8 Considerations to Make When Choosing a Payment Service Provider (PSP)
Pros & Cons of PSPs Online Business Owners Should Understand
In order to run a successful online marketplace, you must have a way to accept payments from your customers. That’s true no matter what industry or niche you occupy. Without the capability of accepting payment, your marketplace cannot serve its customers. Of course, with a bricks-and-mortar business, you can accept cash at the checkout, but that’s not possible in the digital world. Enter payment service providers – companies that exist for no other reason than to enable you to process a wide range of digital payment types.
There are dozens, perhaps hundreds, of payment service providers out there, from companies like PayPal with decades of experience and solid reputations to relative newcomers like Stripe Connect, Adyen, Shieldpay, Klarna, and more. Finding the right partner can be quite challenging. The wrong choice could mean facing serious problems, including high recurring fees, limited payment types, poor customer service, and others.
The challenge for new online marketplace owners is making an informed decision here. In this guide, we’ll walk you through what you need to know about finding a good payment service provider, considerations that you need to make, and even compare some of the options available to you with the goal of helping you choose the right company for your specific needs and those of your customers.
1. Ease of Use
We’ll start with ease of use. The simplicity of the payment system is of paramount importance, not just for implementation within your website, but for your customers. Understand that there’s an enormous focus on UX (user experience) today, with even Google getting in on the act. If your website’s checkout system is difficult to use, then you can bet that your customers are not going to be all that pleased.
In serious cases, it may even affect your ranking in the SERPs (since UX is one of Google’s factors in ranking sites). In addition to not making your customers jump through hoops, you need to ensure that you can customise the solution to match your website’s branding, whether the payment provider complies with industry rules and regulations in your nation, and more.
|Easy to use but usually requires a PayPal Account||Easy to use/requires a credit card||Simple and easy to use/requires Klarna account only||Supports all popular payment types and is easy to use||Supports payment integrations of all complexities, easy to use with both API and wrapper|
2. Available in Your Nation
It’s important to understand that not all payment service providers serve clients in every country around the world. There are many reasons for this, including security requirements, regulation requirements, licensing issues, and more. Other companies require that you (the merchant) open an account in their home nation. For instance, Moneris requires that you have an account in either the US or in Canada. Square only supports the US, Canada, Japan, Australia, and the United Kingdom. It’s important to ensure your PSP supports the nations you operate in.
|Supports UK merchants||Supports UK merchants||Supports UK merchants||Supports UK merchants||Supports UK merchants|
3. Security and Regulatory Compliance
Another major concern when choosing a payment service provider is the company’s commitment to security and adherence with regulatory rules and requirements. In the EU, that means the GDPR. For international purchasers, that might mean compliance with CCPA (California’s rules), or with other regulations. Note that it is the retailer’s responsibility to make sure that payment processors comply with regulations in the purchaser’s home nation in most cases.
For instance, if a customer from California were to shop with your online marketplace, which is located in the UK, then the payment processor would need to adhere to California’s CCPA because of their location. The same applies to US businesses serving customers in the EU – the firm must protect an EU citizen’s data as dictated by the GDPR.
|Digital encryption. Complies with all rules and regulations.||Digital encryption. Complies with all rules and regulations.||Digital encryption. Complies with all rules and regulations.||Digital encryption. Complies with all rules and regulations.||Digital encryption. Complies with all rules and regulations.|
4. Currency Support
Different online businesses will have varying needs when it comes to the currencies that they accept. For instance, if you’re a very small UK-based business, then you may have no interest in accepting anything but pounds. However, if you’re looking to do business outside the UK, you might want to ensure that the payment service provider you choose is able to offer that to you. Of course, this requires that you have at least some idea of what currencies you want to accept. Do you want to be able to process US dollars? What about Japanese yen? Canadian dollars?
|Supports 23 currencies inc. £, €, $||Supports 135 currencies inc. £, €, $||Supports 9 currencies inc. £, €, $||Supports 38 currencies inc. £, €, $||Supports various currencies inc. £, €, $|
5. Fees Charged
No matter what payment service provider you choose, you’re ultimately going to pay them for their processing services. The only question is how much that will cost you. Some companies charge a fee per transaction, while others also charge a monthly fee for membership in their platform. Yet others have variable fees that increase or decrease based on the size of the transaction. Some companies also have other fees that you’ll need to think about, such as setup fees and the like. These are often one-time fees, but they still affect the cost of doing business.
