POLi Pay and Merco. Introduction to Payment Gateways

How much do online payment systems cost?

Note – obviously, we have a vested interest in POLi (it’s our service) but we have tried to make this post impartial 

For a small country, New Zealand still represents a huge potential market in the world of e-commerce. Between 2001 and 2010 the uptake of online shopping by New Zealanders grew from 21% to 57% of the population. By 2011 63% of the population had purchased something online, amounting to approximately NZD $2.68 billion in sales.

As merchants of all shapes and sizes continue to embrace the online market place, utilising ecommerce store development solutions such as ShopifyMagentoOpencart and more it’s essential that Merchants offer their customers a range of convenient and secure  online payment options.

However, payment systems do have a cost associated so it is very important that merchants evaluate their options carefully.

This post will compare the fees for Paypal, POLI and Account2Account.

What are the options?

Broadly speaking, your options include accepting:

1. credit card payments via a bank;

2. credit card payments via a payment gateway;

3. credit card payments via Paypal;

4. debit payments direct from your customers’ bank accounts.

Note that when we say credit card we include scheme debit (i.e Visa Debit). For a full breakdown of the online payment options available in New Zealand.

Currently there are over 1 million people in New Zealand who do not have a credit card, which immediately excludes them from using any payment system that requires one. Also, either through preference or circumstance many people with a credit card will use a debit option if given the choice.

However, there are also as many people who do have a credit card and, with the success of the many rewards programs out there, want to use it.

The upshot is, that if merchants want to entice customers to part with their dollars, they must provide a range of payment options. And understanding the costs associated with each option is critical.

Comparing the options

Debit Options

Poli payments

POLi allows you as a merchant to offer your customers an alternative payment option to credit cards. With POLi, your customer can pay online directly from their bank account via Internet Banking using a secure process.

POLi also has lowest fees of all the options presented in this article.

Account 2 Account

Payment Express Account2Account offers a similar service to POLipay but has only been in the market since 2014 and therefore this service and brand hasn’t been exposed to as many consumers as POLi.

Payment Express charge’s monthly fees so take this into consideration if you’re not going to use them as your credit card payment gateway.

Credit Options


PayPal is extremely well known, but the uptake in New Zealand has been lower than in other countries (perhaps due to its tie with eBay which is not available on these shores).

The system allows customers to pay securely for items using a credit card without having to provide any bank or card details to the merchant. The merchant can choose to have a fully integrated system (transaction takes place within their ecommerce site) or divert the customer to PayPal’s site to complete the sale.

PayPal is often seen as being an easy entry to market for small businesses and startups but transaction fees are particularly high.

Credit Card Schemes –  there is a range of credit card schemes operating in New Zealand. The schemes most commonly known are Visa, Mastercard, Diners and American Express. Part of the contract which allows you to receive payment via a credit card scheme, is a Merchant Service Fee (or MSF) typically a percentage of the transaction value – anywhere from 1 – 6%, (but likely to be around 4% for a startup business in a low risk business category).

Credit Card via a bank

Traditionally, to offer credit card payments you need a facility called a Merchant Account with your bank and a relationship with a payment gateway (see below). The bank will charge you a Merchant Service Fee and the gateway will typically charge you a flat fee per transaction.

Some banks can offer you a bundled service that includes the payment gateway service.

Credit Card via Payment Gateway

Payment Gateways – these connect all participants in a transaction together, i.e the merchant (you) the issuing bank (the bank that issued the card to your customer) the acquiring bank (your bank that issued you with a Merchant Account) and the credit card schemes.

The common Payment Gateways in New Zealand are DPS Payment Express, Paystation, Flo2cash and IP Payments.

(The main New Zealand banks often have a branded Gateway offering e.g. BNZ Buyline or ANZ eGate.  Often the banks’ offering is simply while labelled from one of the Payment Gateway providers, meaning the bank uses their system but put their branding on it.)

For a list of the main payment gateways in New Zealand, check out our forthcoming post.

Two gateway companies in New Zealand offer a bundled service that means you don’t need a Merchant Account with a bank in order to process credit card transactions. They are Flo2cash and SwipeHQ. The fees are quite high, but it can be a good option if you can’t get a merchant facility from your bank.

What is the difference in fees?

  Set up Transaction Fee or MSF Payment Gateway (per tx) Monthly Service Fees
(full solution*)
$0 3.4% + $0.45 (USD ?) Included $0
Credit Cards Varies 4% – 6% $0.15 – $0.25 $25 – $60
POLi $0 1% (capped at $3) Included $0
Account $150 1.2% (capped at $3) Included $25 – $60**
Flo2cash $150 2.75%** Included $30
SwipeHQ $99 2.75%** Included $0

* This illustration is for PayPal’s fully hosted solution.

** Not charged separately if also processing credit card transactions

*** Visa and MasterCard

Note – Figures shown do not include any applicable GST.

Case study illustration

Case Study: start up store, $10k sales per year, 10 transactions per month, av. sale price of $80.

John has recently set up a small start up NZ niche online store and he is now looking for an online payment system. To date, he has been selling his products via Trade Me and he knows many of his customers do not have a credit card.

Therefore, he wants the flexibility to offer his customers both credit card and direct bank transfer payment methods.

Let’s assume half of his sales transactions are completed with a credit card and half via direct transfer of funds.

Using the PayPal service, he will spend $202 on transaction fees, but this includes the fees he would otherwise have had to pay for the Credit Card Scheme Merchant Service Fees (MSF) and payment gateway fees.

If he also uses POLi he will pay an additional $50 in transaction fees but there is no set up fee. So, a total of $252 in the first year.

If he opts instead to use Account2Account, he will pay an additional $150 for set up and $60 in transaction fees. So, a total of $412 for the year.

Do the maths before your commit to an online payment solution

Merchants will have different online payment needs at different stages of their store’s life. Before you jump into bed with a particular solution provider, think about your business growth plans. In the example above, although a little simplistic, shows that the POLi + PayPal option would cost John 2.52% of total revenue in the first year. This is compared to 4.12% using A2A + PayPal.

A 1.6% difference might not sound like a lot but if John were to triple his revenue by year three, he would be paying nearly $500 a year more.

It’s worth thinking about.

What do you think? We would love to hear from you with any questions or comments about your own experiences with online payment systems.

Until next time.

Jeff Skidmore

Director, POLi