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How To Choose The Right Payment Gateway For Your Startup

Cashflow is vital for startups so it is important to select the right payment gateway from the beginning.

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Team Maxio

November 30, 2016

Cashflow is vital for startups so it is important to select the right payment gateway from the beginning. We get it — getting paid is awesome, selecting a payment gateway…not so much.

Don’t worry, we’re putting our experience to work for you. In today’s blog we’ll cover what you need to know in order to select the best payment gateway for your startup: everything from application time frames to fees and fraud protection tools.

Just a quick reminder: a payment gateway is different from a merchant account. A merchant account is a type of bank account that allows you to accept debit and credit card payments from your customers. A payment gateway facilitates the secure transfer of information from your website or application to your merchant account.


You need to have both a merchant account and a payment gateway to process transactions from your customers. Today, many payment gateway providers offer a combination — both a merchant account and a payment gateway from the same company.

In today’s post we’re focusing on how to select the right payment gateway for your startup…

Things to consider when choosing a payment gateway for your startup


Application process & time frames

We’ve already mentioned that cashflow is vital for startups, so it is important to find out how long the application process with a new payment gateway will take. And once approved, how long will it be before you’re able to process payments from your paying users?

Other time frames you need to ask about when comparing payment gateways:

  • Contract terms

  • Payments

Some payment gateways impose specific time frames for contracts, such as a one year contract. If there are time frames specified by a contract, you’ll also want to find out if there are early termination or cancellation fees you’ll have to pay if you become unhappy with the payment gateway.

Cash is king. What is the timeline for your startup to receive the cash following successful payment transactions? The last thing you need is a gap in cash flow when you have to pay your own suppliers and overhead costs!

Supported currencies & merchant locations

These two are non-negotiable; if these aren’t a fit they’re automatic deal breakers. The payment gateway you choose for your startup must support:

  • The currencies you’ll be billing customers in

  • The country your startup is located in

While this sounds like a no-brainer, it can be a bit confusing. For instance, a payment gateway may support both USD and CAD currencies but only support merchants located in the United States. In that instance, even though the payment gateway supports CAD, they wouldn’t be a fit if your startup was located in Canada.

Be aware that multi-currency cards may have a different transaction fee (we’ll talk more about fees in the section below).

For the most part, the major payment gateways support the same card types. But, it is still worth checking to ensure the card types the majority of your customers will likely be using are supported by the payment gateway you’re considering.


Ideally, the payment gateway you select will have transparent pricing and no hidden fees. To avoid hidden fees, ask the payment gateway for all potential costs you could encounter while using them as your gateway.

Some specific fees to ask about:

  • Setup fee

  • Monthly fee

  • Registration fee

  • Payment processing fee

  • Transaction fee (successful and declined transactions)

  • Refund fee

  • Chargeback


  • Limits (transaction value limits or monthly transaction limits)

  • Batch processing fee

  • Fund transfer fee

  • Termination fees if you cancel prior to the end of your contract period

A note about transaction fees:

It is standard practice for payment gateways to take a small fee for every payment transaction you run through their system. It is usually a flat fee of a few cents and/or a percentage of the transaction amount being processed. Some payment gateways will charge different fees to process different types of card transactions (i.e. debit cards vs. credit cards, personal vs. business cards).

On a happier note: As your startup begins to scale, some payment gateways will lower fees as you push through more transactions. This isn’t something a payment gateway normally advertises on their website, but it’s definitely worth a call to discuss potential volume discounts as your startup grows.

Card updater


Many of us have been in this situation: you lose your credit card and the bank issues you a new card with a reminder to update all the automatic recurring payments tied to your lost credit card. Who can remember all of those? This same scenario will likely happen to some of your own customers. And when it does, and they don’t update their card information, you could risk losing the customer.

Many payment gateways offer a card updater feature for free or an additional fee, which automatically updates your customer’s credit card information when a new card is issued. That translates into a reduction of lost revenue due to failed payments from changed or expired credit cards. In addition to saving you money, the card updater is convenient for your customers. It’s a win-win!

The gateway’s card updater combined with an optimized dunning workflow will give you the best chance at maximizing revenue retention and reducing churn.

Fraud prevention tools

The major payment gateways offer these standard fraud prevention tools:

  • Card Verification Value (CVV)

    . This is the 3 or 4 digit security number located on the credit card; only the cardholder should have this number.

  • Address Verification System (AVS)

    . This tool verifies the address of the person claiming to own the credit card.

Some payment gateways offer advanced fraud protection tools that go beyond CVV and AVS. For example, these are examples of some of’s advanced fraud protection tools:

  • Hourly Velocity Filter

    . This tool limits “the total number of transactions received per hour, preventing high-volume attacks.”

  • Transaction IP Velocity Filter

    . This filter isolates “suspicious activity from a single source by identifying excessive transactions received from the same IP address.”

Every business is going to lose money to fraud, but fraud prevention tools help you reduce your losses. So, be sure to ask potential payment gateways about all the fraud prevention tools they provide.

Data portability

If you chose to leave your payment gateway, would you be able to take your customers’ data with you?

Unfortunately, for startups who don’t know to ask this question preemptively, they only find out the answer when they go to move to a different payment gateway and learn they don’t own their data.

PayPal is one example of a provider which doesn’t allow data portability. If you choose to leave a payment gateway where you don’t own your customer data, you would need to ask your paying customers to provide you their billing details all over again to set up with the new gateway. It’s a headache for you and frustrating for your customers.



When reviewing potential payment gateways, find out the type of support they offer.

As a consumer, you’ve likely found yourself needing support but stuck in a never ending phone tree that doesn’t seem to ever connect to an actual support person. While your startup may not need a payment gateway that provides 24/7 live support, you do want to make sure you can speak to a live support person when needed.

The gateway’s self-support options should also be easily available and convenient.

High risk products

What product or service is your startup selling/providing? If your startup has anything to do with e-cigarettes, drug paraphernalia, pornography, alcohol, or guns know that those are classified as high risk products. The major payment gateways do not support processing transactions related to high risk products.

If your startup falls under this category, you’ll need to do some additional research to find payment gateways which specialize in high risk products.

You’ll have a smaller pool of payment gateway options to choose from, but you should still be asking any potential gateways about the other points listed in this blog post.


In some instances, such as transaction fees, most of the major payment gateways are going to be very similar. In other places, such as data portability, the major payment gateways will differ. As a startup, it is important to factor in a variety of features to select the right payment gateway from the very beginning.

To do that, make sure and to ask each payment gateway you’re considering about their:

  • Application process & time frames

  • Currencies supported

  • Merchant locations supported

  • Card updater

  • Fees

  • Fraud prevention tools

  • Data portability

  • Support provided

Once you’re successfully setup with your merchant account and payment gateway, you can focus on growing your business!

Shameless plug:

Not sure where to start? Check out these major payment gateways, including the merchant locations and currencies supported by each gateway. Each of the gateways listed integrates seamlessly with Maxio to help you manage and grow your subscription-based business. Want to learn more? Create a test account to try Maxio for free.

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