HOW ONLINE CARD PROCESSING CHARGES WORK

Online card processing charges essentially work on the same principles as offline card processing charges. Debit cards will typically attract a fixed fee per transaction while credit cards, as well as charge cards, will attract a fee which is a percentage of the total transaction value.

However, there is typically an additional step in the online payment process in the form of the Payment Service Provider (PSP). The Payment Service Provider will typically charge an additional fee which is either a fixed fee per transaction or a further fixed fee per transaction for debit cards and an additional percentage of the total transaction value.

This model, where two parties are charging (the acquirer and PSP), may not always be the case. The PSP may or may not be owned by your acquiring bank or your PSP may even provide you with a bureau service where you are not required to set up your own merchant account with an acquirer. In these cases you may only ever see a single set of transaction fees.

Acquirer (Offline) Card Processing Charges

To illustrate this your base transaction fees may be as follows from your acquirer*:

Debit Cards 30 pence per transaction
Credit Cards 1.7% of the transaction value
Charge Cards 2.5% of the transaction value

Payment Service Provider (PSP) - Online Card Processing Charges

Your Payment Service Provider may well then charge an additional transaction fee.

Scenario A - Where the fees are calculated in the same way as the acquirer does

Debit Cards 10 pence per transaction
Credit Cards 0.5% of the transaction value
Charge Cards 0.5% of the transaction value

Scenario B - Where the transaction fees are fixed and the card type is irrelevant

Debit Cards 15 pence per transaction
Credit Cards 15 pence per transaction
Charge Cards 15 pence per transaction

Combined/Total Online Card Processing Charges

The combined costs for a transaction would therefore be as follows:

Scenario A

Debit Cards 30 + 10 = 40 pence per transaction
Credit Cards 1.7% + 0.5% = 2.3% of the transaction value
Charge Cards 2.5% + 0.5% = 3.0% of the transaction value

Scenario B

Debit Cards 30 + 15 = 45 pence per transaction
Credit Cards 1.7% + 15 pence = 1.7% of the transaction value plus a 15 pence fee
Charge Cards 2.5% + 15 pence = 2.5% of the transaction value plus a 15 pence fee

The figures above highlight two important areas which need to be regularly reviewed to minimise the cost of online card processing charges. Arguably the most important is the actual acquirer base fees as these will also typically apply to your offline transactions and hence have the biggest impact across all your card processing charges. The second is trying to minimise the costs levied by the Payment Service Provider element of the transaction; either through using a fixed fee model or ensuring the charges are reflective of your service level.

It is extremely important to note that the cheapest is not always the best and often there may be external factors, e.g. if you take a lot of overseas payments which require your acquirer to charge you more than if all your payments were UK-based.

WPM Education's e-payment solutions are acquirer and PSP-independent and we are able and willing to work with any provider. We therefore are not in a position to provide advice on online card processing charges but will be happy to put you in touch with organisations which can help review your current arrangements.

Other Online Payment Types

If online card processing charges are an issue for you, it may be advisable to consider other Online Payment Types.


*Please note: The above figures are purely for illustration and not based on any actual rates. It is also somewhat of an over-simplification as in many cases you will have different rates for every card type; i.e. even though it is a Visa-branded credit card, cards issued to consumers attract different rates to those issued to corporate cardholders.

If you are interested in WPM's e-payment solutions then please see the following pages which cover card payments and Direct Debit payments.