Setting up a shop has never been so easy, and it’s now possible to start selling just about anything in a high-street shop, on the go or online with minimal hardware, software and services. However, getting the right equipment is still needed, and even though there’s just a small number of devices, software and services to select to get going, the growing complexity of this equipment and the number of providers is making it more and more difficult to choose the right thing. The fact that new payment solutions keep surfacing regularly doesn’t help, and neither does the growing tendency to unify shopping channels across the web, mobile web and physical shops.
In this ever-changing landscape, merchant services, credit card terminals, mobile payment solutions and payment gateways are definitely the 4 most essential, durable components of just about any merchant or trader’s “starting kit”.
This article explains, for each of these 4 components:
- How they work,
- Which companies need them most,
- How much they cost,
- What their most reputable providers are,
- And how to select the best deal.
Merchant services: the key service part of just about any modern commerce
Merchant services are at the centre of any contemporary B2C commerce, as they are connected with about every modern payment solution used by individual customers. Choosing the right provider is especially vital for the good of the whole business.
What merchant services are and how they work
Merchant services are financial services offered by banks and specialised financial services providers to retailers (“merchants”) who need to accept modern forms of payments.
Extensively speaking, merchant services relate to the providing of any software, service or equipment needed to accept these payment solutions.
Because these payments need to be isolated from other forms of payments in order to be “cleared” electronically, and because this “clearing” involves multiple processing phases between several financial institutions, the core part of merchant services is represented by the merchant account provided by the merchant bank to the merchant.
Funds collected from the customer after this customer has paid using supported payment systems are kept on this dedicated account for as long as it takes for the payment to be fully cleared and processed, before these funds are finally transferred and made available to the retailer on his regular business account.
What companies merchant services are for
Merchant services are basically for any business accepting modern payment systems, in-store or online, such as credit or debit card payments or mobile payments.
This can be the case for any industry, for the sale of goods and services, although retailers and the B2C market are naturally primary targets.
What’s rather new is that merchant services are now also for companies of any size, big and small, thanks to the rapid evolution of the market and the arrival of new players, bringing new merchant services, at any price, even for the most modest businesses.
Prices of merchant services
Merchant accounts are usually provided together with the hardware (or software) for at least one supported payment solution, simply because the fees for keeping a merchant account are usually transaction fees for every transaction accepted using the said payment solutions.
These fees greatly differ from one provider to another, and from one payment solution to another, but even more importantly, depending on the monthly volume of transactions, but are often within a range of 1 to 5% of the transaction amount, and sometimes also a flat fee per transaction of just a few pence.
Other fees for merchant services include:
- Setup fees, which can be as high as £150,
- Minimum monthly fees or service charges for about £10 to £40,
- Termination fees.
Major merchant services providers
In the UK, merchant account providerscan be either traditional, high-street business banks as well as specialised financial services providers without actual physical presence on the streets.
Traditional banks providing merchant services include:
- Lloyds TSB,
Specialised providers include:
- Sage Pay,
- First Data,
Choosing a merchant services provider
Several key criteria may be observed to select a merchant services provider, such as:
- Merchant service fees,
- Industry expertise,
- Preferred payment solution,
- Support for international transactions and currencies,
- Contract terms such as contract duration or termination procedures,
- How long it takes for payments to be transferred to the regular business account of the retailer is also an essential factor.
Credit card terminals: a must for high-street shops
Credit card terminals or credit card machines are logically needed to accept credit card and debit card payments and are therefore an absolute must for any “physical” shop in this day and age. Selecting the right hardware requires an acute understanding of how daily business is made in the shop, and of the various card payment systems available today.
What credit card terminals are and how they work
Credit card terminals are simply the physical machines used by any customer to make credit card or debit card payments – hence their other commonly used name “credit card machines” or “card payment machines”.
Different payment methods can be accepted by different models of credit card machines, based on different technologies such as:
- Chip-and-pin payments, when the credit or debit card has a built-in chip like most modern credit cards for the card terminal to read,
- Swipe payments, when the card needs to be swiped so that the card terminal can get the cardholder information from the magnetic stripe on the back of the card,
- Contactless payments, using a NFC (Near Field Communications) chip hidden inside the card to retrieve this information.
