I am learning about online credit card processing. Part 1 introduced a number of basic definitions.

The number of online payments is going to grow. Only 6% of credit card transactions are currently done online. With so much at stake, there are hundreds of payment gateways who provide a variety of services. But I have chosen to divide them into two categories.

First there are traditional gateways who charge a monthly fee (in addition to a variety of other fees) and often you need to obtain a merchant account on your own which also has various fees associated with it.

The second category contains newer full stack gateways who are more user friendly and provide a merchant account and a much simpler fee structure which is generally a percentage charge on a per transaction basis with no monthly fees.

These “full stack” gateways are convenient and easy but they can cost more. They generally charge 2.9% + $0.30 per transaction. Compare that to a more traditional gateway such as Authorize.net who charges $20 per month and $0.10 per transaction. However you also have to factor in the cost of a merchant account. And both the gateway and merchant’s bank often charge a variety of fees which makes it difficult to assess the true cost.

If you are doing a large number of transactions, saving small amounts of money is going to make a big difference. If you are not then it may be cheaper to use a full stack processor and save yourself the dev work and accounting effort.

One interesting company I would like to note is Spreedly. Spreedly provides an api layer on top many other payment gateways so you can swap out gateways whenever you feel like it. Their service works with a large number of payment gateways – currently 60 gateways in 73 countries. They also give you the ability to deposit funds in different merchant accounts based on location or other business logic. They do have a monthly fee structure and clearly you would only choose this solution if you are processing a large number of transactions.

Additional reading and resources

Also I found this series of videos was an excellent introduction to understanding payments at a lower level. Be aware this is probably more than most web developers need/want to know.