I recently received an email from Glen Ross, the National Sales Manager for MyGate Communications with regards to my article entitled Processing Online Payments in South Africa.

Glen wanted to clarify certain pricing elements with regards to the MyGate service in response to the article, and I have as a matter of transparency and public debate posted the contents of this email below:

Good morning Justin,

I trust that you are well,

Justin, my name is Glen Ross and I am the National Sales Manager for MyGate Communications. I recently read your article on Payment Gateways in South Africa and I would firstly like to thank you for mentioning MyGate, however I would like to clarify our pricing model, as it seems as if you may have misinterepted it.

[Comments by Justin Harrison:]

Firstly let me state for the record that this article provides an overview of the online transaction sector and is no way indented as a feature article or one on one review for any of the payment gateways, not has your pricing model been misinterpreted.

MyGate do charge a once off setup fee of R200 which covers the required integration. This charge is there to not only cover the man hours in integrating MyGate, the merchant and the respective bank, but also for the additional services that MyGate offers the merchant, ranging from holding hands in applying and getting approval for a merchant account to assisting with a business forecast, where necessary. These services are an industry first which none of our competitors can match

[Comments by Justin Harrison:]

Whilst I value what you are saying, the fact is that there is still a setup fee, and this is contrary to many models overseas, where the gateways realise that whilst there is an investment of “man hours” in getting merchants setup, the time invested by the gateway is recouped once the merchant starts transacting. R200.00 is neither here nor there in the grand scheme of things, however ZERO setup fees would provide you with a major competitive selling point.

Additionally I don’t for one second believe that the R200.00 setup fee contributes such value to your business, that it cant be overlooked and absorbed into marketing / advertising costs, after all your core business is not making money off the merchant signup fees, but rather the ongoing “transaction based” relationship.

Secondly, MyGate DON’T charge a monthly subscription fee, however if the merchant does not post sufficient transactions in a month, they will be billed the minimum billing amount. This minimum billing amount is R150, which is equivalent to 100 transactions on the MyGate Standard Package.

[Comments by Justin Harrison:]

Regardless of how you word this, THERE IS A MONTHLY COST COMMITMENT, and the affect is that because there is “RISK” for start-ups (however small that might be) and this stifles the market growth for start-up enterprise (the small mom and pop online businesses).

If a merchant signs on and produces no sales for the first 6 – 12 months that means that they will incur between R900.00 – R1800 in fees (fees which could be spent elsewhere on advertising and getting their business going), and since there is a required contract period on your services, this is a very real risk.

Additionally I will add that whilst your objectives are on the whole are quite noble, the wording with regards to the “lack of a monthly service fee” reeks of nothing more than an underhanded marketing tactic.

Finally, MyGate DON’T charge a % on transaction value, as most of the Payment Gateways do in the South African market, instead we charge a flat rate per transaction ranging from R1.50 to R1.30 per transaction. In response to your statement regarding Setcom, I would like to highlight the following: Setcom are a Super Merchant, which means that the merchant doesn’t need to have a merchant account of their own, as they make use of Setcom’s own merchant account. Using this model Setcom carry the risk for the merchant in question, unfortunately, carrying this risk comes with a price, as you can see when looking at Setcom’s published rates of 4.9% of transaction value as well as R4.00 per transaction.

[Comments by Justin Harrison:]

I am 100% clear on this issue, however I think you will agree that the risk for the “start up merchant” is infinitely less with Setcom as a result of there being no contacted period, no setup fees, and no monthly commitment, although, I do agree that we are not entirely comparing apples with apples.

However on a whole I continue to believe that the model that Setcom has in place provides greater market access for the start up merchant.

Having done a number of real world cost comparisons against all our competitors, I can assure you that MyGate has consistently been the most affordable solution in the market. In closing, I can assure you that MyGate are not only reliant on our pricing model to secure market share. The entire team at MyGate is 100% committed to setting the standards in terms of quality of service.

[Comments by Justin Harrison:]

The fact that you have taken the time to put your foot forward on this topic proves that MyGate has the desire and capacity to take responsibility in the market place and is committed to innovating by engaging stakeholders, and I will support every endeavour with the same level of transparency that I provide in all other areas.

I congratulate you and encourage you to keep pushing forward.

To have a look at what the market is saying about MyGate, please have a look at http://www.mybroadband.co.za/nephp/?m=show&id=5913

If you have any queries, please don’t hesitate to contact me

Kind Regards

Glen Ross
National Sales Manager
www.mygate.co.za