Best Merchant Account Providers

How often do you think cash withdrawals are used for purchases in the UK? The decline in cash usage is real, with only 15% of all UK payments made using cold hard cash as the cashless society takes hold.

Meanwhile, payment via debit card has surged, now accounting for almost 20 billion payments in the UK. 

These stats are important so business owners understand how to prevent their business from being left behind.

The consumer wants to pay for purchases with their debit card, rejecting cash payments. Therefore, you must make your business accessible by accepting debit card payments as well as online purchases.

In this article, we will complete a merchant account comparison of the 6 best merchant account providers in 2023, providing you with the knowledge you need to make the best decision for your business.

At a Glance, Pros and Cons

Do you need a succinct overview of merchant account benefits and limitations to your business? 

Here are our summarised pros and cons of merchant accounts for your business:

Pros

✔️ Customer satisfaction — The majority of customers want to pay for purchases using a debit or credit card, or a digital payment through their mobile phone. You should also be able to access multi-currency transactions for your business.

Limiting the ways that a customer can pay for goods may limit the number of sales you make overall.

✔️ E-commerce — Using a merchant account ensures that you can sell goods and services online via e-commerce. This will expand the amount of customers that your goods and services can reach and increase your volume of sales and generate higher profits.

✔️ Security — A significant benefit of utilising merchant services in your business is the security features you will receive. The chances of fraud occurring are reduced as transactions travel through more than one avenue before being approved.

✔️ Assistance — Whichever merchant account service provider you decide to go with, you will receive assistance and help from the company as and when you require it. 

So, if you are experiencing difficulties processing credit card transactions in your business, you can call the merchant service provider experts for assistance.

Cons

❌️ Hackers — With all technology and online businesses, fraudsters and hackers are trying to obtain information and data at any cost. There will always be a risk that your business data is prone to hacking, even at a reduced risk.

❌️ Approval process — The approval process to secure a merchant account can be long and tedious. During this time, you could lose customers and potential business.

❌️ Costs — A merchant account comes with a range of costs attributed to your business. The actual costs involved will vary but could include one-off and monthly costs.

❌️ Fees per transaction — Every transaction that is processed through the merchant account will be charged a fee, typically between 1% to 5% of the transaction value. Such fees can add-up over time.

Best Merchant Account Providers for Business — Reviews

How can you choose the best merchant account provider? 

Check out our top 6 merchant account providers for your business, arming you with the complete knowledge you need:

1. Worldpay — Best Merchant Account Provider for Growing Businesses

Features:

• Offers pay monthly merchant accounts
• Pay-as-you-go merchant accounts available
• Minimum 12-month contract required
• Dedicated merchant account service provider
• All-in-one provider
• Includes PCI compliance

Visit WorldPay

Prices:

• Minimum card terminal fee per transaction: 0.95%
• Maximum card terminal fee per transaction: 2.75%
• Virtual terminal cost: £9.95 per month
• Payment gateway cost: £19 per month

Worldpay is a well-known merchant service provider, offering a combination of monthly and pay-as-you-go accounts. 

This is a good choice if you are new to business and you are aiming to grow and develop your business over time. You could begin your merchant account journey on a pay-as-you-go basis and then move to a monthly basis once you have achieved a degree of scalability.

Typically, a 12-month contract is required when joining Worldpay, although the contract length can be stated as up to 3 years.

However, as a dedicated merchant account service provider, you can receive an all-in-one service from your account. This means that you can use Worldpay for your card reader, payment gateway service and virtual terminal service.

In addition, you can achieve peace of mind with PCI compliance so you know you are meeting all obligations with data privacy and confidentiality. 

Prices for the Worldpay merchant account vary, although you would expect to pay in the region of £9.95 per month for a virtual terminal and around £19 per month for payment gateway services.

Card terminal fees also vary between 0.95% and 2.75% per transaction, with transactions processed in between 1 to 3 days.

You can be sure of support and assistance when using Worldpay merchant account services, however, with customer support offered 24/7.

2. PayPal — Best for Big Business

Features:

• Good for large businesses
• No monthly fees
• Trusted brand
• Integrations available

Visit PayPal

Prices:

• Card terminal fees start at 1.2% + flat fee
• Transactions made by QR code start at 1.5% + flat fee
• Other transactions are charged at a fee of 2.9% + flat fee

PayPal is a trusted brand that is suited to large businesses with integrations to other software available. You will pay no monthly fees when using PayPal as a merchant account service provider, although some fees are higher than other providers.

