Are you a business owner in the UK who wants to learn more about merchant accounts and credit card processing? You’ve come to the right place! On this page, we’ll go over the basics of merchant accounts and credit card processing to help you make informed decisions about your business.
First things first, let’s define what a merchant account is. A merchant account is a facility which allows businesses to accept payments through debit and credit cards. Merchant accounts are essential for businesses that want to offer their customers convenient payment options and increase their sales.
Merchant accounts work by transferring funds from the customer’s account to the merchant account. This process is initiated when the customer uses their debit or credit card to make a purchase, and the card terminal sends a request for authorisation to the payment processor.
The payment processor then sends the authorisation request to the customer’s bank or credit card company, which checks to see if the customer has enough funds or credit available for the purchase. If the authorisation is approved, the funds are then transferred from the customer’s account to the merchant’s account.
Once the transaction is completed, the payment processor deposits the funds into the merchant’s bank account, minus any processing fees. These fees can include interchange fees, which are charged by the card issuer, and processing fees, which are charged by the payment processor.
Interchange fees vary depending on the type of card used and the type of transaction, such as whether it was a debit or credit transaction. Processing fees, on the other hand, can be flat rates, a percentage of the transaction amount, or a combination of both.
It’s important to note that while merchant accounts allow businesses to accept payments through debit and credit cards, they are not the same as a regular bank account. Merchant accounts are specifically designed to handle electronic payments, and the funds held in a merchant account are not insured by the Financial Services Compensation Scheme (FSCS) like a traditional bank account.
To open a merchant account in the UK, businesses must go through an application and approval process with a merchant account provider. This process involves providing information about the business, such as its legal structure, processing volume, and credit history. Once approved, the merchant account provider sets up the account and provides the business with the necessary equipment, such as card terminals or payment gateways, to process electronic payments.
Accepting card payments, understanding what your business needs and how to find it can be a minefield. The industry is renowned for its complex terminology, as well as confusing quoting and pretty much impossible-to-understand monthly transaction statements.
It can be difficult to determine which company is responsible for separate parts of successful card transactions–with the relationship between third parties sometimes unclear.
Before we dive in, we’ll briefly explain the elements involved in accepting card payments and how they work.
Understandably, business owners can be uncertain of what’s what, as sometimes all three elements can be provided by the same company. More often than not, merchants choose to keep all of their card payment facilities under ‘one roof’ for ease, not knowing that some or part of the service is outsourced to third parties. This is why it’s worthwhile taking time to get to know what your business is paying for and why.
Companies that sell card payments fall into three categories – therefore depending on your requirements, it might be worth exploring different routes;
Merchant Acquirers – These banks own and enable merchant accounts to carry out processing, examples of these types of companies include; Global Payments, WorldPay, Elavon etc.
Independent Sales Organisations – Commonly referred to as ISOs. These guys have contracts with banks and offer merchant accounts via a selection of banks. It’s worthwhile asking how many banks the ISOs have to choose from, some have as little as one or two, others have hundreds!
Payment Facilitators – Can also be referred to as aggregators. They have the right to act as a bank themselves handling the card processing without the need for the business to have their own merchant account. Examples of payment aggregators include; PayPal, Izettle and Sumup.
So, how do you know which payment processor is best for your business?Here we’ll take a look at the top merchant account companies and give an overview of their offerings.
Now that you know what a merchant account is and how it works, it’s important to choose the right merchant account provider for your business. There are many providers in the UK, so it can be overwhelming to choose the right one.
Some factors to consider when choosing a merchant account provider are:
Another important aspect of accepting debit and credit cards is choosing the right credit card processing company. These companies are responsible for processing the transactions made by your customers and ensuring that the funds are deposited into your merchant account.
Each company has its own unique features and pricing, so it’s important to research when comparing.
Some of the best credit card processing companies in the UK include:
If you’re considering switching merchant account providers, there are a few things to keep in mind. First, make sure you understand the terms of your current contract, including any cancellation fees or early termination fees. It’s also important to research potential new providers to ensure that they offer competitive rates and reliable service.
When you’re ready to make the switch, make sure to notify your current provider in writing and follow their procedures for closing the account. Then, work with your new provider to set up your new merchant account and transfer your existing payment processing equipment or purchase new equipment as needed.
It’s also a good idea to test your new account and equipment thoroughly before launching it to ensure that everything is working properly, and finally, make sure to update any relevant business documents or marketing materials to reflect your new payment processing information. With these tips in mind, switching merchant accounts can be a smooth and hassle-free process.
There are various reasons why your business can be deemed high risk by payments companies, which can make finding payment processing a little more complex. Let’s take a look…
You may be surprised to know that some high street and mainstream bankswill look at high risk merchant account applications, however, there is riskinvolved. It’s often better to obtain an account which allows high risk long-term–reducing the risk of account termination.
For more information, please visit our high risk merchant accounts page.
Payment gateway companies enable online transactions via ecommerce stores to take place, working with a merchant account. As a result, payment gateway providers often have referral agreements in place with acquiring banks.
This can be confusing as acquiring banks sometimes use third-party payment gateway providers white labelling the service. Examples of this include WorldPay which uses Pay360, and the Cardstream gateway which is used by various UK banks.
ISVs offer specialist software, and sometimes hardware to go with it. Therefore, often have referral agreements in place with payment gateway providers (sometimes earning a commission in doing so) An example; website hosting platforms have preferred gateway integrations; i.e. Magento and Shopify.
For more information, please visit our payment gateways page.
The card machine hardware (sometimes known as chip and pin, PDQ or POS) is provided by third-party manufacturers. Some merchant services companies hold stock and lease these terminals–you’ll spot these as they will have the acquiring banks logo on the screen. The options include; portable, countertop, WI-FI and GPRS solutions–whichever suits your business requirements best.
The main providers of POS systems in the UK are;
Most merchant services companies use one of the above, despite potentially being white-labelled. For example, DOJO uses PAX.
For more information, please visit our Point Of Sale Providers page.
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Libby helped us find a merchant account when i was having trouble finding one for myself. I would highly recommend using Merchnat Advice Service.
Superb service from Libby James. Forever my go to place for Merchant advice
Libby is very professional in her approach and simply a go getter. She understands clients needs accurately and goes for the bull eye. I am really happy with her services and would always recommend her for any of your payment…
We reached out to Merchant Advice Service when seeking a new payment partner, after multiple failed applications due to the sector we are in. Libby was super-helpful, very clear and supportive and we achieved a successful outcome. Top marks and…
Libby was a great help when we needed to set up a new merchant account. We were up and running very quickly. Highly recommended.
I was initially skeptical about the idea of a merchant advice service but was pleasantly surprised that I have not been bombarded with marketing and junk mail. I was contacted in a very professional manner which lead to a successful…
The team worked hard to get our approval. COVID makes everything harder for everyone. And Merchant Advice Service persisted and gave the correct advice. Thank you PJ Brennan
Very quick to respond and helped us find a provider for euro credit card payments from customers. First class service.
I contacted Merchant Advice Service because I needed an expedited merchant account due to issues with our ongoing provider. After talking to many merchant account operators, it was becoming apparent that this was not possible. I contacted Libby in the…
We were struggling to get anywhere with finding merchant services for our business. I came across them and sent a message. I received quick, professional responses throughout and that has resulted in us getting sorted out.
Great service, quick and professional responce. Libby and her team got our payment processing sorted where others failed. Highly recommended