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What is the best online payment provider? Top options, pros & cons
A 2021 survey by PWC found that COVID-19 shifted consumer preferences towards online shopping, and most consumers now prefer making purchases online.¹
As these trends accelerate, businesses can adapt by offering secure and convenient payment options. Offering such payment options can help boost your sales.
Online payment providers are third-party organizations that allow business owners to offer online payment options. These online payment providers can help your business offer secure online payment methods.
Top Online Payment Providers in the Market
If you are looking for a high-quality online payment service provider, there are plenty of options available.
Some of the best online payment providers include PayPal, Stripe, Square, Braintree and Authorize. This list will cover the benefits of online payment providers and how these companies vary in terms of fees and offerings.
| Top Online Payment Providers: Quick overview |
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PayPal
Features and Services Offered by PayPal
PayPal is a popular online payment provider that allows customers to connect their bank account or credit card. The company offers convenient payment options for customers, and even allows merchants to offer payment plans. Small businesses can also use some of its other services, such as PayPal invoicing.
PayPal fees can be as high as 3.49%. The charge depends on what type of payment you accept. PayPal also charges an additional 1.5% for international transactions.²
Pros and Cons of Using PayPal
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Stripe
Features and Services Offered by Stripe
Stripe is a popular option that allows businesses to accept payments in over 100 currencies. Stripe also has built in software that supports ecommerce companies and companies that want to set up recurring payments.
The company typically charges a 2.9% + $0.30 processing fee, but there may be extra fees for international payments and other services.⁴
If you have a Wise Business account, you can also link your account to Stripe to save money when receiving international payments.
Pros and Cons of Using Stripe
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Square
Features and Services Offered by Square
Square is an extremely versatile option that allows in person and online businesses to accept payments from customers. It also accepts payments from digital wallets and contactless cards. Square’s fees begin at 2.6% + 10 cents, and can be as high as 3.5% + 15 cents.⁶
Pros and Cons of Using Square
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Braintree (A PayPal Service)
Features and Services Offered by Braintree
Braintree is a PayPal company that helps companies increase conversions and offer more efficient options to customers. The company offers popular payment options such as PayPal, Venmo, credit and debit cards, and various digital wallets. Braintree’s fees8 vary depending on the type of payment you use. It charges 2.59%+ 15 cents for card and digital wallets.
Pros and Cons of Using Braintree
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Authorize.Net
Features and Services Offered by Authorize.Net
Authorize.Net accepts popular payment methods like credit cards, contactless payments and electronic checks(see Authorize.net alternatives). It also offshores Ecommerce, Point of Sale (POS), mobile payments and other services for its clients.
Authorize.Net’s fees vary depending on whether a company uses it's all in services or just its monthly gateway service. The company currently charges a 2.9% transaction fee for payments, and its gateway fee is $25/month.¹⁰
Pros and Cons of Using Authorize.Net
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How Online Payment Providers Work
People may use various terms to describe online payments, including payment provider, payment processor or payment gateway.
| In simplest terms, an online payment provider is any company that helps customers connect with companies and make payments online. |
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Payment Gateway Functionality
A payment gateway is the technology that allows companies to accept payment information. The payment gateway receives the payment request when the customer inputs their payment information.
The online payment gateway service provider allows companies to offer multiple payment options to customers online or in person. The payment processor verifies that the customer has sufficient funds and processes the payment.
Transaction Process Flow
The transaction flow process consists of multiple steps. It outlines the journey a customer has to take when a customer makes a payment online. Customers enter their payment information when using the online payment provider.
The online payment provider facilitates the entire process, and charges businesses a fee for this service.¹³
Security and Fraud Prevention Measures
It is also crucial to ensure that payments are secure and that you avoid fraud. Fraud can be costly and time-consuming for small businesses, and it may cause customers to be less likely to trust you.
Ecommerce losses due to online fraud reached $41 billion in 2021.¹⁴ Using a higher quality online payment provider may help you avoid investing in expensive security and compliance software.
Factors to Consider When Choosing an Online Payment Provider
There are many online payment providers available, and it can be hard to find the best option.
Most companies will primarily be concerned with the fees, number of payment options and the ease of use. However, other factors, such as customer service and security, may also play a role when you choose an online payment provider.
Integration with E-commerce Platforms
It is critical to focus on how well you can integrate it on your E-commerce platform. It is important to ensure the process is very simple, so you can easily convert customers. Moreover, it may help to focus on options that customers are familiar with already.
Accepted Payment Methods
Companies also need to decide what type of payment options they want to offer customers. Some companies may offer less traditional payment methods, including cryptocurrency payments.
Offering ACH payments options can also be helpful, as these fees can be lower for customers.
Transaction Fees and Pricing Structure
Payment providers often charge mark up fees to customers when they process transactions. These fees can include a percentage based fee and/or flat fee.
For example, a company may charge a flat fee of $0.10 and a 2.4% fee. You may also need to pay extra fees when transacting in another currency.
Fees are likely one of the most important areas of consideration. It makes sense to choose a cheap and convenient option that is also secure.
Customer Support and Service Reliability
Most online payment providers will offer you satisfactory customer service. However, not all companies offer 24/7 customer service. It is important that you have stable and reliable support for issues like chargebacks and payment errors. It can be helpful to automate steps in the payment process, if possible, to reduce the need to contact customer support.
Choosing Online Payment Providers for International Transactions
If you are going to process international transactions, it is important to choose a company that provides extensive support and reasonable fees.
Global Payment Solutions
Companies typically charge extra fees for international payments and may not support all currencies. Your decision to choose an online payment provider may be based on the fees and number of offerings.
