We answered the top 5 questions asked by local SMEs on ecommerce payment gateways.
The payment gateway you choose for your online store matters. Apart from the appeal of your products and services, the success of your online store hinges on the ease of payment. Studies have shown that half of online shoppers will abandon their shopping carts and cancel their orders if the ecommerce store does not offer their preferred method of payment. Here are the top 5 questions asked by local businesses on ecommerce payment gateways:
1. What are the transaction fees for the various payment gateways in Singapore?
There are a number of payment gateway options available in Singapore and they all come with different transaction fees.
PayPal, a well-established global platform, charges a fee of 3.9% + $0.50 for domestic transactions. This means that when a shopper spends $100 in a single receipt, PayPal charges a transaction fee of 3.9% of $100, and an additional $0.50. That works out to $4.40.
For Shoptiq merchants, however, you will pay a lower rate, thanks to the ecommerce platform’s tie-up with PayPal. The Shoptiq platform, which is integrated with PayPal, offers merchants a lower transaction fee of 3.4% + $0.50 for each domestic transaction. So merchants will pay $3.90 instead of $4.40 when a shopper spends $100.
eNETS, the Internet payment arm of local leading payment solutions NETS offer transaction fees at 4% per credit card transaction, and 3.5% or $1.50 for transactions via direct debit. It is also the only payment gateway in Singapore that allows shoppers to pay through Internet Banking if they have DBS/POSB, UOB, OCBC or Citibank accounts. But while its transaction fees are slightly cheaper, users need to pay a setup fee as well as annual subscription fees.
Stripe, a relatively new entrant which was launched in Singapore in 2016, charges 3.4% + $0.50 per transaction. Despite being a new kid on the block, the payment processor has an impressive list of clients – it has worked with platforms such as Grab, Hipvan, Deliveroo and Kickstarter.
Braintree, which is powered by PayPal, offers a transaction fee of 3.4% +$0.50 and accepts payment via major credit cards and e-wallets such as Apple Pay and Andriod Pay. Apart from ready-made interfaces, it also offers merchants the flexibility to customise the look and feel of the checkout process.
With a variety of options available, it is important to assess the different payment gateways and find one most suitable for your online business. Look out for hidden cost such as set-up fee and annual subscription cost deals to maximise cost savings.
2. Is the transaction fee absorbed by customer or merchant? How does it work?
Transaction fees are thought of as a business expense and are usually absorbed by the merchant. In the ecommerce space, the shopper often pays only the amount listed for the goods and services purchased.
Contracts between merchants and acquiring banks also state that retailers should not make customers pay more for using credit and debit cards, or impose a minimum spend for such payments. Retailers who do so are in breach of the contract terms, even though it is not actually illegal for them to impose credit card surcharges. In 2013, Visa formed a 20-man team to conduct spot checks on merchants to clamp down on errant retailers that levied a credit card surcharge on shoppers.
3. How many payment methods can I integrate to my website?
Any. You can have more than one payment method integrated to your online store. You can set up manual payment methods to enable customers to pay for online orders through more conventional methods such as bank transfers and cash on delivery (COD). This way, you won’t lose customers who shop online without credit cards. Moreover, you won’t be charged transaction fees for manual payments.
When you choose to host your online business with Shoptiq, the platform allows you to accept a wide range of payment methods – through credit and debit card payments via PayPal, and manual payments.
4. If I’m using PayPal, can customers still pay through their credit cards?
Certainly. PayPal accepts payments from most debit and credit cards. Customers do not even need to have a PayPal account to proceed with payment. They can complete their payments as a guest and then decide if they want to save their information in a PayPal account for future purchases.
If they choose to do so, their subsequent purchases through PayPal will be even more convenient and fuss-free as the payment processor will remember their checkout details. They will no longer have to input their credit card detail, email address, phone number and shipping address.
5. What’s the difference between using third-party payment gateways and setting up a dedicated merchant account?
Third-party payment gateways like PayPal and Stripe allow you to accept credit card payments without having to sign up for a merchant account. They accept credit card payments on your behalf and let you use their merchant accounts. Often, online business owners are not required to pay upfront fees, though payment gateways charge a fee for each transaction. Setting up is also quick and fuss-free – you can sign up with a third-party payment processor and start processing payments on the same day.
Alternatively, you can set up your own merchant account. With it, your ecommerce store will have the ability to process credit card payments though you will still need a payment processor to handle the online credit card transactions. Merchant accounts have a higher setup cost and may charge a monthly fee, but their per-transaction fee is often lower than third-party payment gateways. Banks will also scrutinise your personal credit history, business history and business model before approving your merchant account.
Both options have their pros and cons and ultimately, your choice will depend on what your business needs at different points in time. If you are just starting out and building up your sales volume, you may appreciate the quick and easy integration of third-party payment gateways. For new and small ecommerce businesses, third-party payment processors offer a convenient way to process credit card payments. But as your business grows and transaction levels increase, you may want to look into setting up merchant accounts to save on operation costs.