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Compare Merchant Services In 2022

Seamless and secure payment processing is the backbone of every eCommerce business. But with options galore, often with overlapping benefits, it can be tough to compare merchant services no matter for a big or small business.

That’s where we step in. Internet penetration for online shopping in the UK touched 86.2% in 2022. As a merchant, you cannot afford to shop pig in a poke anymore. You need a merchant account provider that will give you the best terms, the most competitive pricing, and great customer service. We have spent considerable time in the payment processing industry.

It gives us an astute understanding of the factors that matter the most while engaging a payment processor for your business. We can provide a FREE sourcing service that will connect you with vetted, reliable merchant providers.

But it’s always important to know how to compare a merchant service yourself – which is what’s on topic today.

What is a Merchant Account?

A merchant account is a type of bank account that allows businesses to accept digital payments by debit or credit cards. In simple terms, it is an account held by a bank or other financial institution that permits a business to receive payments through card transactions.

Card payments are processed through the merchant account and the customer’s bank account is debited for the purchase amount. The funds are then transferred to the merchant’s account, less any processing fees and other add-on charges.

That’s a basic explanation of how it works. There are myriad other features and parameters that come into play while choosing a merchant account provider. Let’s take a look at some of them.

What makes a good merchant service provider?

Advertisements for Merchant account providers are often dominated by low prices. We understand the appeal. After all, no business wants to pay through their nose for payment processing. But there lies a fallacy in this approach for selecting a merchant account provider.

You see, the cheapest option is not always the best one. In fact, it may well turn out to be the most expensive one in the long run. Here are three essential parameters that make for a good merchant service provider.

Easy Payments across channels

Digital payments are no longer limited to plastic cards swiped at a physical POS terminal. Customers today want to pay through multiple channels including contactless payments, ewallets, and even cryptocurrency.

Your merchant account provider should be able to offer you a comprehensive solution that supports all major digital payment channels. This will ensure that you never miss out on a sale because you couldn’t accept the customer’s preferred mode of payment.

Add-On Services

Some merchant accounts are just that. A basic intermediatory service between the customer and the acquiring bank. But the best merchant account providers go a step further by offering add-on services that make it easier for businesses to manage their finances.

For instance, some providers offer online reporting and analytics tools that give insights into spending patterns, sales trends, etc. This helps businesses take informed decisions about their marketing channels and ROI. In addition to this, here are some valuable add-on services you might want to consider.

  • Virtual Terminals
  • Cryptocurrency Payment Processing
  • EPOS systems
  • Recurrent subscriptions
  • PDQ machines

This of course, is not an exhaustive list. The point is, your merchant account provider should offer more than just the bare minimum to keep this in mind when you compare merchant services.

Fraud Protection

According to a report by UK Finance, card-not-present (CNP) fraud cost businesses £197.3 billion in 2021. As an online merchant, you are particularly vulnerable to CNP fraud, given the lack of physical interaction with the customer.

This is why it is essential to partner with a merchant account provider that offers robust fraud protection tools and mechanisms. This will help you keep fraudulent transactions at bay and protect your business from financial losses. This goes for small and large businesses – these days cyber attacks are executed on a large scale without any physical knowledge of who they are attacking. It shows the important to compare merchant services for small businesses as well as large.

Accepting High-Risk Industries

Businesses in certain verticals are subject to higher risks of fraud and chargebacks. These are commonly referred to as high-risk industries.

Chargeback ratios for high-risk businesses such as e-Cig / Vape retailers are generally higher than the acceptable limit of 1-2%. This makes it difficult for these businesses to get approved for a merchant account by traditional financial institutions.

Fortunately, there are specialist providers that offer merchant accounts for high-risk businesses. If your business falls into this category, make sure to partner with a provider that has experience in processing payments for your industry. Look at factors like rollover fees, chargeback fees, and reserve requirements before signing up for an account.

Many a time, businesses make the mistake of signing up with the lowest priced merchant account provider, only to discover that their payment account is frozen without notice. This can happen if the provider doesn’t have prior experience in processing payments for your industry and is not equipped to handle the risk.

To avoid such a situation, always compare merchant services for high risk businesses and check their list of prohibited industries.

PCI Compliance

If you process, store or transmit credit card information, you need to comply with the Payment Card Industry Data Security Standard (PCI DSS). This is a set of security standards designed to protect customer data from fraud and theft.

As a merchant, it is your responsibility to ensure that your systems are PCI compliant. But this can be a daunting task, given the ever-changing nature of threats and cybercrime.

This is where your merchant account provider can help. The best providers will offer PCI compliance assistance, either through in-house teams or by partnering with specialist firms. This will take the burden off your shoulders and help you focus on running your business.

PCI compliance is measured in terms of levels. Level 4 is the lowest and is for organisations that process less than 20000 transactions annually. The highest is Level 1 for organisations that process more than 6-million transactions annually.

Compare Merchant Services Rates

Charges is an umbrella term that can be used to describe the various fees associated with your merchant account. The most common charges are listed below to help you compare merchant service rates.

Transaction Fee

This is a fee charged for every transaction processed through your merchant account. It is generally a percentage of the transaction value, plus a fixed amount (known as the interchange fee).

For instance, if you are charged 2.75% per transaction and the interchange fee is £0.10, the total transaction fee for a £100 transaction would be £2.85 (£100 x 2.75%) + £0.10).

Monthly Fee

Most merchant account providers will charge you a monthly fee, which covers the cost of maintaining your account and providing customer support.

Annual Fee

An annual fee is charged by some providers to cover the cost of your account’s annual PCI DSS compliance assessment.

Setup/Activation Fee

A setup or activation fee is charged by some providers to cover the costs of setting up and activating your account.

Minimum Monthly Charge (Potential Red Flag)

In addition to the monthly fee, some providers will also charge you a minimum monthly charge. This is generally a fixed amount that is charged even if you don’t process any transactions in a given month.

This is considered a potential red flag as it’s an unnecessary fee that can add up over time, especially for businesses that have seasonal fluctuations in their transaction volume.

Why it’s challenging to compare merchant services

There’s no one-size fits all solution in payment processing. What might be excellent terms and charges for one industry, might be obscene for another. That’s the reason why most merchant account providers do not lay out all their cards on the table.

To further complicate things, most providers will structure their charges in a way that makes it hard to compare them side-by-side.

For instance, one provider might charge a lower transaction fee but make up for it with higher monthly and annual fees. Another might lure you in with a waived setup fee but hit you with high minimum monthly charges.

Here’s a look at a side-by-side comparison of leading merchant account solutions in the UK based on their transaction charges alone.

How we can help you compare merchant services UK

The best way to compare merchant account providers is to use an independent specialist such as Merchant Advise. We have the expertise and experience to help you identify the right provider for your business.

Having worked in different capacities in the financial sector for more than two decades, we have the knowledge and expertise to provide you with insights and advice that is grounded in reality. Our team will take the time to understand your business and compare the various merchant account providers in the UK market to find the best solution for you.