With the introduction of chip and pin back in 2004 and contactless payment now being more widely used, the card has become somewhat of a household or rather, ‘wallethold’ item. Counting your pennies to pay for a taxi is soon becoming a thing of the past as even the traditional hackney carriages are now accepting card payments. It seems likely that soon we will be living in a cashless society and ‘sorry I don’t take cards’ will be heard less and less. However, the reality is that two thirds of British SMEs still don’t accept debit or credit card payment.
Why is that? Well, it can be a nightmare to get started. You have to pay for the privilege and the amount you pay can vary with every single transaction, making it appear over complicated.
To help, here are five essential need-to-knows. We’ve put together a guide to get you started and written it in plain English to try and make it as painless as possible to understand.
1. Who’s who?
To understand the process, every transaction you accept on a card involves a number of bodies and they all receive some payment from the merchant (you).
They are the card issuer (the bank or financial institution that provided the card to the customer), the acquirer (Such as WorldPay, an organisation that facilitates the authorisation, processing and settlement of the transaction) and finally, the card scheme (the brand on the card e.g Visa, MasterCard, AmEx).
2. Why the payment?
Ok, so we are going to tell you to suck eggs here but stick with it… 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).
That means the customer uses a card that has an electronic chip embedded into it and they validate they are the genuine owner of that card using a PIN (just like at the cash point). This greatly reduces the chance of plastic card fraud and these types of transactions are now the norm in the UK. They are also considered to be the most secure and, as such, attract some of the lowest fees, which is why most providers use them in their quote.
Expect to get quotes such as 15p per transaction or so many % of each transaction. What’s best value for you depends on how many transactions you carry out and what the average value of them is.
3. Wheels in motion
Next, you need to think about how you go about getting your payment terminal. This depends a lot on the size of your business and for an SME it’s normally easiest to go through an ‘introducer’. 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. Understand those fees
Joining fees: These are variable, some providers charge but others don’t. Look around to see who charges and who doesn’t and factor this into the price. As a rule of thumb, you’re more likely to pay a joining fee if a representative comes out to see you, explains in detail the offer and completes the paperwork with you. 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): This is the most complicated section, as the price is calculated on each transaction and can vary from transaction to transaction, but roughly speaking the average business will pay £1 a day to have a card terminal.
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.
Rates can vary depending on the type of transactions you complete – 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. Let’s go!
Most applications are processed in a few days which means you could be up and running within a week of signing your agreement. In order to get to this stage, a few checks will be made such as, what does your business do? Do you sell face to face or over the internet? How are your finances? Do you file your tax returns on time? Assuming that’s all fine, you’ll be set up and ready to start taking card payments from your customers.
Don’t watch as customers put items back on the shelf – let them pay the way they want. It’s easier than you think.
Andy Macauley is chief operating officer of Handepay, www.handepay.co.uk/accepting-card-payments