Depending on usage patterns, this machine can be:
- Physically connected to the electronic point of sale system or till, as part of a countertop solution,
- Wirelessly connected by Wifi or Bluetooth, allowing payments in a restricted area, a few metres away from the electronic point of sale system (it can then be called a portable card machine),
- Wirelessly connected by the cellular network, using a dedicated mobile data plan, so that it can be used almost everywhere (it is then entitled to be called a mobile card payment machines).
What companies credit card terminals are for
Credit card terminals are designed for just any business selling goods, especially retailers.
Depending on the card machine type, specific types of retailers may be more interested than others:
- Tabletop, wired card machines are still good enough for most retailers where transactions are processed at a specific place in the shop, like fashion stores or supermarkets,
- Portable card machines are the best for restaurants, cafés or pubs,
- Mobile card machines are perfect for wet market stalls, travelling salesmen, logistics...
Prices of credit card terminals
Prices of credit card terminals are very different depending on the type of terminal:
- Wired card machines can be purchased for as low as £100,
- Bluetooth portable card machines will be much more expensive, at over £300,
- Mobile card machines usually cost over £500, not counting the subscription to the required data plan.
However, the investment needed can be brought much lower by renting the machine for £15 to £40 per month, and new merchant services players are bringing the price of the machines much lower – as long as retailers choose to use their merchant accounts with their machines.
Major credit card terminal providers
The market of credit card terminal manufacturers is quite concentrated, with three players covering most of the market:
- Pax technology.
However, new players making card readers and providing merchant accounts have appeared such as:
But it should be remembered that retailers rarely get their credit card terminal directly from the manufacturer: in fact, the main providers of credit card machines today are still traditional, commercial banks supplying merchant services.
Choosing a credit card terminal
Choosing the right card payment machine for one’s business requires a deep understanding of the payment habits of the customer base.
Prospective users will therefore be advised to carefully look into:
- Supported payment methods (swipe, chip-and-pin, contactless...),
- Supported card providers (Visa, Mastercard, JCB, China Union Pay... although this is largely a software issue),
- For mobile and portable systems, battery life,
- Whether or not the device has a built-in printer,
- Whether or not the device is compatible and easily integrated with the point-of-sale system of that retailer.
Mobile payment solutions: banking on impulse purchase
Accepting mobile payment solutions is especially needed by shops selling items traditionally purchased by small change, or to highly mobile and tech-savvy customers. The main difficulty is to precisely identify just what mobile payment systems the merchant needs to be able to accept, and how.
What mobile payment means and how mobile payment solutions work
Mobile payment may mean very different things when considered from a retailer’s point of view and from a customer’s point of view. From a retailer’s point of view, accepting mobile payments may mean accepting payments on the go, and therefore refers to mobile card machines. These mobile card machines also now represent mobile card reader solutions like iZettle, PayPal Here, Stripe or Square, as they use the mobile phone itself as a credit card terminal, and a simple external reader for customers to insert or swipe the card.
However, the most popular definition is related to the customer’s point of view, and mobile payments rather refer to all solutions enabling payments from mobile devices, like smartphones.
Mobile payment systems therefore include all mobile contactless payment solutions, whereby the mobile phone itself, as a physical device, is used to make contactless payments, such as Apple Pay, Android Pay or Samsung Pay.
Various mobile wallet solutions are also covered, and they all require mobile apps to work.
What companies mobile payment solutions are for
Mobile payment solutions are especially advised for businesses banking on “impulse purchases”, so that customers can pay with their mobile what they would normally pay with small change.
This includes bakeries, fruits and vegetables, pubs, or basically any kind of small shop.
Supporting mobile payment solutions is also especially recommended for small, new, ambitious startup companies with heavy online-offline convergence.
Prices of mobile payment solutions
The good thing for retailers with m-payment systems such as Apple Pay, Google Pay or Samsung pay is that accepting them nearly doesn’t cost a penny. “Nearly”, because although there is no setup fee or equipment fee (retailers just need a compatible app or card machine), transaction fees may be different from simple card transaction fees, and when they’re different, they’re more expensive. Every merchant services provider has its own rates for every payment solution, so it would be extremely tedious to list all these possible rates. Businesses interested in accepting these payment systems should then really check these rates when selecting their merchant services provider.
