How much will it cost me?
Just over 2 years ago, in June 2012, I did a brief, top level summary of payment gateway options and costs in a presentation at the MAKE business hub, and I shared it online. Although it was fairly superficial it has received over 17,000 views to date.
I hope to be more useful with this updated edition, which includes a wider range of gateways, more detailed costs, and a link to a working spreadsheet which shows details in full.
Go straight to the spreadsheet on google docs http://bit.ly/paymentsUAE
Gateways looked at:
- Network International (NI)
The first thing most people look at is the per transaction percentage cut the gateway will take.
According to this graph, 2CO is the most expensive, so we should avoid it. But this graph doesn’t tell the whole story.
As you will no doubt be aware, the 3 banks permitted to process credit card payments in the UAE; Emirates NBD (NI), Mashreq Bank (Payfort) and National Bank of Abu Dhabi (?) tend to require large security deposits. These have to be factored in when thinking about operating costs.
In addition, there are monthly fees, setup fees, and any other additional fees to work into any caluclation.
There are also the fixed costs per transaction that some gateways levy, for example, 2CO takes 5.5% plus a fixed 1.65 dirham fee every time someone purchases.
Some payment processors, like Telr, offer a tiered approach, where a higher per transaction percentage comes with a lower monthly fee (eg 3.5% and a 150 AED monthly fee) and a lower per transaction cost comes with a higher monthly fee (3% and a 500 AED monthly fee)
Finally, as with many service industries in this region, it is hard to generate an exact consistent price across the board for certain things because it depends on who is dealing with whom, what type of business you have and the particular attitude of the person on the day you make the application. Bank deposits can range from $30,000 (USD) to $50,000 and even more. For this exercise i have used $30k and $50k to be able to compare.
(excerpt from spreadsheet)
Once we have these costs, we can then manipulate them into more real life examples, by amortizing the costs over one year (to generate a PCM cost) and inputting assumed sales units for one month.
(excerpt from spreadsheet)
If we then put in a cost of 20 AED per item for delivery charges (Aramex costs for shipments up to 5kg), we then end up with a table which gives us total cost of retail goods, payment processing fees on those goods, and the operating costs of the banking and payment processors along with the logistics fees.
We can then see what we are left with at the end of the month per gateway and the results are incredibly different
Visit the spreadsheet here: http://bit.ly/paymentsUAE
If you don’t have a “to the penny” marketing plan, or you are a startup, its best to err on the side of caution and assume very few sales at the beginning. You would need to generate several thousand hits to your website and have high conversion rates to be looking at over 100 sales a month. This will not be cheap. In fact, since most of your money will be going to acquiring customers, you want to spend as little as possible on processing the payments from them.
What i haven’t included in here is the extra 50 – 100 AED per month you might need to spend in transferring money from the processor into your account; eg from 2CO, checkout.com. Payment gateways also can apply their own currency exchange before transferring the money to you at a higher rate than normal, so that’s something to watch out for. If you are using local bank processor (NI, Payfort etc) they will pay straight into your account.
Visit the sheet and let me know if any updates to the fees required here: http://bit.ly/paymentsUAE
Source: New feed
Payment Gateway Costs UAE, October 2014