Merchant Services – Where Do You Start?

From cost to who's involved, here's our small business guide to developing a card payments system

Merchant Services – Where Do You Start?

Many UK small and medium enterprises still don’t accept card payments despite experts forecasting the end of cash in the foreseeable future. Given that recent research suggests the average small business loses out on £1,800 by not accepting card payments, it may be time for you to consider merchant services.

But where do you start? We’ve complied a simple guide to help you understand the process:

1. Who’s involved?

Every time the merchant (that’s you) accepts a payment on card several different bodies will take a cut: The card issuer (the bank that provide the customer with their payment card), the acquirer (organization that facilitate the authorization, processing and settlement of a transaction e.g. WorldPay) and also the card payment scheme (brand that appears on the card e.g. Visa, Mastercard).

2.  Why does it cost?

Most providers of card payment terminals will quote you a basic rate for credit and debit card processing which is based on a “chip and PIN” transaction using a card issued in the same country it is being processed (i.e. here in the UK).

As the customer uses a card that has an electronic chip embedded into they confirm that they are the genuine owner of that card by using a PIN. These types of transactions are now the norm in the UK as they greatly reduce the chance of plastic card fraud. As they are considered to be the most secure they attract some of the lowest fees, which is why most providers use them in their quote.

The best value option for you depends on how many transactions you carry out and what the average value of them is – expect to get quotes such as 15p per transaction or so many % of each transaction.

3. Where does the terminal come from?

There are various types of payment terminals available, the type of terminal you need depends on the size and nature of your business. Luckily there are ‘introducers’ available to guide you through the process and identify the best option for you. These companies work with thousands of businesses and have a greater buying power when it comes to securing a better rate than if you attempted to do it solo.

4. What fees are involved?

Joining fees: Not all providers charge joining fees so it’s important to shop around and factor this into the price. Generally, if a representative comes out to visit you, spends time explaining the offer and helps you with the paperwork you’re more likely to pay a joining fee. This can give you the confidence to fully understand the set-up and as a result can be well worth the fee.

Merchant Services Charges (MSC): Roughly speaking the average business will pay £1 a day to have a card terminal. The actual price is calculated on each individual transaction and can vary depending on the nature of said transaction.

Simply put, it breaks down like this:

BASIC RATE (cost to process the transaction)
+ PREMIUM CHARGES (processing costs for transactions that attract fees above the basic rate, if applicable)
+ AUTHORISATION FEE (sometimes called Bank 24 on statements)
= PRICE YOU PAY FOR A TRANSACTION.

There are numerous types of transactions, all with varying rates. Face to face Chip and Pin, customer not present, foreign cards, premium cards and magnetic stripe swiping all carry different rates per transaction. Some customers will take the option of paying a percentage of each transaction, others so many pence on each transaction – typically around 15p. It all depends on what the value of your average sale is, how many transactions you do daily and what type of customer you serve.

5.  How long will it all take?

In order to reach the stage where you can accept card payments a few checks will be carried out to check: what your business does, whether you sell face to face or via ecommerce, how your finances are and whether you file your tax returns on time. Providing these checks are all satisfied the majority of applications can be processed within a few days, meaning you could be up and running within a week of signing your agreement.

Now you know the facts there’s no excuse for you to watch customers put products back on the shelves – it’s time to accept card payments.


Andy Macauley is Chief Operating Officer of Handepay.

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