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Taking online payments in Europe

When you compare it with e.g. the United States, taking payments online is different in Europe. There are other rules, there are other consumer whishes and habits and there are other companies. So, for a company that wants to sell in an European country there a few things you should know. Luckily, a pal named James Maskell wrote an enlightening blog post about taking payments online (in Europe) in 2013.

James is the founder of Vinetrade, a London based tech startup where you can buy and sell wines. He also has a blog where we found this gem. He starts with saying that it may sound like a simple thing to set up a process wherein you’re able to take payments, but it can be rather complex. “And disruptive US companies such as Stripe and Square have yet to launch in Europe.”

Taking payments online is hard
When he started with his company, Maskell noticed that it’s very hard to take payments online. Because the easiest way to do that is via credit cards or debit cards. But behind all these card payments are a number of bank transactions. And banks don’t really like new companies, because in their opinion they could be a risk.

Buyers can and will claim a refund from their bank if something goes wrong with online payments (e.g. they pay for something that never arrives) and if the bank can’t reclaim those fund from the company that took the payment, they’ll make a loss. And banks don’t want to lose, so they will try to minimize their risk. And as a result new companies are often rejected by banks.

And oh, there are also the high fees (sometimes 5% or more of each transaction processed) or the fact that the bank is holding a rolling balance (“such as 20% of the value of all transactions processed for 6 weeks to cover the cost of any chargebacks”).

Three main options for UK based entrepreneurs
So, if you want to take payments online, credit and debit cards maybe aren’t the best option. So what’s left? “Until recently there have been three main option for UK based entrepreneur wanting to take payments online”, Maskell explains. “Applying directly to a bank for a merchant account or signing up for a WorldPay or PayPal account”. The first option, he says, can be a painful process with a lot of waiting, chasing for answers and submitting a lot of documentation. WorldPay is a common alternative and has a relatively easy signup process. Fees and the fact that they can be very restrictive on the type of businesses they’ll accept payments for are the downside of this option. PayPal has always been popular and will allow almost anyone. Fees are also relatively reasonable, so why not? “The downsides are poor technology (API) and bad customer service”. And of course, Paypal have traditionally been a target for fraudsters.

Maskell then sums op a few companies that entered the online payments market. “These new entrants make it much easier to get started and accept payments, take reasonable fees, pay out to your bank account quickly and have a short approval process (if any).”

GoCardless (UK only):
Innovative, allows anyone to take payments via Direct Debit (it’s not particularly suited to payments for physical products that need to be shipped quickly!)

Braintree Payment Solutions
Easy to integrate with and their customer service appears to be excellent. Submitting process is relatively painless. They handle payments for well known sites like Github, Airbnb, Fab and Uber.

This German startup is a Rocket Internet clone of Stripe. They, like Stripe, also have an API that is easy to integrate with and you can start taking payments very quickly.

Eventually Vinetrade was able to open an acount with BarclayCard. The process wasn’t easy and Vinetrade haven’t completed the integration work because BarclayCard forces them to user their gateway. Maskell says if he was to start another company today, he’d look at using GoCardless, Braintree or Paymill for taking online payments. He thinks that, with companies like Braintree and Paymill now launching in Europe, it ‘finally looks as though the payments market is heading in the right direction’.