Generally, most PSP’s charge a per transaction fee plus a % of the transaction. This % can vary based on the type of card used (for example, AMEX payments will typically be charged more) and most PSP’s will charge more for cross-border payments. Some PSP’s that offer additional features, like Klarna, may charge extra for their features, whilst other PSP’s may include their key features in the price, such as PayPal’s Buyer & Seller Protection.
It’s important to do your research on the fees that each PSP charges, as the right solution for you will vary based on your individual marketplace requirements.
Below is an overview of domestic charges for UK merchants:
|Per transaction fee (£0.20) plus % (3.40) of the transaction.||Per transaction fee (£0.20) plus % (1.40) of the transaction.||Per transaction fee (£0.20) plus % (2.49) of the transaction for basic checkout.|
Additional Klarna features charged at £0.20 per transaction and 1.90% to 5.40% fee.
|Per transaction fee (€0.10) plus a % (0.90 – 1.10) of the transaction.|
Google/Apple Pay transactions are assessed an additional fee. AMEX is charged at 3.95% fee.
|Tailored pricing for individual business needs.|
6. Sliding Scale Fees
While we’re discussing fees, it pays to know that some payment processors offer a sliding scale system. This is important, particularly for online companies that are expecting significant growth, or that are already growing very quickly. These payment service providers are willing to charge less per transaction fee if you meet specific sales volume requirements. That can save you a great deal of money, particularly once you start processing a larger number of sales. Of course, not all companies offer a sliding scale basis, and not all of those that do offer the same sort of discount.
|Sliding scale fee weighted for slower sales volumes.||Sliding scale available for £150,000 or higher.||No information available.||No information available.||Sliding scale tailored to individual needs.|
Choosing a payment service provider means partnering with a company. Just as you would in any other professional relationship, you will need to lean on that partner from time to time. There may be outages, or perhaps a glitch will prevent your website alone from processing a particular type of payment. There are many instances in which you’ll need to work with the payment service provider to find a solution to the challenge, so it’s important to make sure that your partner will be there when you need them. You should have access to more than just an FAQ or a knowledge base. Make sure that you can get in touch with live support staff to answer your questions and challenges.
|Support is provided by phone and email.||Support 24/7 via chat and email.||Support through online chat, phone, and email.||Support through web form only (FAQ and knowledge base, as well).||Support by contact form, phone, and live chat (FAQ and knowledge base, as well).|
8. Recurring Payments
While many online marketplaces will charge a customer only at the time of sale, that’s far from the only commercial model in existence. Many types of marketplaces use a recurring payment model to handle things like subscription fees and the like. Not all payment service providers are able to support recurring payments, so double-check that the provider you choose not only offers this, but makes it simple to set up and integrate in your website. Again, remember that user experience is vital, and the simpler you can make things for your customers, the better your results will be.
|Recurring payments possible||Recurring payments possible||Recurring payments possible||Recurring payments possible||No information available|
At the end of the day, the right payment service provider offers you more than just the ability to accept payments online. They can protect sensitive consumer information and business data, as well as providing you with the means to grow and scale your company. From accepting credit cards to processing international purchases and setting up recurring payments, the right payment service provider is a serious asset to your firm, and your decision here should be based on careful consideration and comparison of the options.
If you’d like to have a more in-depth discussion about the best payment service provider you should use specific to your marketplace aspirations, we’d love to help. Book a free, no-strings-attached consultation today and learn how we can help you.