Choosing the best payment gateway in Pakistan

Payment Gateways are digital platforms that help flourish electronic payments, particularly for e-commerce. For anyone considering to startup online business, the cost of transaction is one of the most important factors to workout. To help  ecommerce players in Pakistan understand the online payment gateway providers, in this post we have done thorough review along with the charges to setup, recurring fees, merchant account opening procedure and integration process.

E-commerce industry is in early stages in Pakistan however one important piece that has been missing for a long while to support the growth and ecosystem is enabling consumers to make purchase online using credit/debit card. Though international payment gateway were used by certain eCommerce websites to provide this facility however the procedure and cost of setting up and ongoing recurring fees was not only high but passed on to the consumers which made online shopping an expensive proposition. This delay in bringing localized e-payments offering by financial institutions forced online businesses to look for alternate options such as cash on delivery, which in the beginning was a logistical challenge but this soon gave birth to various specialized startups that offers outsourced cash pick up and delivery service at a reasonable fees. This soon became a norm for both e-commerce stores and consumers and now adopted by upcoming online businesses.

Realizing the need, UBL in 2013 launched a local payment gateway service in collaboration with Etisalat which was the only option for quite sometime but not a very lucrative one.

Only recently other financial institutions including HBL, MCB and EasyPaisa (Telenor & Tameer bank intiative) has also launched payment gateway offering competitive rates and better options.

The technology behind these 4 providers vary as most of them use international payment schemes, MCB utilizes the hosted services offered by MasterCard’s MIGs to allow ‘card not present’ transaction. HBL, the largest bank in Pakistan, has partnered with VISA using their hosted payment application Cybersource while EasyPaisa has launched EasyPay, a local payment gateway application developed by Systems limited. Lastly, UBL used Etisalat proprietary solution to offer ecommerce based transaction. Before we get into the pricing structure, we have explained the meaning of different terms used by banks and what it means to you.

Merchant Account: Merchant here refers to the business that wishes to accept payment online. A business account must be opened in the same bank they wish to use the payment gateway. Every bank requires different set of documents to open a business account of your company however at minimum, you will be required to produce NTN, AOP and CNIC of owners.

Merchant Discount Rate (MDR): This is a percentage charged by the bank (payment gateway provider) to merchant on each transaction. For example, if you have signed up with a bank that offers 1% MDR and a customer makes a payment of Rs. 1000 on your website, Rs. 10 will be dedcuted by bank and Rs. 990 will be deposited in your merchant account.

Settlement Period: It is a time from the moment when a transaction is authorized by the payment gateway provider to the time when money shows up in your business(merchant) bank account. The reason for the delay is because banks want to decrease the number of chargebacks and fraudulent transactions. By holding on to the money for a few days, or in some cases weeks, they are ensuring that all is in order before the seller is paid.

Now that you understand the jargons and well versed with them, now look at the pricing structure of each Payment Gateway.

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Except Easypay, FED (16.5%) will be charged additional on top of the above fees . Chart prepared by Smartchoice.pk

Integration

An API is provided by payment gateway provider which needs to be integrated into your ecommerce website, this can be easily done by a web developer.

Below table will further help you understand the strengthens and weakness of each payment gateway

Bank	Points to consider
	Benefits Quick to setup Multiple payment options Quick settlement FED charges included in pricing
	Benefits Proven and renowned payment gateway Monitor and Protects from fraudulent transaction Low MDR Used by Aga Khan, DHA, Nadra Disadvantage Longer settlement period Ecommerce store must be in business for 2 years Longer account opening procedure
	Benefits Proven and renowned payment gateway Monitor and Protects from fraudulent transaction Disadvantage Higher MDR Yet to be used by known ecommerce store
	Benefits No transaction fee Shorter settlement period Disadvantage Higher MDR Longer account opening proces

 

Verdict

When it comes to technology HBL and MCB uses robust application and you can be assured that you are in safe hands, no ecommerce store wants to be victim to fraudsters.

For early stage startups or purely e-commerce companies, Easypay is a great option since it utilizes local payment system, no upfront payment and has rapid settlement period. It is easy to implement as well, making it ideal for e-commerce and small scale businesses.

For larger corporations, HBL seems to be the best choice. The MDR is lower as well as the annual fee, and has a respectable corporation like Agha Khan as its client.

For payment gateway providers, it is going to be a long way to generate real volume and share a substantial percentage of online transactions as it requires a behavioural change to migrate customers from cash on delivery mechanism to pay online. Online businesses also need to play their part to encourage customers by not passing on the MDR to customer and offering other lucrative offers.

If you are you using any of these platforms to accept payment online, tell us about your experience in comments section below.