Small and medium sized businesses which don’t accept card payments are missing out on £8.8 billion of business according to a recent Barclaycard report, which also revealed that a third (33%) of people ‘would consider walking away from a purchase if they couldn’t pay by card.’
Nobody wants to lose business, so how do you go about setting up card payment facilities?
Choose an acquirer
You’ll need to select an acquirer. You can ask your bank but shop around, there are independent providers - for example Payzone - who can offer good deals for small businesses. Once you’ve made a decision you’ll need to sign a merchant service agreement, which will have a minimum contract term.
Your acquirer will discuss with you which card types you’ll accept (for example: American Express, MasterCard, Visa).
Additional services are also available, such as a ‘Code 10’ call, which you can make to the acquirer’s Card Authorisation Centre if you’re suspicious about a cardholder. Its questions will generally be phrased in a way that you can answer ‘yes’ or ‘no’.
Terminal for processing card transactions
Your acquirer will provide you with a terminal, for which it will typically charge a monthly fee, that connects with the acquirer to process card transactions.
The various types of terminal available include:
- Desktop card machines with an integrated or separate PIN pad
- Portable card machines that can be used anywhere on your premises
- Mobile card machines that can accept payments almost anywhere
- Integrated point-of-sale terminals linked to other devices
- Internet sales use a virtual terminal or payment page.
Here at Payzone, your card machine will accept contactless payments for transactions up to £30.
The terminal will authorise the processed transaction by checking that the card has the funds required for the payment as well as checking that it hasn’t been reported as lost or stolen. Note that this doesn’t mean that the transaction will be paid as there are various reasons why it may be charged back.
The acquirer manages the payment and will pay the funds into your account, typically within four working days after processing. Proceeds from ‘card-not-present’ transactions by phone or mail order may take longer to reach your account and internet transactions may take as longer than 30 working days.
The amount you receive will be less than the card transaction amount to cover the ‘Merchant Service Charge’ (MSC) deducted by the acquirer. The MSC also covers the charges paid to the issuer (the ‘interchange fee’) and the card scheme (the ‘card scheme fee’). You’ll negotiate the MSC with the acquirer. The MSC will be lower for debit cards than for credit cards. Charges for accepting American Express card payments will generally be higher than those for MasterCard or Visa. You may also see deductions for other services such as the monthly fee for renting the terminal.
The acquirer will pass the transaction details to the card scheme – MasterCard or Visa for example – which manages the clearing of the card payment transaction, and it will pass the transaction details to the issuer. The issuer is the cardholder’s card provider, for example Barclaycard, MBNA or Capital One.
You can also print a daily summary of all the card transactions from the terminal.
So that’s it. It’s pretty simple and, contrary to popular opinion, the set-up costs and monthly charges are minimal. If you’re thinking about introducing card payments, our Card Payments Checklist will help you choose the best partner for your business.