Paying with anything but cash in ecommerce nowadays involves the use of one of the possible payment gateways. While payment processing may seem like a simple task, the choice of payment gateway can greatly impact a business’s revenue and success If you are a web hosting provider and offer your service exclusively for electronic payments, this can be especially relevant for you. If you instead are looking for a good web hosting plan, it can be useful for you to know more about the types of payment gateways and related fees. It’s a good idea to look for a provider who offers a variety of payment gateways, like HostZealot, for example, so there is a possibility to pay using the most beneficial payment gateways according to your needs.
To exploring this in fact pretty much broad topic and giving you tips of how to get the most out of your payment gateway we are going to dedicate today’s article.
One of the essential reasons why payment gateways matter is the fees that come with each payment. They depend on the specificity of the gateway, the type of currency the gateways are based on, and the policy of the service provider.
The fees on various gateways may be presented either by some fixed sum that is charged with each transaction or by a certain percentage of the sum involved.
When put together, the fees that are due to your payment gateway can eventually make up a serious sum, so using a too-expensive payment gateway can result in a worsening the experience of your customers.
Therefore, the first and most obvious reason why payment gateways matter is the cost. The fees affect how much your customers are going to pay and how they will like it. Try looking for gateways that offer lower fees this way you can increase the number of satisfied customers and your eventual revenues. Cooperating with the best payment gateway services and offering a broad selection of them will give you a significantly advantaged over your competitors.
Profit margins are a measure of a company’s profitability and indicate how much profit a company makes on each dollar of revenue earned. Profit margins are expressed as a percentage and are calculated by dividing the company’s net income by its total revenue.
Here are some ways that payment gateway fees can impact your profit margins:
Cost of Goods Sold (COGS): Payment gateway fees are a cost of goods sold (COGS) because they are directly related to the sale of your product or service. This means that they impact your gross profit margin. If you are selling products with low profit margins, payment gateway fees can significantly eat into your profits.
Order Size: Payment gateway fees are often charged as a percentage of the transaction amount, which means that larger orders will result in higher fees. This can be particularly problematic for businesses that sell high-ticket items, as the fees can quickly add up and eat into your profit margins.
Payment Method: Some payment methods are more expensive to process than others. For example, credit card transactions typically have higher fees than debit card transactions. If you are accepting payments from customers using expensive payment methods, your profit margins can suffer.
Volume of Transactions: Payment processors often offer lower fees for businesses with a high volume of transactions. If you are just starting out and have a low transaction volume, you may be charged higher fees, which can negatively impact your profit margins.
Chargebacks: Chargebacks occur when a customer disputes a transaction and requests a refund from their bank or credit card company. Chargebacks can result in additional fees charged by the payment processor, as well as lost revenue from the sale. If you have a high rate of chargebacks, your profit margins can suffer.
Since payment gateways can have a noticeable effect on your eventual income, it’s important to choose your payment gateways wisely. Considering the following factors may help you here:
The best way of minimizing the payment gateways fees is to find the payment gateways with the lowest fees and payment methods that involve lower fees. For example, debit cards usually are associated with lower fees than credit cards. It’s also worth mentioning that cryptocurrency gateways are usually associated with fewer fees since they are based on a different technology that suggests the absence of a centralized institution. Therefore, the best thing you can do is to make a research of providers and choose once that offer the best conditions with an eye on the way you offer your services.
There is a broad selection of payment gateways available, each having its features and advantages. There is no single answer to which one is best since it all depends on the type of your business and on your payment policy. Therefore it makes more sense to learn about payment gateways and make your choice on your own.
To help you with this, let’s have a quick overlook of the popular payment gateways that might be optimal for your business.
PayPal is not only a convenient application for making individual payments, but also a widely used payment gateway that offers both merchant and personal accounts. It is popular for its user-friendly interface and secure transaction processing. PayPal charges a transaction fee of 2.9% + $0.30 for domestic transactions and 4.4% + a fixed fee for international transactions.
Stripe is a robust payment gateway that is known for its flexibility and customization options. It offers several features such as mobile payments, subscription billing, and support for multiple currencies. Stripe charges a transaction fee of 2.9% + $0.30 for domestic transactions and 4.4% + a fixed fee for international transactions.
Authorize.net is a popular payment gateway that offers a range of features such as fraud detection, recurring billing, and support for multiple payment methods. It charges a monthly fee of $25 and a transaction fee of 2.9% + $0.30 for domestic transactions and 4.4% + a fixed fee for international transactions.
Square is a payment gateway that is designed for small and medium-sized businesses. It offers several features such as invoicing, mobile payments, and support for multiple payment methods. Square charges a transaction fee of 2.9% + $0.30 for domestic transactions and 3.5% + a fixed fee for international transactions.
2Checkout is a global payment gateway that offers support for over 45 payment methods and 87 currencies. It also offers several features such as fraud detection, recurring billing, and support for mobile payments. 2Checkout charges a transaction fee of 2.9% + $0.30 for domestic transactions and 4.5% + a fixed fee for international transactions.
