Transaction Fees

Transaction Fees are charges levied by e-commerce platforms or payment processors as a percentage of each sale processed through an online store, separate from payment processing costs.

Meaning & Context

These fees vary significantly across platforms, with some charging 0.5-2% per transaction on top of standard payment processing fees, while others include transaction processing in their monthly subscription or charge no additional fees. Platform transaction fees are distinct from payment gateway fees (like those from Stripe or PayPal) and represent a platform's take of each sale. The fee structure directly impacts profit margins and total cost of ownership for online stores.

Why It Matters

Understanding transaction fees is crucial for calculating the true ROI of conversion rate optimization efforts, as increased conversion rates directly translate to more fees on platforms that charge per transaction. When evaluating A/B test results and projected revenue impacts, these fees must be factored into profit calculations. Transaction fee structures can also influence platform selection decisions, particularly for high-volume or low-margin businesses where small percentage differences significantly impact profitability.

Example

An optimizer calculates that a 10% conversion rate improvement on a Shopify store using external payment gateways would generate $50,000 additional revenue but incur $1,000 in additional transaction fees (2%), reducing the net benefit to $49,000 when presenting ROI projections to stakeholders.