- Original Poster
- #1
Scouting around this forum (and others) I’ve noticed a lot of business owners asking for “the best” or the “the best value” Merchant service provider – this applies to ecommerce as well as other ways of taking payments like Chip & PIN etc, but I’ll keep it ecommerce for this thread. I thought it might be useful to just make something clear: don’t be caught out by eye-catching processing rates! There are other charges often not mentioned in the jazzy ads and I thought it might be useful to break some of the main charges down here so UKBF readers are in the know.
Rates
Although worked out on a case-by-case basis, remember that the cost of processing Corporate debit and credit cards will always be higher than the rate you are offered for Consumer debit and credit cards.
Providers/banks may also charge a pence fee on top of the % rate.
Authorisation Fees
Authorisations or ‘auth fees’ are the amount the Acquiring Bank charges to process transactions between your customers’ or clients’ bank account and their card scheme (e.g. Visa or MasterCard). That’s because, in the few seconds it takes to process a card payment, Acquirers have to check the card in use has not been registered as lost or stolen in order to authorise payment to you and the charge covers this process. Remember, auth fees are charged on declined transactions too, so resubmitting the same details is likely to result in a further charge.
Inter/Intra Rates
International and Inter-regional rates are the charges for processing cards from outside of the EEC (International) and outside of the UK but still within the EEC (Intra); both will be higher than the rate quoted for the above UK standard rates. I advise Merchants to check carefully how much extra these type of transactions will cost compared to their normal rates, as I have seen some in excess of 2%.
Paper Statements
Many Acquirers only offer online statementing, which is sometimes free for Merchants to use and receive. However, for those Acquirers who do offer paper statements, a monthly fee of around £2 or £3 usually applies.
Card Not Present
Card Not Present transactions (or CNP for short), are payments that are taken when the card is not physically presented face-to-face, i.e. when a card payment is taken over the phone or via mail order. CNP situations tend to be where the majority of fraudulent activity occurs so Acquirers deem these as higher risk and may levy additional charges.
As well as a one-off set-up fee, Acquirers may also apply a surcharge on top of the Merchant Service Charge, so an additional percentage above your usual fee. I would advise Merchants wishing to process Card Not Present transactions in any volume to ensure this surcharge is made clear from the start.
Refunds
Acquirers will charge for processing refunds, although the price is generally the same for debit or credit card refunds. Typically, the charge is 50p, although with volume this can be substantially reduced.
Chargebacks
Chargebacks are disputed transactions, i.e. should a customer claim they didn’t make a payment to you and their bank requests the money back from your Acquirer. For Merchants it’s important to remember that there are strict time limits for responding to a chargeback claim, and the amount you are charged will vary depending on the volume of claims. I have seen costs anywhere between £10 and £35 in the past.
Exchange Rate
You will be charged if the Acquiring Bank has to convert currency into GBP after receipt of funds. Some Acquiring Banks will allow the Merchant’s Bank to convert funds and others will not. Whilst both will charge you for this service the exchange rates may differ, and you may get a better rate by allowing your bank to do the currency conversion. If your volumes are large and you require settlement in GBP then you might be able to negotiate with your provider.
Terminal/Gateway Fees
These are charged per month and vary depending on whether you are a terminal or ecommerce merchant, and depending on contract length.
Joining & Terminal Delivery Fees
Many services providers will charge this fee to cover delivery and set-up, however, I would advise that if you are charged a joining fee you ensure you’re getting your money’s worth! i.e. if you’re charged and yet still have to set-up everything on your own with no support – is it really worth it?
Hanging around on the phone to call centres and engineers is never a great first experience for anyone.
PCI DSS (Payment Card Industry Data Security Standard)
PCI DSS compliance is a fee charged by Acquirers for ensuring that merchants are running their organisation according to strict industry standards, and usually involves a monthly fee and annual review to ensure compliance. It’s worth adding here that non-compliance also incurs a monthly fine for most Acquirers/Providers of around £10-15 (more if charged at a % per transaction). This is particularly interesting to me since 1) of course it is better for Merchants to be compliant since heavy fines are payable by those who process fraudulent transactions and are shown later to be uncompliant, but 2) charging for non-compliance is pure profit on the part of the Acquirer or Provider – literally, it is money for doing nothing.