Many companies offer payments in more than 100 currencies. However, you may need to pay an extra fee, sometimes 1% or higher, for these transactions.
Currency Conversion and Multi-Currency Support
Other services that you may value include converting currencies. This can save you money if you receive payments from international customers.
For example, with Stripe, you can connect your Wise Business account to receive international payments and avoid foreign currency conversion fees.
Frequently Asked Questions
How do online payment providers protect sensitive financial information?
Online payment providers may take the following steps to protect customers:
- Use data encryption technology
- Require customers to receive a password and/or secure PIN before checking out
- Companies may also use Secure Socket Layer (SSL) protection
- Some companies may choose to be PCI-DSS-compliant
Can online payment providers be used for recurring billing?
You can use most online payment providers for recurring billing. If you choose to do this, it may be best to encourage options with lower fees.
What are the typical transaction fees charged by online payment providers?
The transaction fee varies depending on the type of payment made. Fees are usually around 2% per transaction, but can be cheaper.
Some companies may also charge a flat fee on top of this and have a minimum charge per transaction.
Fees made through Venmo, credit cards and digital wallets are typically more expensive relative to ACH payments. Moreover, international transactions typically have additional fees, which can be 1% or higher.
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Save money on international payments
with Wise Business
Advantages and Benefits of Using Online Payment Providers
Online payment providers create many benefits that help consumers and companies. Offering a convenient payment option can help improve the user experience, which may help you boost your revenue and create loyal customers.
Convenience and Accessibility
Businesses that offer a variety of online payment options can make the process convenient and accessible for consumers. Consumers that can access familiar payment options may be more likely to purchase products online.
Enhanced Security and Fraud Protection
Leading online payment providers help protect customers from fraud and security issues. It is important to choose a security company that adds authentication steps in the process. Choosing the right online payment gateway provider can help minimize these risks. \
Faster Payment Processing
After you establish a secure and reliable payment processing method, it is important to ensure the process moves as quickly as possible. Online payment processes with poor user experience design may result in consumers not making a purchase.
Limitations and Potential Risks of Online Payment Providers
You can boost your revenue by offering a variety of online payment options. It is important to offer multiple options to make the process easier for customers.
However, it is important to recognize some of the setbacks of using online payment providers. There are multiple issues, in addition to paying high fees, that you should consider.
Chargebacks and Dispute Resolution
Chargebacks and disputes can be costly and, most importantly, time-consuming. Online payment providers typically have a fee for any chargebacks. Disputes are more common than some may imagine. McKinsey notes that 1% of transactions result in a dispute.¹⁵
Dependency on Internet Connectivity
A poor internet connectivity can result in payment failures. Any glitches like this may cause you to lose customers. If you operate a restaurant or other physical business and have internet issues, you may not be able to process payments until you resolve this issue.
Integration Challenges for Small Businesses
Small businesses who choose to integrate online payments may encounter a number of issues:
- Options are overwhelming: It may be difficult to find a provider that provides enough options without overwhelming consumers. Moreover, small businesses may not be familiar with popular options available now.
- Record Keeping: It may be difficult for a business to keep track of financial records if it manages multiple payment methods. Some companies offer software and other tools to help businesses manage this process.
- Security: Most small businesses may not be familiar with security measures and may need to rely on the services of online payment providers. These providers may charge more.
- Fraud/Errors: It can be costly and time-consuming to deal with refunds, fraud or payment errors.
Conclusion
Offering a secure online payment method is a must for most small businesses. PWC anticipates that cashless transactions will grow by 80% between 2020-2025.¹⁶
There are multiple factors to consider when choosing an online payment provider. Most businesses may be concerned with the transaction fees. However, other issues like security, convenience, and customer support are important.
Choosing the right online payment provider can help your business offer your customers convenient options and, in turn, boost your revenue.
Receive International Payments With Ease: Try Wise Business
If you want to run a successful ecommerce store, it’s crucial for you to offer local payment methods. The Wise Business account can help you receive payments in multiple currencies. This makes it easier for customers to pay you, and helps your business to avoid costly international transaction fees.
Register with Wise Business today 🚀
Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. The Wise Business account is designed with international business in mind, and makes it easy to send, hold, and manage business funds in 40+ currencies. You can also get 9 major currency account details for a one-off fee to receive overseas payments like a local.
You’ll always get the mid-market rate when exchanging currencies with Wise, and there are no hidden fees.
| Some key features of Wise Business include: |
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Sources
- We’re all shopping more online as consumer behaviour shifts | World Economic Forum (weforum.org)
- Fees | Merchant and Business | PayPal US
- What Is a Chargeback and How Does It Work | PayPal US
- Pricing & Fees | Stripe Official Site
- Stripe Review 2023: Features, Pricing & More – Forbes Advisor
- Understanding Our Fees | Square Payments (squareup.com)
- Square Review 2023: Features, Pros & Cons – Forbes Advisor
- Pricing | Braintree Payments
- Stripe vs Braintree (2023 Comparison) – Forbes Advisor
- Merchant account fees and payment gateway pricing | Authorize.net
- Authorize.net vs. PayPal: Which Is Right for Your Business? - NerdWallet
- Authorize.net Fees & Pricing | A Comprehensive Guidebook (paymentcloudinc.com)
- Understanding the Transaction Flow Process (emerchantbroker.com)
- Global e-commerce payment fraud losses 2023 | Statista
- Payment-disputes-A-pathway-to-deep-customer-relationships.ashx (mckinsey.com)
- Digital Payments Trends: Small Businesses Are Getting Savvy (forbes.com)
All sources checked September 2023.
*Please see terms of use and product availability for your region or visit Wise fees and pricing for the most up to date pricing and fee information.
This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.
We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.
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