At the start of the month, Interac launched a service called Konek. It includes Interac Direct, which allows people to pay online directly from their bank account, with lower fees for merchants, according to Interac. For now, it works with customers of BMO, National Bank, RBC, Scotiabank and TD, and Staples.ca was the first store to offer it.
Most small businesses will not have access to it for some time. The launch is nonetheless a good reminder that many small businesses choose a payment setup once, in a hurry, and never revisit it. The period just before the holidays is a good time to review it.
What do online payments really cost a small business?
Roughly 3% to 4% of each sale, depending on the order size. For online card payments in Canada, the major processors are mostly in the same range. Stripe's posted rate for domestic cards is 2.9% plus 30 cents per transaction. Square and Shopify Payments are in a similar range depending on the plan. International cards and currency conversion usually cost extra.
The percentage receives most of the attention, but the 30-cent fixed fee matters more than many owners realize.
The calculation should be based on your actual average order. At 2.9% plus 30 cents:
- A $40 order costs $1.46 in fees, or about 3.7% of the sale.
- A $200 order costs $6.10, or about 3.1%.
A business that sells many small items therefore loses a larger share to the fixed fee, and two processors with the same percentage can cost different amounts once monthly fees, payout fees or chargeback fees are added. We recommend pulling the last few months of sales, calculating the average order, and comparing the options on that figure. It takes about half an hour.
One point is specific to Quebec. Some businesses elsewhere in Canada add a surcharge for credit card payments. In Quebec, the Consumer Protection Act does not allow this. The fees should be built into prices instead.
What role do Interac, e-Transfer and online debit play?
An important one, since Canadians like paying by debit. In a store, tapping a debit card is routine. Online, it has been less straightforward for a small merchant.
Many small businesses in Quebec have filled the gap with Interac e-Transfer. The customer places an order, receives an email with the amount, sends the money, and the business confirms. The method works and is inexpensive. It is also cumbersome and manual, and some customers abandon the order rather than open their banking app. It suits a caterer taking ten orders a week, but not a store that wants to accept orders at midnight.
This is why Konek merits attention. If it extends to more banks and to the platforms small businesses actually use, paying from a bank account could become as easy as paying by card, at a lower cost to the merchant. We recommend monitoring its progress without reorganizing anything around it for now. Business offerings are listed on Interac's site.
Is buy now, pay later worth offering at checkout?
It depends on the average order value. Klarna, Afterpay and Affirm are the best-known services. The customer splits the purchase into a few payments, the merchant is paid up front, and the BNPL company assumes the risk.
The main consideration is cost. The fees merchants pay for these services are generally higher than for a regular card payment. Verify the actual rate with your processor before activating it.
For a $30 item, the benefit is limited; customers do not need four payments of $7.50. For furniture, equipment, a course or anything in the several-hundred-dollar range, it can help customers decide, and some shoppers now look for it. If the average order is small, we recommend not offering it. If it is large, a trial of a few months will show whether orders actually change.
Which payment methods should be offered?
Those your customers already use. Checkout is not the place to introduce customers to new methods; it should offer what they already have in their wallet or on their phone.
For most small Canadian stores, this means Visa and Mastercard, likely American Express, Apple Pay and Google Pay, and PayPal if the clientele is older or buys only occasionally. Customers reluctant to enter a card number on an unfamiliar site will often trust PayPal or Apple Pay.
Every possible option is not necessary. Each additional button is one more element to maintain and one more logo cluttering the page. Customer requests are the best guide: if three people this month asked whether they could pay by e-Transfer, that is a meaningful signal.
Why does checkout length matter so much?
Because this is where we see the most revenue lost, and it is usually unrelated to fees.
Requiring account creation, adding an unexpected shipping fee at the last step, asking for an unnecessary phone number, or making customers re-enter their address for billing: each of these costs sales. We would recommend a slightly higher processing rate on a checkout that works over saving a few cents on one that customers abandon halfway through.
The following elements help:
- Guest checkout.
- Shipping costs shown before the last step, ideally on the product page.
- Wallet payments such as Apple Pay and Google Pay, which fill in most of the form.
- As few fields as possible.
- Both languages throughout, including the confirmation email.
Measurement is essential. Most store platforms show how many people start checkout and how many complete it. With proper conversion tracking, it becomes possible to see exactly where customers drop off, rather than guessing. If the checkout requires more than a minor adjustment, the e-commerce setup itself usually needs to be reviewed.
Payments are a routine subject, but they are the last step between a customer and a sale, which justifies an afternoon of review before the holiday rush.