Business

What is the best online payment provider? Top options, pros & cons

Panna Kemenes

11.09.23 (updated more than 1 year ago)

Read time 10 minutes

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.

In this article:
Top Online Payment Providers in the Market How Online Payment Providers Work Factors to Consider When Choosing an Online Payment Provider Choosing Online Payment Providers for International Transactions Frequently Asked Questions Advantages and Benefits of Using Online Payment Providers Limitations and Potential Risks of Online Payment Providers Conclusion

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
PayPal Stripe Square Braintree (A PayPal Service) Authorize.Net

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

PayPal pros:
Ease: PayPal is easy to set up, and most customers are already comfortable using PayPal. Safety: PayPal only requires customers to attach payment info to their secure PayPal account. Recurring Payments: You can accept recurring payments through PayPal.

PayPal cons:
Chargebacks: PayPal charges a $20 fee if a buyer files a chargeback. It may be difficult for a merchant to win a chargeback dispute.³ International fees: PayPal charges additional fees for international transactions. Account required: You need a PayPal account to receive money.

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

Stripe pros:
Dashboard: Stripe has a dashboard that helps companies keep track of payments. Discounts: Stripe offers discounted fees for ACH payments. Customer support: Stripe offers 24/7 phone, email and chat support. Customization: Stripe’s platform is more technical, which allows companies to customize payment options.

Stripe cons:
May need a developer: Some companies have noted that they need a developer to successfully integrate Stripe.⁵ Disputes: It can be time-consuming to resolve customer disputes/refunds.

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

Square pros:
Versatile: It offers convenient payment options for brick and mortar stores, ecommerce companies and other types of businesses. Flexible payment plans: Customers can also use Afterpay to create payment plans. This flexibility may help boost sales. Software: Square has built in software that can help the company manage its operations and finances. Discounts: Square offers flexible pricing for business with revenue above $250,000.

Square pros:

Versatile: It offers convenient payment options for brick and mortar stores, ecommerce companies and other types of businesses.
Flexible payment plans: Customers can also use Afterpay to create payment plans. This flexibility may help boost sales.
Software: Square has built in software that can help the company manage its operations and finances.
Discounts: Square offers flexible pricing for business with revenue above $250,000.

Square cons:
Minimum Fees: Some payment types require a $1 minimum fee, regardless of the transaction size. Extra Services: Some of the company’s extra services are beneficial, but you typically have to pay monthly fees.⁷ Extra Fees: Fees are very high if you have to manually enter card details. Customer Service: Square does not offer 24/7 phone support.

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

Braintree pros:
3D Secure 2: This feature helps reduce fraud. ACH payments: Braintree only charges a 0.75% fee for ACH payments. Integrations: Braintree supports third party integrations. Customers can also integrate with PayPal, which allows Braintree to tap into its existing customer base. Chargebacks: Customers can automate the management of chargebacks.

Braintree cons:
Limited customer support: Braintree does not provide 24/7 customer support. It is unavailable on the weekends, and is only available during certain hours from Monday-Friday.⁹ Fees: Customers may face higher fees and charges for chargebacks and international transactions.

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

Authorize.Net pros:
Enterprise benefits: You may qualify for lower fees if you have more than $500,000 in annual revenue. Customer Service: The company offers 24/7 customer service. Fees: Authorize.Net has relatively lower fees and does not charge extra for American Express.¹¹

Authorize.Net cons:
Chargeback fees: Authorize.Net has relatively high chargeback fees compared to some of the other providers featured here.¹²

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.

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.

One smart way to save money on international transaction fees, is to receive payments to a local account. It can be a hassle to open multiple foreign accounts, however. This is where Wise Business steps in.

With Wise Business, you can open nine local account details in one place to get paid like a local. You can then hold, exchange, or send payments all from one account.

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.

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:
Receive payments from e-commerce platforms (such as Amazon or via Stripe). Create invoices using the Wise invoice generator or invoice templates. Easy to open an account online, no need to book appointments or wait in line

Read more:
Top 10 best international payment gateways

Sources

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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