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Merchant services: List of merchant services providers in the UK and how to compare them
Merchant services providers are the necessary partners to any business accepting payments by credit card or debit card. As “one-stop shops”, they try to offer any large or small business all merchant services these businesses might need, acting as credit card processing companies, offline or online merchant account providers, card machine providers and other payment systems providers.
Why are they so essential to any business engaging in credit card transaction? What are these different merchant services? What are the different types of merchant account providers and how to compare them in order to find the best partner doing credit card processing for small businesses?
An introduction to merchant services providers
Merchant services providers don’t just offer card payment terminals: they provide the full hardware, software and services suite needed to accept card payments. Different types of providers are active on the UK market, based on their origins.
What merchant account services providers do
Merchant account services are basically all services needed to accept credit or debit card payments. The Payment Card Industry consortium defines a merchant as “…any entity that accepts payment cards bearing the logos of any of the five members of PCI SSC as payment for goods and/or services.” And who are these five members? MasterCard, Visa, American Express, Discover and JCB.
With regards to the services providers, the official definition adopted by PCI is rather loose, as this definition refers to “business entities that are not a payment brand, involved in the processing, storage or transmission of cardholder data on behalf of another entity.”
Simply said, these providers are banks, as they provide financial services.
Initially, these banks only provided the most essential service to any business processing card payments, that is, the merchant account through which all card transactions must transit before funds are eventually made available to the retailer. So it just became another service provided by mainstream, high-street, brick-and-mortar banks.
But as these banks had easy access to the market of retailers, they quickly started providing all card payment services, and even hardware and software needed by these retailers to accept credit card payments, including:
- Credit card terminals or PDQ machines,
- Point of sale systems,
- Payment gateways,
- Payment processors...
The situation became more confusing as in the UK, payment services providers offering the whole package of merchant services started to include software companies like payment gateway providers and even hardware companies such as terminals manufacturers. Additionally, aggregators selling sub-merchant accounts and brokers also entered the market.
Types of merchant account services providers
In the UK, merchant services providers can now be found literally anywhere, and these providers have many different origins and profiles.
They can either be:
- “Traditional”, brick-and-mortar acquiring banks, domestic or foreign. That’s the bank down the street already taking care of the business and most typical provider of merchant accounts and merchant card services. As a sign of the times, some now rely on partnerships with payment gateway, software or hardware specialists to act as full-service merchant services providers.
- Online banks acting as merchant account providers. The only difference with the former is that these banks operate largely or fully online and are specialised in merchant banking services rather than providers of universal banking services like most high-street banks.
This last type of providers of merchant accounts can be itself subdivided into three subcategories:
- Actual full-service online merchant banks,
- Payment gateway providers acting as merchant account providers,
- Aggregate merchant account providers, who offer shared merchant accounts, for much lower fees than traditional banks.
Tips for selecting merchant account suppliers
In such a crowded and diversified market, a few tips really come in handy to select the merchant services provider which best fits the specific needs of a given small business.
These tips fall into three main areas, related to precisely defining needs, preparing the material required for an application to get merchant services, and deciphering the fee structure of the merchant account provider.
As merchant services are usually grouped in packages, where business customer may find the most essential as well as the most trivial, it’s an absolute must to make a detailed list of which services are really needed, and which are not.
- In order to select the right credit card terminal, for instance, retailers will try and evaluate if they need to be able to accept online payments or on-the-phone payments as well as face-to-face payments. But they also need to check whether they will need to accept contactless payments, payments by e-wallet, and if they really need to accept credit card transactions away from the till or even away from the shop.
- Evaluating which payment services the business has to support is also very important, as fees will largely vary depending on the currency used, the country of issuance of the card, the card network (Visa, Mastercard, Diners, JCB, China Union Pay or even more exotic ones).
- Also, it’s essential to make sure that the software and hardware will integrate easily with the existing equipment, even more so when online payment systems are needed.
- Finally, retailers should check a few things about the provider itself, like the reputation of this provider, what kind of businesses usually work this provider, customer service availability and efficiency, and the level of transaction security offered.
Deciphering the fee structure
Budgeting the whole package needed is of course a key part of the selection process.
Requesting as many quotes from merchant services providers is a brilliant idea, and online services such as Companeo is a great place to start.
Knowing whether the hardware will be purchased, leased or hired is an important choice to make. However, the way merchant services providers structure their merchant account fees is often hard to decipher.
Fees may or may not include:
- Setup fees,
- Chargeback fees,
- Minimum monthly fees,
- Termination fees.
Transaction fees are especially hard to compare as they may be flat, percentage-based in relation with transaction amounts, or a combination of both.
Fees may also differ depending on payment method used, card network, or payment currency.
Finally, merchant services providers may apply a tiered system based on business specifics of the retailer.
Preparing the application material
This last variable makes it especially necessary for any retailer applying to get a merchant account to submit as much evidence as possible for the merchant bank to evaluate risk.
Common accounting documents such as tax filings and credit history are therefore a must.
But applicants must also provide an estimate of the average value of monthly credit or debit card transactions, as well as a value for the average transaction amount.
Small businesses or new businesses shouldn’t be worried, as forecasts are accepted.
Solid and detailed business plans are also appreciated.
A comparison of merchant services providers
As there are dozens of merchant services providers for small businesses in the UK to choose from, the following table should be understood as a mere sample of notable companies representing the various types of providers on the market.
Name of provider
Brick-and-mortar, UK banks
Seamless foreign card payment acceptance,
Very good fraud protection
Full service in partnership with Worldpay
Fast settlements from merchant to business account,
Clear fee structure
Biggest retail bank in the UK,
Reputed customer service
Brick-and-mortar, Foreign banks
Full service in partnership with Elavon
Nearly all payment methods accepted,
Allied Irish Banks (AIB)
Online payment gateways
Large volume of transactions processed,
Partnerships with the best software and hardware vendors
Partnership with Verifone, major PDQ vendor,
Support for third party integration
24/7 customer hotline,
Big customer base
Full service in partnership with Santander
Originally a payment processor,
Known for their gateways, but also make their own PDQs and merchant accounts.
Probably the most established gateway provider,
Very large customer base,
Whole range of plans
Seamless integration with payroll and accounting software products,
Long experience of small businesses
Mobile solutions specialist,
Cheap card reader,
Allows on the phone payments,
Plans for businesses of all sizes
Now also provide card readers, merchant accounts as well as gateways
25 currencies supported,
Easy shopping cart integration
Mobile solutions specialist,
Very cheap card reader,
More information on Merchant services