Guide on Cost Structure of White-Label Payment Gateways

Type of fees

When considering a white-label payment gateway, understanding the various types of fees involved is essential. These fees can significantly impact your bottom line and overall business strategy.

Setup Fees

One of the most prevalent barriers to entry for a white-label payment gateway is setup fees. Setup fees imply integration and the necessity for the gateway to integrate into already established systems and platforms. For example, payment processors with their own technology established need to integrate as well as possible to ensure the payment gateway operates with minimal downtime and conflict resolution. 

In addition, many white-label payment gateways will allow for white-labeling the aesthetics of the payment gateway so the operational capabilities are in line with brand perception. This means custom UX, colors, logos, etc. While this is a good option for cohesive branding efforts, it still requires additional costs. Finally, keep in mind the costs of testing and certification as well.

This essentially means that your payment processor will be PCI compliant and your transactions secure, which safeguards your business reputation as well as your clients.

Recurring Fees

Then, there are recurring charges. Unfortunately, these fees will be a part of your existence going forward. Recurring charges are assessed as flat fees—monthly charges and annual charges that are applied regardless of volume processed. Flat fees are good for budgeting, as many merchants who know they have stable transaction volume appreciate the stability such a charge offers.

However, some processors have volume pricing where the fees fluctuate based on how much volume is typically processed. This benefits those merchants that anticipate growth, as it usually has better pricing for more processed amounts down the line.

In addition, discount rates—lower fees assessed for high volume or buy-in situations—should be assessed, as this can equate to great savings over time.

Transaction Fees

Transaction fees are another critical component to consider. Domestic transaction fees apply to transactions within the same country and are typically lower. These fees can vary based on the provider and the specific services you require.

International transaction fees, on the other hand, are generally higher due to the complexities involved in cross-border transactions. These fees can include currency conversion charges and additional security measures.

Volume-Based Pricing

If your company does a high volume of transactions, a lot can be saved with the fee of volume-based pricing. The standard structure is tiered pricing where the higher you process, the cheaper it is per transaction. This is a fee structure advantage for those who do high volumes of transactions—which would work well for rapidly scaling companies.

Another option for pricing is interchange-plus pricing. This is the interchange plus a payment gateway provider markup. This type of pricing is a bit more on the transparent side because it shows you where all your money is going.

In addition, it's perfect for those companies that have varying transactions, as it gives a better feel for what the fees will be.

Additional Charges

Beyond average fees assessed, there are other fees that muddy your overall pricing. Chargeback fees are assessed every single time a customer has a transaction reversed—no matter if they're doing it on purpose or if they dispute a mistaken charge. This can be expensive—especially if you're a company with a lot of chargebacks.

Another thing is refund fees. For example, when you need to process a refund for a customer, certain providers will charge a fee. Then there are support and maintenance fees. Depending on the processor you go with, you might owe fees for customer support and maintenance of the system. In a perfect world, your payment processor processes and that’s it. This means, however, help and updates on an ongoing basis.

Finally, there are PCI compliance fees. This is for compliance or ensuring PCI DSS compliance. There are fees for adhering to the industry's security guidelines to protect your company and clients.

Factors Influencing Cost Structure

Several factors can influence the cost structure of white-label payment gateways. Understanding these factors can help you make informed decisions and optimise your investment.

Volume of Transactions

The volume of your transactions impacts how much you'll pay. For instance, if you do a lot of transactions, this can provide you with access to lower fees per transaction. Many processors provide volume or tiered pricing which could save merchants thousands. Conversely, however, you want to assess how much you've transacted in the past and how much you plan to transact in the future to go with the best, most cost-effective selection.

Level of Customization

Branding Customization will also affect pricing. Custom payment gateways will cost extra for modifications made for your business and your needs. This is a small or large cost depending on the type of customization and the fees associated with the vendor. However, a payment gateway that is highly customized could offer a far better experience for the consumer, so pros and cons should be weighed.

Integration with Other Platforms

Costs to consider include integration with other systems. The more this is going to cost, the more extensive the integration. This is the integration of the payment processing gateway with your other systems—CRM, ERP, e-commerce platform. It's not uncommon to find these integrations as it's necessary for business to run smoothly and for data to be transferred; however, this increases the total cost of ownership of the payment processing gateway that needs to be considered.

Considerations

There are factors taken into consideration for white label payment processing gateway that ultimately guide you to the best decision for your business. The factors are scalability and transparency.

Scalability

From the start, ensure all processing fees are disclosed so you aren't hit with surprise costs later on. This also means evaluating the payment processor's payment gateway to see how transparent it will be for your future clients/customers when it's time to pay.

Transparency

This means finding a payment processor that resembles transparent pricing and pricing schemes. Set-up fees, transaction fees, and likely fees for changes or customer service should all be revealed up front to avoid the hidden, surprise charges that eat into profit margins. Knowing the costs associated with a payment processor makes for proper planning and proper considerations of payment processor choices.

Summary

White label payment gateway pricing relies on fees and other elements that impact pricing. For example, white label payment gateways include setup fees, customization fees, maintenance fees, monthly/annual fees, and transaction fees, which all contribute to the overall expense to you. In addition, elements that impact your expense include transaction volume, level of customization, and simplicity of integration.