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The Ultimate 2023 Guide to Merchant Accounts for UK Small Businesses
In today’s fast-paced and cashless world, small businesses must adapt to meet the needs of their customers. One essential tool for success is a merchant account, which allows businesses to accept various payment methods securely. This comprehensive guide will walk you through everything you need to know about merchant accounts and their benefits for small businesses in the UK.
Understanding Merchant Accounts and Their Importance
A merchant account is a type of bank account that enables businesses to accept credit and debit card payments. It acts as an intermediary between your business and your customers’ banks, ensuring smooth and secure transactions. As more people move towards cashless transactions, having a merchant account is critical for small businesses to remain competitive and offer customers the convenience of card payments.
How a Merchant Account Works
When a customer pays using their credit or debit card, the payment information is sent through a payment gateway to the issuing bank. The bank then forwards the request to the card scheme (e.g., Visa or Mastercard) for authorization. Once approved, the transaction is completed, and funds are deposited into the merchant account. This process ensures secure and efficient payment processing for your business.
Top UK Merchant Services Providers
Merchant services providers supply businesses with the tools necessary to accept debit and credit cards. Some of the leading merchant account providers in the UK include:
Applying for a Merchant Account
To apply for a merchant account, you can choose between working with a card payment services provider or applying directly through your bank. Banks often charge higher fees compared to independent payment providers or ISOs. As most merchant services providers don’t advertise their fees, it’s crucial to shop around and compare several providers to find the best deal for your business.
For start-ups, obtaining a merchant account isn’t guaranteed. Banks view merchant accounts as an extension of credit and will assess your business’s risk level. A poor credit score or high-risk industry may result in your application being denied.
Key Benefits and Features of UK Merchant Services for Small Businesses
Merchant accounts offer a wide range of services and features that can benefit small businesses:
Credit Card Processing Services
Accepting debit and credit card payments is essential, as customers increasingly prefer cashless transactions. With a merchant account, you can process card payments in person, online, or over the phone.
An internet payment gateway or virtual terminal processes online transactions. This service enables businesses to receive the necessary authorization to complete a sale and ensures secure online payments.
Mobile Card Payment Solutions
Mobile card readers, such as iZettle or Sumup, allow businesses to accept payments on smartphones and tablets. Customers can make contactless payments by tapping their card on the device, offering a convenient and secure payment method.
Point of Sale Solutions (POS)
A point of sale (POS) system includes the software and hardware necessary for processing payments through card terminals or cash registers. Modern POS systems often feature touchscreen interfaces for efficient transaction management.
Understanding Merchant Account Fees in the UK
Merchant account fees can vary, and it is essential to understand the costs associated with opening and using a merchant account before signing a contract. Here are some common fees you may encounter:
Payment Gateway Fee
Payment gateway providers charge fees for processing online transactions. These fees cover the costs associated with receiving payment information, requesting bank authorization, and sending authorization to the merchant.
This fee is charged per transaction, regardless of whether it is successful or declined. Transaction fees typically range from 0.5% to 4% and are often the most significant cost associated with maintaining a merchant account.
Monthly or Annual Fee
Many merchant account providers charge a monthly or annual fee, which can range from £10 to £25 per month, depending on your business type.
Early Termination Fee
Some providers may charge a cancellation fee if you decide to terminate your contract before its end date. Ensure you are aware of any potential early termination fees before signing up with a merchant account provider.
High-Risk Merchant Accounts
High-risk merchant accounts cater to businesses with unpredictable cash flow or those operating in industries deemed high-risk. Examples of high-risk industries include travel, insurance, payday loans, and debt collection. Some merchant account providers specialize in offering services to high-risk businesses, although these accounts often require more stringent background checks and may come with higher setup and transaction fees.
If you are rejected for a merchant account with your bank, don’t worry. Explore other options and talk to different merchant account providers to find the right solution for your business.
Accepting Card Payments with a Merchant Account
Credit Card Machine/PDQ Machine
Portable, countertop, or wireless credit card machines are the most popular options for businesses of all sizes to accept card payments. Providers like Worldpay, Sagepay, and Barclaycard can help you get set up with the right equipment for your needs.
Mobile Card Reader
Mobile card readers like iZettle, SumUp, and Square enable small businesses to accept card payments using their smartphones at an affordable rate.
Online Payment Gateway
Small businesses can accept payments online through a website using a payment terminal or virtual terminal. The right online payment gateway enables your business to accept all major credit cards, as well as offering features such as fraud protection and real-time transaction tracking.
Having a merchant account is a must for small businesses in the UK, allowing you to accept various payment methods securely and efficiently. By understanding the benefits, fees, and options available, you can choose the right merchant account provider and solution for your business. Don’t miss out on potential sales and customers—get a free comparison quote through our quote form today and start accepting card payments with confidence.