Chances are, you’re already selling your products or services online. Even if your business isn’t doing what you would call ecommerce or running a web based shopping site, if you are requesting customers to pay you with a credit or debit card for transactions when they are not in person, or the card is not present – then the payment should be processed online.

Typical hosted payment screen
Merchant payment gateway admin virtual terminal

Some examples might be:

  • Accepting payments over the phone
  • Sending email invoices with a “Pay Now” link
  • Signing up for online subscriptions, eg. radio, TV, gaming
  • Memberships like gym clubs, golfing or business associations
  • Billing for professional services like Bookkeeping, Accounting
  • Access for premium web content
  • Service Contracts – Home maintenance, Cleaning services
  • Hourly billing – Lawyers, Tax Consultants
  • Recurring billing for any B2B or B2C service
  • Ecommerce shopping carts and web stores.

Payments 101 – What is a payment gateway?

An online payment gateway is the software technology layer that links your customer’s financial institution to yours when processing a payment. Think of it as the smart virtual version of the countertop POS payment terminals used by almost every retail business worldwide. Most gateways are accessed via a web based portal with no sofware download necessary or a simple ecommerce plugin. The best gateways are bank agnostic allowing them to plug into virtually any merchant account and acquiring banks within North America.

“…many popular payment gateways block or limit the ability to connect to an existing business merchant account and instead charge high flat rate fees processed directly by their own banking institution. This maximizes their profit at your expense and limits your choice of solutions as a merchant.

Smarter Payments
The Canadian Bank Interchange Rate costs are set by the credit card issuing banks and card brands (Visa, Mastercard this example). Interchange costs are the same for all payment processors in Canada. Similarly with the assessment charged by Visa and Mastercard as a brand royalty fee – this is the same for all processors. The above chart shows how flat rate processors at 2.9% charge much more than the majority of merchant card service providers in Canada who normally use a cost plus simple processing fee formula.

Choosing an Online Payment Gateway

Here are some of the most common online payment gateways used by merchants:

  • Bambora
  • Paypal
  • Square
  • Amazon Pay
  • Authorize.net
  • Shopify
  • Wave
  • Converge
  • Quickbooks
  • Apple Pay
  • Stripe

Locally, more than 80% of my customers are using an online payment gateway in addition to in store POS systems and smart payment terminals. More than half use an online payment gateway exclusively. A Smarter Payments solution powered by Paystone doesn’t limit your choice of gateways. A business doesn’t have to be locked into look alike, all-in-one ecommerce shopping cart templates or inflexible invoicing systems that charge high flat rates. All of our plans have affordable interchange cost plus rates with multiple choices of ecommerce integration and virtual invoicing.

With our solutions, your business can have access to multiple gateway billing methods to make transactions easier for your customers – All Major Credit Cards, Interac Debit Online, Electronic Funds Transfer, and custom e-Invoicing.

We recommend only the most reliable and PCI secure payment platforms. Our core offerings include three of the top gateways worldwide: Find out more here.

Bambora Worldline – Authorize.net – Converge

Exposing the Myth About Flat Rate Pricing

In the last two years especially, large corporate all-in-one, ecommerce and online payment platforms have have aggressively pushed the premise that a flat rate credit card payment processing fee of 2.9% + 30 cents per transaction is a cheaper and simpler way of doing business online. Many are bundling in low cost hosted web apps and SaaS services “free” included with that 2.9% flat rate. Well as the old saying goes,

“TANSTAAFL: There Ain’t No Such Thing As A Free Lunch“.

Robert Heinlein

Why 2.9%?

Here’s a list a few of the more popular flat rate platforms: Paypal, Shopify, Square, Stripe, Wave, and Quickbooks. Their flat rates range from 2.7% to 3.5% per transaction, and all charge a 30 cent per transaction fee. Some charge monthly fees ranging from around $10 per month to $79 per month.

The main reason for the 2.9% average flat rate fee is competitive and goes back to bell-weather rates set by pioneers in online payments like Paypal. It has nothing to do with the actual cost of the various credit card brands and premium card categories. These are much lower and, in Canada, rates are public knowledge and published online by the card brands like Visa and Mastercard. Those rates range from 0.80% to 2.5% – See for yourself: check Visa here and Mastercard here. The rates are set by the card issuing banks and card brands. These rates are not set by the merchant service providers or credit card processing companies.

As a matter of fact, all of these rates and the rules for credit and debit cards are federally regulated in Canada by the Financial Consumer Agency and all payment processors must abide by the federal Code of Conduct for the Credit and Debit Card Industry in Canada, including fee transparency. By law, there can be no “hidden fees”.

Flate rate “all-in-ones” like Paypal, Shopify, Square and the others bundle all the allowable card fees and some services into a single flat rate like 2.9%. It is a very profitable price point for them because it is tied to your total card sales as a merchant. The more you sell, the more profit they reap from their services. Is a simple web site template or hosted service really worth $500 to $1000 extra per month (or even much more)? That seems like a much different scale of “hidden cost” for merchants to bear.

A typical merchant account processing fee should average 0.40% plus 5 to 10 cents per transaction. (or lower based on transaction volume).Your monthly effective total cost plus rate (EFR) should average 2% or less. See how much this adds up in the chart below – even for quite conservative monthly credit card sales volumes a standard merchant account will save your business significantly and help keep your profit working for you.

A payment gateway solution from SmarterPayments.ca is the best way to reduce credit card processing fees versus all-in-one flat rate plans.

Find out more about the smarter way to accept credit cards online with our popular Online Payment Gateways.

Questions? Reach out to us here anytime. Talk to you soon!

Published by Canayjun

Canadian, eh!

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