Payment Gateways - Realex or PayPal?
Update 8 Aug 2014:
This article is largely historical. Since 2013 two new players have come onto the market with straightforward, value for money offerings that are easy to implement and include the ability to deal with subscription payments. Both have 0 monthly fees and a 7 day settlement. They've been widely embraced by developers so you're bound to find one or the other (or both) available as options in most ecommerce software these days. Stripe was created by Irish fellas now based in the US, and Paymill is considered to be a very fine copycat of Stripe. There is some difference in the countries supported. Do check out:
If you’re setting up an online store you’ll need a Payment Gateway. This is the middleman that sits between your online store and your bank account. Its primary purpose, and why you need one, is to provide software for your website that can securely take the customer’s credit card details. Payment Gateways also give you other useful features like real time fraud checking and an administrative area where you can do routine housekeeping tasks like provide refunds, cancel payments and send your profits to your bank account.
Here in Ireland 2 popular Payment Gateways are Realex and Paypal – so which one would you choose and why?
For most of us, it'll boil down to these 2 costs:
Implementation Costs
This is the cost of getting the Payment Gateway coded into your website so that you can take Credit Card details and charge for your goods/services.
PayPal - Implementation Costs
The cost of implementing PayPal is significantly cheaper than Realex. The main reason for this is that PayPal is a much bigger company. PayPal is already integrated into most popular third party applications including almost every shopping cart system you can think of (find a list of them here) - all you need to do is input your merchant id. For smaller websites, you can use PayPal's straightforward copy/paste code to produce simple Buy Now buttons.
Realex - Implementation Costs
You will almost certainly need to hire a developer to get Realex wired into your website. They’ve recently added functionality for Vendorshop (FaceBook) which is a great move, but for plug-in functionality with other popular shopping cart systems you'll mostly be relying on developer contributions which come with a few gotchas. Not all developer contributions are free. Developer code may be out of date, or out of synch with your chosen shopping cart. Or you might just get lucky and find it works 'out of the box'. Whatever the case - unless you can code - you'll need to factor in the cost of hiring a developer.
Transaction Charges
Once you have the system in and working on your website, you need to be aware of the cost of doing business. Note that the charges provided below do NOT take into account VAT or your bank’s fees for accepting money from either Payment Gateway.
PayPal Transaction Charges
Paypal operates a sliding scale. For each transaction Paypal charges:
- Up to €2500 per month - 3.4% + €0.35
- Up to €10000 per month - 2.9% +€0.35
- And so on. Get full details of PayPal merchant fees and conditions here
The sliding scale is not applied automatically. You will need to have registered as an Internet Merchant with PayPal for at least 90 days and be in good standing with them. The sliding scale is applied on a monthly basis.
Realex Transaction Charges
Realex charges a flat rate fee, based on number of transactions per month.
- Up to 350 transactions per month - €29/month (flat fee)
- Over 350 transactions per month – additional €0.12/transaction
(If well over 350 transactions per month, you can apply to Realex for more favourable corporate rates)
Comparing Realex and Paypal
This is difficult to do since they charge in different ways. A comparison of three types of business may be instructive.
Case 1: Supplier with small turnover, and many transactions
| Avg Sales | Avg Customer Basket | Avg No. Transactions | Realex charges | PayPal charges |
|---|---|---|---|---|
| €600 | €15 | 40 | €29.00 | €34.40 |
Case 2: Supplier with a small number of expensive products, and few transactions
| Avg Sales | Avg Customer Basket | Avg No. Transactions | Realex charges | PayPal charges |
|---|---|---|---|---|
| €1200 | €400 | 3 | €29.00 | €21.45 |
Case 3: Supplier with large turnover, and many transactions
| Avg Sales | Avg Customer Basket | Avg No. Transactions | Realex charges | PayPal charges |
|---|---|---|---|---|
| €5000 | €80 | 62 | €29.00 | €166.70 |
Any other considerations?
There are a few.
- PayPal will not accept Laser cards, popular here in Ireland. However, Laser cards are being phased out.
- PayPal offers an even simpler system for suppliers who maybe don't want to operate a website payment system. In this case, where a sale is agreed, the seller can send an email to the customer that contains a link generated from their PayPay account where the customer can pay securely instead.
- Some people still think you need a PayPal account to pay by PayPal - you absolutely don't. PayPal accepts payments via all the usual credit card companies.
- If you sell nothing, PayPal charges you nothing. With Realex, you pay by the month whether you sell or whether you don't.
- There is far less time and bureaucracy involved in getting Internet Merchant status with PayPal. If you are dealing with Realex, you must first get Internet Merchant status from your Irish bank. The delay (up to 3 months in some cases) is with the bank, not with Realex.
DIY Calculator
You can use this calculator to get a rough comparison of transaction charges based on your own estimates:
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Transaction charges:
Comments
In return they hold on to your money for 7 days before it gets automatically transferred to your bank account.
Another great advantage is that the customer is not redirected to their site, the payment is done in a simple and elegant popup window that can greatly improve conversion. Hope it helps, Jozsef
To make things more interesting, it looks like AIB and Realex are going to try and cancel each other out. AIB has launched Authipay (with its own Payment Gateway and therefore doing away with the need for Realex). Realex are launching "Fire" which will include your own paypal style bank account therefore doing away with your need for AIB. Hopefully we'll be the beneficiaries.
See these 2 to get the gist:
http://www.authipay.com/i-am-a-merchant/bundle-options/
http://www.independent.ie/business/realex-payments-to-allow-money-transfers-with-no-fees-29500656.html
Surely here your comparison between Paypal and Realex are wrong? You have not calculated the merchant fee which are generally 2-5%?
Thanks
Tom
Is that correct? If yes, the cost of using Realex is far more prohibitive than it would appear at first sight.
Perhaps this is the "merchant fee" which Tom Melby mentions in his comment above?
Cheers,
James