Choosing a merchant service provider can be a daunting task. In this article, we look at the most important things to look for when selecting a merchant service provider.
1. Processing fees or merchant service charge (MSC) or Processing fees
This is the cost of accepting different card types and after recent changes in regulation is charged mainly as a percentage (%)
There are 3 broad groups which card types fall into, Debt, Credit (personal) and Commercial. Although there is a vast range of individual card types this a good basis for understanding their characteristics.
Typically, most clients will find a high percentage of debit card transactions as this is the most commonly used card type in the UK. A typical SME would take 80%+ of their transactions on Debit Cards.
Credit cards (personal) are the second most commonly used card type around 10-15%, these cards tend to be charged at a slightly higher rate as shown below.
Commercial/Debit cards – There is a wide range of commercial cards available in the UK market with a huge range of prices. In general, most business will accept few transactions from this category.
This is an overview of the market, but different business will have different splits between categories. Companies providing high-ticket items may see more credit card payments and B2B companies may see more commercial cards. It is therefore important to understand how much of each card type your business takes to maximise savings.
Here is a price range for each category:
|Card Type||Price Range|
|Debit Card||0.25% – 0.6%|
|Credit Card||0.3%- 0.9%|
|Commercial Card||1.5% – 2.5%|
2. Terminal charges
Merchant service providers will typically offer 3 types of terminal. Static, portable and mobile. The general rule of thumb is the wider the range the more expensive the terminal will cost per month.
A static terminal is perfect for businesses with single/multiple points of sale where you wish to bring the machine to the customer. Such as a local shop where the customer pays at the counter.
A portable terminal is perfect for businesses with single/multiple points of sale where you wish to bring the machine to the customer, think restaurants where they bring the terminal to you.
A mobile terminal is perfect for business who need to take payments further than 150m from the base unit or run a mobile business. Ideal for a hairdresser or festival stall and work through GPRS.
How much do they cost?
This will largely depend on the contract as well as the type of terminal. Terminal contracts are typically quite long and can go for as long as 5-6 years but typically 4 years. Here is a rough guide to cost
|Countertop Card Machine||£13 - £20|
|Portable Card Machine||£16- £25|
|Mobile Card Machine||£20 - £35|
Auth fees are becoming more common for most merchant service providers and can be tagged on to all transactions done online via a terminal or both.
Normally a penny per transaction (PPT) charge will be taken for every payment accepted.
Auth fees tend to cost between 1p-6p. A working example would be a shop which takes 10,000 transactions with a 3p Auth fee, would get charged an additional £30 a month.
Gateway fee (online transactions)
If you are an online business and have an integrated online gateway (a fancy way of saying you take payments online) you will be charged a fee for this service.
Most providers now provide a set number of transactions for a set fee. I.e. 1000 transactions for £10-£25 a month. (Beware some providers still charge a % of your online turnover, this can lead to a significantly larger bill).
Any transaction exceeding the package will be charged at a set PPT, around 10p. We have found that many growing companies are paying far too much for their online payments! Definitely, something to keep an eye on.
PCi Compliance fee
PCi DSS or payment card industry data security standard (you can see why they used an acronym) concerns holding and transmitting card data securely. It’s much less daunting than it sounds, in most cases it involves some simple forms to be filled once a year. (be careful not to forget some companies can charge big percentages until the paperwork is returned.
The PCI fee is charged to help you stay secure and is normally between £5-£20. Some merchant service providers charge this per business but in the main, you will see this appear on each outlet. See Beware of the extra cost!
These are the key points to review when selecting a merchant service provider, make sure you look at each thoroughly before making a selection.