But losses mount for the home furnishings e-retailer that went public in October.
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In addition to features that make it easy for mobile consumers to buy via smartphones, many payment gateways provide other services and functions. This means that costs can vary widely depending on the vendor and the services the retailer receives. While fees typically include a setup fee, monthly fee and transaction fee, these can range significantly based on the services the gateway provides.
For example, many gateways for smaller retailers, such as 2Checkout.com which works mainly with e-retailers with annual sales of $2.5 million and less, bundle payment gateways and processing with a shopping cart. Many also host the card data, relieving retailer clients of the costly burden of having to comply with the Payment Card Industry Data Security Council's standards for securing cardholder data. The council's standards are designed to protect cardholder data. 2Checkout.com, for example, charges a 5.5% transaction fee plus 45 cents for a hosted checkout, international currency services, PCI compliance, fraud management and processing.
Online merchants that sell or have plans to sell internationally can easily find one of many gateways and processors that specialize in international payments. For example, payment service provider Computop Inc. allows retailers to accept 140 currencies and country-specific types of payments such as Boleto Banc‡rio, which is popular in Brazil. Computop (as do many other gateways) also integrates with e-commerce platform providers such as Demandware Inc. and Magento, a subsidiary of eBay Inc.
Computop can help retailers expanding into Europe deal with the many banking rules and regulations across each country in the region, CEO Ralf Gladis says. For example, it offers merchant accounts in countries around the world, eliminating the need for retailers to open a merchant bank account in each of the, say, 10 countries where it wants to sell online. It also offers fraud prevention services. Computop charges a setup fee of around $350, a monthly fee of around $35 and a per-transaction fee of around 10 to 15 cents, on average, depending on volume. It charges an additional 2.5% to 3.5% per transaction on top of that for merchant accounts set up on behalf of the retailer in foreign countries so that retailers can accept local payment methods.
Butlers, a German home and housewares retailer that launched its e-commerce site in 2007 and now sells online in Austria, the United Kingdom and Germany, with plans to begin selling in Spain in the coming months, says it chose Computop because it offers payment methods that are popular in several countries through one interface integrated into its Demandware e-commerce platform.
Butlers knew it needed to be able to accept a wide range of international payment types, just as Fab.com knew it needed a simple checkout for its mobile shoppers. And so they were able to find a payment gateway that met those needs. Retailers that take a hard look at their current and future needs will be the ones more apt to ask the right questions to potential payment gateways. And that, merchants say, is the gateway to a good payment vendor.
How to vet a gateway
When vetting payment gateways, Jason Miller, chief technology officer and vice president of technology at Motorcycle Superstore, suggests turning to associations such as the Merchant Risk Council for help. For a $1,500 annual fee, the council gives retailers access to online forums where they can ask merchant peers for their thoughts on vendors. The council has about 900 merchants representing more than 300 companies worldwide.
Merchants can also use search engines to vet vendors, says Kevin Gallagher, general manager of e-commerce at Merchant e-Solutions, a payment gateway and processor. "Google who you're considering and add words like 'customer support' or 'uptime' or 'downtime'," Gallagher says. "You'll be surprised at how much you can find." Merchants get angry when they run into issues and they often take to the web to vent their frustrations, he says.
Richard Sexton, founder of web and store furniture retailer Carolina Rustica, stresses the importance of taking a careful look at the fine print in a contract. Some companies offer a low rate for a few months and then it skyrockets, he says. Others charge for access to basic tools like online statements or try to lock retailers into long-term contracts. Some charge for any order that gets sent for processing, even if the transaction is ultimately denied.
"Ask what the fixed monthly fees are and if there is a scale for volume," Sexton says. "Make sure that you can get out in 30 days so you are not locked into a bad relationship. And get everything in writing."