seriously as you do.

Before choosing a payment gateway, check out its PCI compliance level.

Morally, it’s the right thing to do.

Legally, it’s the only way to run a successful online retail business.

And, of course, the consequences for not doing so can be heavy fines and irreversible reputational damage.

Our advice is simple; only consider a payment gateway that offers PCI DSS Level 1 and disregard any that don’t match those standards.

4. Fraud detection and protection.

Fraudsters come in different guises online.

But they all share one common goal.

That is, to relieve you or your customers of your hard-earned cash.

As a result, you’ll want a payment gateway with a high level of fraud detection to enable you to sell and your customers to buy safely and securely.

5. Payment options.

From standing orders to contactless payments and PayPal and Amazon payments, how we buy things has changed dramatically over the past decade.

As a result, your main goal should be to make paying for your products as simple as possible for customers.

And more importantly, it should be easy for your customers to pay using their favoured payment method.

So, when you’re debating a payment gateway option, first find out if they accept all the most popular payment methods, including debit and credit card payments.

6. Speed of processing payments.

There’s nothing more demoralising for a customer than slow-loading payment gateways that are buggy and not fit for purpose.

And there’s nothing more frustrating for you as a retailer when customers do not complete a purchase, and you lose out on money.

Ensure you carry out research online about which payment gateways have issues and which ones consistently excel in their speed for processing payments.

It’s a choice that could be the difference in you making or losing money, so choose wisely.

7. Currencies accepted.

In our globally connected world, we can buy anything from anywhere with the click of a button.

As a result, the world’s financial system has had to adapt to this new reality.

And for retailers like you, that might mean offering multiple currencies.

So, to compete globally, your payment gateway should accept foreign currencies.

Read the small print, though, as some companies might charge you more for these transactions.

8. Reporting and interface.

Okay, it’s not a biggie that’s going to make or break your company.

But we think it’s crucial to have real-time reporting with an easy-to-use interface.

Why?

Well, because just like Facebook and Google found out long before the rest of us, data is vitally important.

In the form of reports, payment gateway data can help you manage your stock and give you a complete 360-degree look at your company’s health.

You’ll also be able to spot emerging trends, nip any issues in the bud, plan for the future and most importantly, make your customer’s life as easy as possible.

9. Cost.

We’ve deliberately left this one to the end because as important as cost is for us all, you can’t put a price on reliability, security and integration.

So, when choosing your payment gateway, it’s a better idea to look at the first eight necessities first.

Once they’ve passed the first eight vitals, then decide based on cost.

PS: Don’t forget to read the small print to avoid stealth charges.

Payment gateway costs

Like choosing a high-powered supercar or a mundane family car, prices can vary widely with payment gateway providers.

As we explained earlier, some are bundled together into premium packages, while others are more limited but serve a specific purpose.

However, it’s always a good idea to have some ballpark figures, so you know what to expect in advance.

Costs to factor in include monthly fees, set-up fees, transaction fees and transaction rates.

But remember, the cheapest doesn’t necessarily mean it’s good value, and the most expensive doesn’t guarantee it’s the best.

Let’s take each individual to give you an idea of what you might expect to pay if you opt for five of the most popular companies.

Monthly fees

  • Stripe: No monthly fees.
  • PayPal: £20.00 per month.
  • Worldpay: free to £19.95 per month.
  • Authorize.net: £19.00 per month
  • Amazon Pay: No monthly fees.

Set-up fees

  • Stripe: free.
  • PayPal: free.
  • Worldpay: free.
  • Authorize.net: £35.00.
  • Amazon Pay: free.

Transaction fees and rates

  • Stripe: Fixed 1.4% + 20p for European cards, 2.9% + 20p for non-European cards.
  • PayPal: 1.9% - 3.4% + 20p per transaction.
  • Worldpay: PAYG fees are 2.75% of  + 20p per transaction
  • Authorize.net: Fixed 2.49% + 15p per transaction
  • Amazon Pay: Starting from 1.4% + 20p per transaction.

Our top 5 payment service providers for SMEs Compared

Payment gateway providers
Payment gateway providers

You’ll remember earlier how we said that cost should be number nine on your list of priorities when you’re choosing a payment service provider.

Based on all nine of our must-haves, we’ve chosen the top payment service providers that we think represent the best value while also ticking necessary boxes such as security and integration.

Stripe
Stripe

Stripe

The fastest growing online payments provider, and for good reason.

Stripe is the most versatile payment gateway system on the planet, boasting a wide range of integration possibilities for your online store, Stripe lets you customise the look of your payment pages to create a consistent shopping experience.

An added bonus, they were founded and based in Ireland, so they offer local support in the UK and Ireland.

