Andy Macauley, Chief Operating Officer at Handepay, gives some concise pointers to business credit card processing.
As we speed towards a cashless society, the phrase ‘sorry I don’t take card payments’ should be heard less and less. But the reality is that half of British small and medium-sized enterprises (SMEs) still don’t offer business credit card processing. 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.
Who can you trust? Why do you need to pay? To help, here are five essential need-to-knows.
Know who you’re dealing with
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 (an organisation that facilitates the authorisation, processing and settlement of the transaction) and finally, the card scheme (the brand on the card, eg Visa, MasterCard, AmEx).
Make sense of why it costs
Most providers of card payment machines will quote you a basic rate for business credit 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 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. What’s best value for you depends on how many transactions you carry out and what the average value of them is.
Wheels in motion
Next, you need to think about how you go about getting your card machine. 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.
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.
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. 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.
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.