Skrill is a payment gateway that offers support for over 40 currencies and several payment methods, including credit cards, bank transfers, and e-wallets. It also offers fraud protection and chargeback management. Skrill charges a transaction fee of 2.9% + $0.30 for domestic transactions and 4.4% + a fixed fee for international transactions.
One way of reducing your business expenses is to pass your payment gateway fees onto your customers. Beware, however, that to be fair, it has to be done in a transparent way and straightforward not to make your customers think you’re an unfair merchant. There are a couple of efficient approaches that can be helpful for reaching the bilateral content of you and your clients, which we’ll discuss in the following.
The first step in passing payment gateway fees onto your customers is to clearly communicate the fees to them. Be upfront about the fees and make sure they are clearly visible to customers before they complete their transactions. This can be done through an itemized breakdown of the fees on the checkout page or by providing a notification before the customer makes the payment.
Another strategy for passing payment gateway fees onto your customers is to adjust your product prices to include the fees. This can be done by increasing the price of the products or services slightly to cover the fees. This approach ensures that the fees are absorbed by the customer and not the business.
Offering discounts for alternative payment methods can encourage customers to use payment methods that are less expensive for the business. For example, you can offer a discount for customers who pay using direct bank transfers or e-wallets. This approach incentivizes customers to use a payment method that does not incur fees for the business.
Setting a minimum order amount can help offset the cost of payment gateway fees. For example, if the payment gateway fee is $0.30 per transaction, you can set a minimum order amount of $10. This means that if a customer makes a purchase of less than $10, the business will absorb the cost of the fee.
If passing on the full payment gateway fees to customers is not feasible, you can consider passing on only a portion of the fees. For example, if the payment gateway fee is $0.30, you can pass on only $0.15 to the customer, while absorbing the remaining $0.15 as a cost of doing business.
The fees in payment gateways are not always fixed and unchangeable, and for this reason there is often a possibility of negotiating the fees to reach bilateral cost efficiency. In the following, we’ll give you a couple of tips and approaches that can help you achieve an agreement with your service provider.
Before negotiating payment gateway fees with providers, it is important to do your research and understand the industry standards and pricing models. This will give you a better idea of what to expect and what is reasonable to negotiate.
Building a relationship with your payment gateway provider can go a long way in negotiating fees. A good relationship can lead to more favorable terms and better service. Regular communication, feedback, and cooperation can help build a strong relationship with your provider.
Understanding your transaction volume can help you negotiate better rates with your provider. If your business processes a high volume of transactions, you may be eligible for volume discounts or lower per-transaction fees. It is important to have a clear understanding of your transaction volume and communicate it to your provider.
Comparing payment gateway providers can help you identify the best rates and terms for your business. It is important to evaluate the features, pricing, and reliability of different providers to determine the best fit for your business.
Negotiating payment gateway fees can be a difficult process, and it is important to be prepared to walk away if you cannot reach a satisfactory agreement with your provider. There are many providers in the market, and it is important to find one that offers the best value for your business.
To efficiently manage the fees associated with using payment gateways, it’s essential to find out what they actually look like. There are the following types of payment gateway fees:
Payment gateway fees are typically calculated as a percentage of the transaction amount or a flat fee per transaction. The percentage fee can vary depending on the provider, the type of transaction, and the volume of transactions processed. For example, a provider may charge 2.9% + $0.30 per transaction, which means that for a $100 transaction, the fee would be $3.20.
Monthly fees are typically based on the volume of transactions processed or the features included in the plan. For example, a provider may charge a monthly fee of $50 for up to 1,000 transactions, and an additional fee of $0.10 per transaction for transactions over 1,000.
Chargeback fees are usually a flat fee per chargeback, ranging from $10 to $50, depending on the provider.
Payment gateway fees are only one aspect of making your business more and more profitable. Besides that, there are dozens of strategies for optimizing your income, bit by bit, but eventually coming to serious numbers. Now we’ll have a quick look at them, to give you a basic idea of where to go next.
Offering value-added services, such as website design and optimization, data encryption, SEO services, and data analytics, can help increase revenue and profitability for your hosting business. By providing additional services, you can differentiate your business from competitors and add value for your customers.
Upselling and cross-selling can help increase revenue and profitability by encouraging customers to purchase additional services or upgrades. For example, you can offer customers the option to upgrade their hosting plan, purchase additional storage or bandwidth, or add security features to their website.
Streamlining operations can help reduce costs and increase efficiency, which can lead to increased profitability. This can involve automating processes, using cloud-based tools, and reducing waste and redundancies in your business processes.
Acquiring new customers can be costly, so it is important to focus on customer retention. Offering exceptional customer service, providing personalized support, and implementing loyalty programs can help increase customer satisfaction and retention rates.
Monitoring key performance indicators, such as revenue, customer acquisition costs, and churn rates, can help you identify areas for improvement and make data-driven decisions to increase profitability.
Now we’ve given you all you needed to know about payment gateways and the fees associated with them. We hope this information was helpful and now you will surely find the right payment gateways for your hosting business. Good luck!