Do you have questions about payment gateway charges and would want to know more? Read on to find out more about payment gateway charges.
Payment gateway charges refer to the cost incurred by businesses to process payments online through their websites or applications using the chosen payment gateway. Payment gateways usually charge a percentage of the transaction amount, but the amount could vary depending on the type of payment method used and the amount of risk involved.
What are Payment Gateway Charges?
You might think the difference in payment gateway charges between different businesses is not significant enough. However, for bigger businesses whose revenues are measured in crores, even a difference of one or two decimals can have a significant impact on the profits.
Payment gateways enable you to accept online payments on your website or app in addition to managing transactions, providing instant refunds, and allowing real-time bank settlements.
In other words, the payment gateway charges are the fees charged to provide all of these services, as well as allowing your customers to pay on multiple platforms.
Payment Gateway Charges are affected by several factors:
When you integrate a payment gateway into your website or application, it enables you to accept online payments. To facilitate online payments, the payment gateway service provider partners with banks and card networks such as Visa and Mastercard.
What influences the decision to choose a payment service provider: it’s market reputation, the success rate of payments, or the number of payment sources supported? According to changing market trends, many people believe that a product’s price is one of the factors that determine its quality. Choosing a payment gateway depends on factors like the Merchant Discount Rate or MDR and other associated charges.
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Merchant Discount Rate (MDR)
The merchant discount rate (MDR) is the percentage that is charged by the payment service provider when your business accepts online payment methods or debit and credit cards. MDR percents are defined before the merchant agrees to set up and use any services and, therefore, the charges are assessed on every transaction made.
MDR consists of bank fees, interchange rates, chargeback fees, point-of-sale fees, and assessment fees charged to customers and merchants who use digital payments.
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Interchange Rate
Interchange Rate refers to the amount credit card companies like VISA, Mastercard, and Discover charge the receiving bank for every payment received by a credit card transaction.
The rate includes the transaction handling costs that are incurred by issuing banks and the investments they make to minimize the risk of fraudulent transactions. Merchants’ interchange rates are also affected by the type of card, the amount of risk associated with their business, and how they accept payments (swipe or online).
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Merchant Account Provider Fee
Having a merchant account linked to the credit card network is a necessity for accepting credit card payments online. The merchant account lets you accept online credit card payments, and the provider deposits the received sum into your bank account regularly.
Based on the volume of transactions and type of business, the merchant account provider may charge a small fee in addition to the interchange fee. There may be a monthly maintenance fee as well as an additional fee for disputed transactions.
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Payment Security
Customers are also charged differently based on how they use a payment gateway, be it an in-store transaction, an online transaction, a telephone transaction, etc. Each type of transaction carries a different level of risk.
For instance, receiving payments in an offline store via a card swipe machine is less risky and is assessed lower fees, than online transactions which are highly vulnerable to cyber-attacks.
Payment Gateway Charges and Components
To facilitate online payments, gateway fees usually comprise various components. Here are the components of the payment gateway fee:
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Payment Gateway Setup Charges
The setup fee for a payment gateway is a one-time fee charge levied at the time of integration of the payment gateway to set up a merchant account.
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Annual Maintenance Charges
Payment gateway providers charge an annual maintenance fee to cover the cost of maintaining software, security, and payment technology and to cover operational costs.
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Integration Charges
Integration charges are fees the payment gateway charges for integrating the payment gateway into the merchant’s website or app.
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Merchant Discount Rate
The merchant discount rate (MDR) is the percentage that is charged by the payment service provider when your business accepts online payment methods or debit and credit cards.
What are the benefits of considering Payment Gateway Charges?
Payment gateway charges vary depending upon several factors, including the types of transactions processed, the frequency, the type of market, and the amount of revenue generated by a business.
Making a detailed comparison will be easier if you are aware of the fees charged by different payment gateways. You can then compare other factors, such as the number of payment modes supported, payment security, success rate, and other factors, based on these charges.
FAQs
1. What is TDR?
Transaction Discount Rate (TDR) is a charge for usage of a payment gateway that is assessed per transaction.
2. What is the purpose of payment gateway charges?
Service providers use the PG charges to cover various expenses, such as software maintenance, security, payment technology, and to cover operational costs.
3. What is MDR?
The merchant discount rate (MDR) is the percentage that is charged by the payment service provider when your business accepts online payment methods or debit and credit cards.
4. How do I select the best payment gateway for my online business?
The best way to choose a payment gateway for your business is to compare its features with the needs of your business and before making a choice, compare the options from various sides.
5. What are payment gateway charges?
The payment gateway charges are the fees charged to provide services for managing transactions, providing instant refunds, allowing for real-time bank settlement, as well as allowing your customers to pay on multiple platforms.