There is also no setup fee, it’s quick and easy to get set up, and there are no fixed-term contracts, most providers don’t offer that kind of flexibility.

Stripe Fees:

  • No setup fees, no monthly contracts, or hidden fees
  • 1.4% + 20p for European cards
  • 2.9% + 20p for rest of world

Pros:

  • Easy to set up
  • Stripe accepts all major debit and credit cards
  • Entirely PCI DSS compliant
  • Can accept international payments in an eye-watering 135 currencies

Cons:

  • Slow with releasing funds, 7 days rolling basis.
  • Lack of shopping cart functionality.

Ideal for:

Businesses of any size.

PayPal online payments
PayPal Payments

PayPal Online

PayPal is one of the most popular payment providers in the world, they’ve been around for 22 years. They are easy to get set up with (even easier if you have an existing PayPal account) and have no monthly fees.

It can be quite expensive to use PayPal online payments, especially with lower transaction volumes. For businesses processing over 50k in online payments, you can negotiate better rates.

PayPal Online Fees

  • 2.9% + 20p for local transactions
  • 2.9% + 20p and a 2.5% currency conversion fee from non GBP balances
  • Free with standard web payments and £20.00 per month with payments pro

Pros:

  • No monthly fees.
  • Secure, fast and reliable
  • Accepts international payments
  • Easy to implement

Cons:

  • Higher transaction fees
  • Average reviews about customer service

Ideal for:

Startups or growing businesses.

Worldpay online payments
Worldpay online

Worldpay Online (FIS Global)

As the UK’s most popular payment service provider, Worldpay (now FIS Global) is a behemoth in the industry.

And for a good reason.

With a full suite of payment services available and safe, secure and reliable features, Worldpay is a decent option.

Fees:

  • Pay as you go: 2.75% + 20p per transaction
  • Pay monthly: £19.95pm plus 2.75% for credit cards and 0.75% fees for debit cards

Pros:

  • Lots of integrations
  • Offering payments in over 120 currencies and 146 countries
  • Quick deposit of payments
  • Pricing can be negotiated with larger volumes

Cons:

  • Pricing is not transparent
  • Not as suitable for smaller businesses.
  • Lengthy contracts and early termination fees can soon add up.
  • PCI compliance is an additional cost

Ideal for:

Medium to large businesses with large transaction volumes.

Authorize.net

Authorize.net

One of the oldest online payment systems around. Authorize.net is highly customisable, has simple pricing and offers some advanced features like a virtual terminal.

They offer 2 packages for UK retailers, payment gateway & merchant accounts, or simply just payment gateways.

Fees

  • Payment gateway & merchant account: £19.00 pm, and 2.49% + 15p transaction fees
  • Payment gateway only: £19.00 pm and transaction gateway fee of 10p per transaction

Pros

  • Includes a virtual terminal
  • Easy to set up recurring payments
  • Good fraud protection

Cons

  • Fees on the higher end
  • Additional currencies cost (non-GBP) £15pm
  • Monthly fees

Best for:

Businesses with higher transaction volumes

Amazon Pay
Amazon Pay

Amazon Pay

Amazon Pay lets your customers pay using their Amazon account.

It can also be integrated with your existing online payment system.

It’s definitely more of a niche product, but one that can be useful for speeding up the transaction process.

Fees:

  • Processing fees between 1.4-3.4% + 20p transaction fee (depending on volume)
  • Less than £1,500 volume – 3.4% + £0.20
  • £1,500 – £6,000 volume – 2.9% + £0.20
  • £6,000.01 – £15,000 – 2.4% + £0.20
  • £15,000.01 – £55,000 – 1.9% + £0.20
  • Above £55,000 – 1.4% + £0.20
  • Cross border fees (outside your country) additional 0.4-1.5%
  • Chargeback fees of £14

Pros:

  • Quick & secure checkouts
  • 150 million prime accounts worldwide
  • Easy to integrate with partner platforms (Shopify, BigCommerce etc)

Cons:

  • High transaction fees for low volume businesses
  • 3-5 business days to get paid

Ideal for:

Businesses looking for additional payment options on their site.

Our Recommendation

Small UK retailers face many choices online for payment gateways.

Our top recommendation is Stripe, it has an easy setup, reasonable, transparent fees, and good local support.

As always we’d advise you to research all online payment gateway options thoroughly.

Please don’t choose the cheapest payment gateways unless they meet all of your other criteria.

Instead, cost should be considered alongside safety, security, uptime, reliability, customer support, ease of use, payment options, advanced fraud features and currencies accepted.

If you'd like to learn more about retail ecommerce, contact our team, we'd be happy to help you integrate your retail store and ecommerce store.