Understanding Payment Gateway Options for UK eCommerce

Accepting payments online requires choosing a payment gateway—the service that securely processes card transactions between your customer, their bank, and yours. The choice affects your costs, customer experience, and operational complexity. This guide compares options relevant to UK eCommerce businesses.

How Online Payments Work

Understanding the payment chain helps evaluate options:

Payment gateway: The technology that captures card details securely and communicates with payment networks. This is the service you integrate with your website.

Payment processor: The service that routes transactions through card networks (Visa, Mastercard) to the customer's bank.

Merchant account: A special bank account where funds settle before transferring to your regular business account.

Traditional setups required separate providers for each layer. Modern payment service providers (PSPs) like Stripe combine everything, simplifying setup but bundling pricing.

Stripe

Stripe has become the default choice for many developers and businesses, for good reasons:

Pricing: 1.5% + 20p for UK cards, 2.5% + 20p for EU cards, 3.25% + 20p for international cards. No monthly fees, no setup costs.

Strengths:

• Excellent developer experience with comprehensive APIs
• Fast setup—accepting payments within hours
• Strong fraud protection included
• Supports all major payment methods including Apple Pay, Google Pay
• Clean, modern checkout experience
• Excellent documentation and support

Considerations:

• Higher percentage fees than traditional merchant accounts at volume
• Account reserves possible for new or high-risk businesses
• Rolling settlement (typically 7 days initially, reducing over time)

Stripe suits most businesses, especially those prioritising speed to market and developer experience over marginal fee optimisation.

PayPal

PayPal remains significant due to customer trust and recognition:

Pricing: 2.9% + 30p for PayPal transactions, similar for card transactions through PayPal Commerce Platform.

Strengths:

• Many customers prefer PayPal—they don't need to enter card details
• Buyer protection builds customer confidence
• Established trust, especially for first-time purchasers
• Quick checkout for logged-in PayPal users

Considerations:

• Higher fees than some alternatives
• Dispute resolution often favours buyers
• Account limitations and holds can be frustrating
• Customer service quality varies

Many stores offer PayPal alongside card payments, letting customers choose. The conversion benefit of offering PayPal often exceeds the fee premium.

Traditional Merchant Accounts

For higher volumes, traditional merchant accounts through banks or independent sales organisations (ISOs) may offer lower fees:

Pricing: Typically 1.0-1.5% for UK cards plus a per-transaction fee (10-20p). Monthly account fees (£15-30) may apply.

Strengths:

• Lower percentage fees at volume
• Next-day or same-day settlement possible
• Direct relationship with acquiring bank
• Potentially better terms for established businesses

Considerations:

• Longer setup process with underwriting
• Separate gateway needed (adding complexity)
• Contracts may have early termination fees
• Less flexibility than PSPs

The break-even point where traditional accounts save money varies, but typically becomes relevant above £10-20k monthly transaction volume.

Worldpay (FIS)

One of the UK's largest payment processors, often used with traditional merchant accounts:

Strengths:

• Established reputation and stability
• Wide range of terminal and online solutions
• Strong enterprise capabilities

Considerations:

• Less developer-friendly than modern PSPs
• Complex pricing structures
• Contract lock-ins common

SumUp / Zettle / Square

These providers focus on simplicity, particularly for businesses with both online and in-person sales:

Pricing: Typically 1.69% for in-person transactions, higher for online (around 2.5%)

Strengths:

• Unified online and in-person payments
• Simple, transparent pricing
• Easy setup and management
• Good point-of-sale integration

Considerations:

• Online capabilities less sophisticated than Stripe
• Less suitable for pure online businesses

Alternative Payment Methods

Beyond cards and PayPal, consider:

Apple Pay / Google Pay: Increasingly expected by mobile shoppers. Usually included with Stripe or similar at no extra cost. Reduce checkout friction significantly.

Buy Now Pay Later: Klarna, Clearpay (Afterpay), and similar services let customers spread payments. They charge merchants 3-6% but can increase conversion and average order value.

Open Banking: Direct bank-to-bank payments via services like TrueLayer or Plaid. Lower fees than cards but less familiar to consumers. Growing but still niche.

Cryptocurrency: Possible but rarely worthwhile for most eCommerce. Volatility, user unfamiliarity, and regulatory uncertainty make it impractical for typical retailers.

Factors in Your Decision

Transaction Volume

Low volume: Stripe or PayPal's simplicity wins. High volume: Traditional accounts may save meaningful money.

Average Order Value

Per-transaction fees matter more with small orders. A 20p fee is 2% of a £10 order but 0.2% of a £100 order.

Customer Expectations

Your audience may expect specific payment options. Consumer electronics shoppers might expect Klarna. Premium goods buyers might prioritise card security.

International Sales

Selling internationally increases payment complexity. Stripe handles multi-currency well. Traditional accounts may require separate arrangements.

Technical Requirements

Complex checkout flows, subscriptions, or marketplace payouts may require Stripe's advanced features. Simple stores can use almost anything.

Our Recommendations

For most new eCommerce stores, we recommend:

Primary: Stripe for card payments. Excellent developer experience, straightforward pricing, strong feature set.

Secondary: PayPal as an option. Some customers strongly prefer it, and the conversion benefit typically justifies the fees.

Consider adding: Apple Pay and Google Pay (usually included with Stripe). Klarna or similar if your products suit instalment payments.

As volume grows, review whether traditional merchant accounts would save money—but don't optimise prematurely. The simplicity of modern PSPs has value.

If you're setting up an eCommerce store and need guidance on payment integration, get in touch. We'll recommend and implement the appropriate solution for your situation.