The most important costs of a payment service provider and payment gateways

The most important costs of a payment service provider and payment gateways


    The most important costs of a payment service provider and payment gateways

    The costs for the development of payment are some of the most important criteria in choosing a payment method and a payment service provider (PSP). Currently, there’s unfortunately no easy way to compare costs between different providers and methods. A number of direct and indirect costs must be considered and calculated into the comparison. We would like to help guide you navigate this complicated web of costs and provide you with an overview of the most important costs that should be factored into your decision.

    How are setup or installation fees billed by PSPs?

    The setup or installation fees are billed by the PSP once, when the online shop or website is acquired as a client. These fees cover the costs of integration or the desired payment method. Certain payment providers refrain from billing installation fees, but the general cost ranges from 49€ to 100€. Additional costs might be accrued depending on if the PSP must adapt an interface to another system.

    Monthly fees for the retailers

    For the usage of the payment interfaces, certain payment service providers bill a monthly or yearly fee that is not dependent on the amount of use. That means that these fees are also accrued even when no transactions are made. This way, the PSP can secure their own income regardless of their clients’. Certain providers offer all inclusive packages that calculate their fees after taking the number of transactions on the client’s website into account. This package is especially good for retailers who still have a low number of monthly transactions on their websites, as this type of fee takes the low number of transactions into account and reduces the fees the retailer must pay to the PSP.

    Transaction fees and discounts

    For each payment transaction on a retailer’s website, the PSP calculates a small cost. These costs arise between the bank of the customer and the bank of the retailer. Other parties such as acquirers are often involved in this process and are paid by the PSP through these transaction fees.

    The transaction fees are calculated in percentage. The higher the transaction volume is, the lower the average cost will be. Furthermore, the fees will vary depending on the method of payment. In some cases, the country, the industry and average price of the purchased product may also influence the transaction fees. The PSP already deducts the amount upon the processing of the transaction.

    The following diagram gives a first overview of the percentages of transaction fees. The price model of the provider may vary and can be dependent on the number of transactions. If the transaction volume sinks, the costs of each transaction will as well.


    Diagram: Percentage based average transaction fees in percent of average shopping cart amount (Source: ibi research)

    Cross border fees

    Is your online shop or website internationally active? Then there are further cost points to keep in mind. If payment transfers are made from foreign countries outside of the SEPA-Zone, banks typically raise fees. With transactions in different currencies, retailers might find it sensible to establish their own currency account. If the dealer decides to transfer currencies themselves, it is necessary to establish when the currency will be exchanged, which currency rate of reference is used and which surcharge the PSP will accept. The PSP can provide you with a list of details concerning certain countries and payment methods.

    Indirect payment costs

    Direct payment costs are frequently the deciding factor in choosing between payment method offers and payment service providers. It is easy to forget to take indirect costs into consideration. However, depending on your customer group, product and offered payment methods, indirect payments can greatly affect your total costs. These are costs such as payment disruptions, unpaid invoices or return fees. A payment study by ibi Research shows that when both direct and indirect costs are considered, purchase on account is the most expensive method of payment for the retailer, with fees up to 8.31% of the purchasing price. That means that the most commonly used method of E-Commerce payment in Germany is also the most expensive.

    Chargeback Fees

    Chargeback processing is a process that reverses false or incorrect charges. For example, if a customer triggers the chargeback process on a credit card payment, the issuer bank, or the bank of the customer, will take back the payment back from the business on the customer’s behalf.

    The option to chargeback serves to protect customers from theft and misuse of their cards. It can also be used by customers if the product they receive is damaged or not delivered. The processing cost of the chargeback falls on the PSP and the banks. The costs are generally around 10 to 20 euros.

    Unpaid or missing invoices

    The average case of a missing or unpaid payment from a customer costs businesses about 65 euros, according to ibi Research. Despite the high costs, risk assessments are only used by about half of all retailers. Retailers can work together with payment service providers in order to better control these costs. PSPs offer payment guarantees and take over claim management for their clients. Overall, this is a sensible choice for retailers in order to control their time and costs more efficiently.

    Tipps für E-Commerce-Händler

    Recommendations for small and large retailers: which payment service provider is right for you?

    Basic fees, transaction costs and discounts, as well as one time setup fees can add up to a hefty bill for a business establishing an online shop. That means that the inclusion of multiple payment methods can lead to a significant decrease in the online retailer’s margin of profit, and they should take this into account when setting the prices of the products in their online shop.

    Retailers with a small sales volume optimize their position when they choose a payment provider that provides them with access to their chosen payment methods. The expense and indirect costs can typically be chosen between models. Models with a high basic fee that include a high number of free transactions are most often used by new businesses.

    Larger players in E-Commerce handle their individual cost blocks with the payment service provider. Certain businesses also create their own acquiring contracts. Currently, it is important to choose the right payment service provider in cross-border business. The right PSP in cross-border business can offer suitable country-specific payment methods and use conversion and cost potentials to the business’ advantage. We recommend that you use a cost comparison of payment service providers.

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