| Summary When taking online Payments you need an Internet Merchant Service and a Payment Service Provider to collect card details over the Internet. A Payment Service Provider acts like a virtual PDQ machine. You can compare Payment Service Providers using our free online payments comparison tool. Your bank will carry out thorough credit checks and will charge you for this service. The more transactions you make, the less it will cost you. |
All the electronic payment methods we have examined use an Acquiring Bank and Merchant Service to process the transactions. To take online Electronic payments you need to get a specific Internet Merchant Service and also a Payment Service Provider to collect the card details over the Internet. Let’s review these elements.
An acquiring bank: is a high street bank that offers credit and debit card processing services. They acquire the money from the customer, process the transaction and credit your account. You need to apply for a merchant service if you want a bank to handle your Electronic payments (other options are explored later).
Merchant Services fall into three categories:
- Standard Merchant Service for use in shops when the customer is present;
- Mail-order Merchant Service for customer not present transactions when the customer orders remotely by phone or post / fax;
- Internet Merchant Service for transactions generated over the World Wide Web.
Obtaining an Internet Merchant Service from an Acquiring Bank is quicker and easier if you already have “offline” card processing facilities set up with the bank. In this case, just ask your bank for an additional Internet Merchant Service ID for use exclusively with Internet transactions. This process is normally quick, especially if the risk to your business does not change.
If you have no prior card processing the bank will carry out a thorough credit check (lasting anything up to 8 weeks). The delay can make it worthwhile using a Payment Bureau that can be upgraded when the Acquiring Bank application is ready – or when you feel your Internet turnover justifies the slightly higher fixed costs of an Acquiring Bank. Alternatively you could look at Post Paid Account services, some of which remove the need for an Internet Merchant Service ID.
When you obtain multiple merchant numbers for both online and offline, you may need to pay separate set up fees and rent a PDQ swipe machine for customer present transactions. The acquiring bank could charge around £25 per month for this rental. If you are getting a combination of these services negotiate the costs with your provider as they may only charge one set-up fee.
A Payment Service Provider (PSP): is a “virtual” PDQ swipe card machine that collects the card details over the Internet and passes them to the acquiring bank. To take Electronic payments over the web, you will need a PSP at a small cost. Some acquiring banks offer PSPservices as part of their product and there are other less expensive options available.
Your choice of PSP will depend on its cost and compatibility with your chosen e-commerce software solution. A fixed monthly fee starts around £10, but there are some cheaper option available starting as low as £0.05 per transaction. Usually, the higher your transaction volume the cheaper the rate you will be charged.
Use our free diagnostic tool to calculate the cost of specific options and find out if this electronic payment method is right for you.
For more detail on the process of authorising a card transaction click here.