Hope this helps!
Rates
Although worked out on a case-by-case basis, remember that the cost of processing Corporate debit and credit cards will always be higher than the rate you are offered for Consumer debit and credit cards.
Providers/banks may also charge a pence fee on top of the % rate.
Authorisation Fees
Authorisations or ‘auth fees’ are the amount the Acquiring Bank charges to process transactions between your customers’ or clients’ bank account and their card scheme (e.g. Visa or MasterCard). That’s because, in the few seconds it takes to process a card payment, Acquirers have to check the card in use has not been registered as lost or stolen in order to authorise payment to you and the charge covers this process. Remember, auth fees are charged on declined transactions too, so resubmitting the same details is likely to result in a further charge.
Inter/Intra Rates
International and Inter-regional rates are the charges for processing cards from outside of the EEC (International) and outside of the UK but still within the EEC (Intra); both will be higher than the rate quoted for the above UK standard rates. I advise Merchants to check carefully how much extra these type of transactions will cost compared to their normal rates, as I have seen some in excess of 2%.
Paper Statements
Many Acquirers only offer online statementing, which is sometimes free for Merchants to use and receive. However, for those Acquirers who do offer paper statements, a monthly fee of around £2 or £3 usually applies.
Card Not Present
Card Not Present transactions (or CNP for short), are payments that are taken when the card is not physically presented face-to-face, i.e. when a card payment is taken over the phone or via mail order. CNP situations tend to be where the majority of fraudulent activity occurs so Acquirers deem these as higher risk and may levy additional charges.
As well as a one-off set-up fee, Acquirers may also apply a surcharge on top of the Merchant Service Charge, so an additional percentage above your usual fee. I would advise Merchants wishing to process Card Not Present transactions in any volume to ensure this surcharge is made clear from the start.
Refunds
Acquirers will charge for processing refunds, although the price is generally the same for debit or credit card refunds. Typically, the charge is 50p, although with volume this can be substantially reduced.
Chargebacks
Chargebacks are disputed transactions, i.e. should a customer claim they didn’t make a payment to you and their bank requests the money back from your Acquirer. For Merchants it’s important to remember that there are strict time limits for responding to a chargeback claim, and the amount you are charged will vary depending on the volume of claims. I have seen costs anywhere between £10 and £35 in the past.
Exchange Rate
You will be charged if the Acquiring Bank has to convert currency into GBP after receipt of funds. Some Acquiring Banks will allow the Merchant’s Bank to convert funds and others will not. Whilst both will charge you for this service the exchange rates may differ, and you may get a better rate by allowing your bank to do the currency conversion. If your volumes are large and you require settlement in GBP then you might be able to negotiate with your provider.
Terminal/Gateway Fees
These are charged per month and vary depending on whether you are a terminal or ecommerce merchant, and depending on contract length.
Joining & Terminal Delivery Fees
Many services providers will charge this fee to cover delivery and set-up, however, I would advise that if you are charged a joining fee you ensure you’re getting your money’s worth! i.e. if you’re charged and yet still have to set-up everything on your own with no support – is it really worth it?
Hanging around on the phone to call centres and engineers is never a great first experience for anyone.
PCI DSS (Payment Card Industry Data Security Standard)
PCI DSS compliance is a fee charged by Acquirers for ensuring that merchants are running their organisation according to strict industry standards, and usually involves a monthly fee and annual review to ensure compliance. It’s worth adding here that non-compliance also incurs a monthly fine for most Acquirers/Providers of around £10-15 (more if charged at a % per transaction). This is particularly interesting to me since 1) of course it is better for Merchants to be compliant since heavy fines are payable by those who process fraudulent transactions and are shown later to be uncompliant, but 2) charging for non-compliance is pure profit on the part of the Acquirer or Provider – literally, it is money for doing nothing.
Hope this helps!