As for modern mobile card payment solutions, their costs include:
- Price of the card reader (less than £60),
- Percentage transaction fees (between .39% and 5% depending on the type of card used by the customer and the merchant services provider),
- Flat transaction fees between 2p and 20p,
- And sometimes a minimum monthly service fee, between £9 and £20.
Major providers of mobile payment solutions
Major providers of mobile payment solutions, customer-side, include:
- Apple Pay,
- Android Pay,
- Samsung Pay,
- And an ever-changing list of mobile wallets and applications.
Major providers of mobile card payment solutions include:
- PayPal Here,
Choosing a mobile payment solutions provider
Points to watch when selecting a payment solutions provider include:
- How convenient it is for customers,
- How widespread it is in the customer base,
- How simple their fee structure is,
- How secure it is, and what fraud protection features apply,
- How precisely defined and efficient their disaster recovery procedures,
- How international they are,
- How responsive the customer service teams are,
- How quickly funds get transferred to the retailer’s business account.
Payment gateways: a must for any e-commerce
Payment gateways have been the loyal companions of any e-retailer for many years now. But as online shops and physical shops are more and more obviously merging in the rise of the “click-and-mortar” model, payment gateways are fundamentally changing.
What payment gateways are and how they work
Online payment gateways are an absolutely necessary part of any online payment solution for e-commerce. A payment gateway represents a software item connecting the website’s shopping cart to the credit card processing network, in order to check cardholder information, authorize the transaction and register it with both the customer’s credit card company, and ultimately his bank account, and the retailer’s merchant account, and ultimately his business bank account. Technically, the payment gateway is usually hosted in another server than the e-commerce website itself, to allow for better security. The customer is therefore taken “outside” the e-commerce website to the payment gateway’s interface, or “virtual credit card terminal”, to enter his credit card details, and once the gateway has processed the payment, payment information is transmitted to the e-commerce, and the customer sent back to that e-commerce website.
It should be noted that a payment gateway is also used to process credit card payments in any physical shop, as the shop’s electronic point of sale system must be connected to the gateway to process card payments.
What types of companies payment gateways are for
Payment gateways are an absolute must for every company actually selling goods or services online, or “e-retailers”, but also for high-street retailers accepting card payments.
Shop owners however rarely choose their gateway themselves, as it is part of the merchant services package, together with the credit card terminal.
But owners of e-commerce websites, unless they also accept in-shop credit card payments, will usually choose their payment gateway themselves. In a remarkable twist, online payment gateways now also offer credit card equipment and compete with traditional merchant banks.
Prices of payment gateways
Just like traditional merchant accounts, payment gateways charge their clients on a transaction basis, sometimes with additional fees such as minimum monthly fees or setup fees.
Some payment gateway providers charge only on a pay-as-you-go basis, with a combination of flat rate and percentage rate applied to every transaction, some may charge only tiered monthly subscription fees for a maximum number of transactions per month, and others may use a combination of monthly charges and transaction fees.
However, transaction fees are usually higher than for in-shop transactions as online payments are considered “cardholder not present” situations, with a higher degree of risk.
As prices greatly differ depending on payment gateway provider, credit card network used by the customer and type of card, it’s necessary to request quotes in order to get a clear picture. Using online services such as Companeo makes it easy to receive several quotes from the best payment gateway providers in the UK and compare their offers.
Major providers of payment gateways
In the UK, best online payment gateways for small businesses include:
- Sage Pay
- Amazon Pay
- Merchant e-Solutions...
Choosing a payment gateway
Several key criteria should be taken into consideration when comparing payment gateway providers, including:
- The level of security provided by the solution, notably, in terms or PCI DSS compliance level, and the capability to handle SSL connection requests, HSTS and advanced encryption protocols,
- The ease of integration with popular e-commerce platforms such as Shopify, Drupal Commerce, Magento, WPShop, PrestaShop, Akeeba, OSCommerce, Volusion...
- The extent of the international coverage, represented by accepted payment methods (there are hundreds of e-wallet or m-payment systems worldwide, with noted local preferences), accepted currencies and interface translations,
- Pricing – the fee structure has to be understandable by a simple human being, especially for the most likely type of transactions!