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Receiving payments
What is a payment gateway?
Selecting a payment gateway.

Selecting a Payment Gateway

Although payment gateways offer the same service, their pricing models and checkout process may differ.

The main distinction between the various payment processors is whether they require that you have your own merchant account or make use of their merchant account.

A merchant account is a credit card account that is setup with a bank and allows you to accept credit card as a form of payment.

(a) Using your own merchant account.

If your payment gateway requires that you utilise your own merchant account, it is then up to you to open a merchant account with your bank and negotiate a discount rate directly with the bank. The discount rate is the percentage of each transaction that your bank will charge based upon the value of the transaction. If you already have an existing merchant account with your bank, then it is a simple process of informing them that you require online merchant facilities.

Once the merchant account has been established, you can then go ahead and link it with your payment gateway so that all credit card transactions originating from your site are processed using your merchant account with your bank. In this case, each time a successful transaction is processed via your website, the funds are deposited directly into your bank account.

A Note on discount rates:

Discount rates vary between banks. It is up to you to approach various banks and negotiate the best rate possible. Generally speaking, the discount rates for the various banks in South Africa for credit card transactions range from 2% - 7%. The main determining factor is volume and value of credit card transactions per month. The higher your volume and value, the lower your discount rate.

Be aware that the banks in South Africa charge a minimum monthly fee. If the total discount applied to all credit card transactions in that month is below the minimum fee, you will then be charged the minimum fee.

(b) Using the payment gateway's merchant account.

Some payment gateways offer a service that includes the use of their merchant account. This is an indirect method of accepting credit cards on your website. From the customers point of view, there is no difference in the checkout process or the way the purchase is transacted. In fact there is no way to distinguish between the two methods. The only time a customer sees the merchant reference is on their credit card statement where under company name it states the company name of the payment gateway as opposed to your company name.

With this setup, the payment gateway charges you a discount rate per transaction and holds all funds in their bank account. When you sign up with the gateway processor, they will give you access to your own administration panel where you can view and edit all the credit card transactions linked to your site. You may at anytime withdraw the funds from your account and have them transferred to the bank account of your choice.

To summarize:

Although there are many factors to consider when selecting a payment gateway, the choice of whether to setup and utilize your own merchant account will be based upon the volume and value of credit card transactions each month. Thus if you are expecting a high value of credit card transactions every month, then it might be worth your while setting up your own merchant account with the bank and negotiating a low discount rate per transaction.

If however most of your customers pay using other forms of off-line payment such as bank transfer and you do not expect a high volume or value of credit card transactions each month, then it might be more cost effective to utilise a payment gateway that does not require that you use your own merchant account.

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