Card terminal fees start at 1.2% plus a flat fee. The flat fee will vary depending on the currency in question, although a 30p charge is applicable to British Sterling.

When a transaction is made using a QR code, the fee charged rises to 1.5% of the transaction, plus the relevant flat fee.

However, other transactions can see a substantial fee of 2.9% plus flat fee. So, for a £100 transaction, you might need to pay a fee of £2.90 plus a 30p flat fee when the currency in use is British Sterling.

3. Stripe — Best for e-Commerce

Features:

• Good for online transactions
• Can also use for physical transactions
• Transparent fees
• Build your own package

Visit Stripe

Prices:

• Minimum card terminal fee per transaction: 1.4% + 20p
• Maximum card terminal fee per transaction: 2.9% + 20p
• Minimum payment gateway fee per transaction: 1.4% + 10p
• Maximum payment gateway fee per transaction: 2.9% + 10p
• Minimum virtual terminal fee per translation: 1.4% + 10p
• Maximum virtual terminal fee per transaction: 2.9% + 10p

Stripe is a popular merchant account provider for e-commerce, specialising in services for online businesses. However, you can also use Stripe to process physical transactions, with two varieties of card reader available for businesses.

Stripe is a flexible provider that encourages the user to build their own package, including transparent fees so you can tailor the service to your business.

When processing a transaction with a debit or credit card, you can expect to pay a fee of between 1.4% and 2.9% of the transaction value, plus a flat fee of 20p.

If you process an online purchase from a customer, a payment gateway fee will cost your business between 1.4% and 2.9% of the transaction value, plus a 10p flat fee.

Telephone purchases can also be made through a virtual terminal. In this instance, your business will be charged between 1.4% and 2.9% of the transaction value in addition to a 10p flat fee.

4. Smartpay Anywhere (Barclaycard) — Best for Pay-As-You-Go Accounts

Features:

• Uses the reputation of Barclaycard
• Specialises in pay-as-you-go contracts
• Fast account creation and approval
• Grow the account with the business

Visit Barclaycard

Prices:

• Minimum card terminal fee per transaction: 1.6%
• Custom plans can be created to provide bespoke rates
• Virtual terminal cost: from £15 per month
• Payment gateway cost: from £20 per month

Smartpay Anywhere is a merchant service from Barclaycard and uses the Barclaycard brand and reputation to its benefit.

Smartpay anywhere has created a niche specialism in creating pay-as-you-go merchant accounts that are easy to set up and offer fast approval. This is a great choice for new businesses, particularly sole trader businesses. The account also benefits from scalability so your merchant account can grow with your success.

The minimum card terminal fee for each transaction processed is 1.6%, although you can contact Smartpay Anywhere to create a custom plan with bespoke rates.

Costs for a virtual terminal to be added to your account start at £15 per month and can rise as high as £75 per month.

Additionally, including a payment gateway to your account will cost you between £15 to £75 per month.

5. SumUp — Best for Simplicity

Features:

• Simple structure and pricing fees
• Integrate with QuickBooks
• Choose your preferred card reader
• Add virtual terminal and payment gateway services

Visit SumUp

Prices:

• Card terminal fee per transaction: 1.6%
• Virtual terminal fee cost: 2.5%
• Payment gateway fee cost: 2.5%

SumUp offers a simple yet effective merchant account for businesses, providing clear fees and flexible adaptability to suit your business needs.

Integrate your SumUp merchant account with QuickBooks, automatically uploading transactions processed by your merchant account to your QuickBooks accounting software. This saves time and effort whilst increasing productivity and accuracy.

Tailor SumUp to suit your business, choosing the card reader to meet the needs of your business and transactions. You can also add a payment gateway service to your account for online purchases and a virtual terminal for telephone payments.

Fees are clear and concise with SumUp. You will pay a fee of 1.6% of a transaction value when a payment is made via debit or credit card. Fees of 2.5% are applicable when processed through the payment gateway or virtual terminal.

6. Square — Best for Zero Monthly Fees

Features:

• Suitable for all business sizes
• Zero monthly fees
• Only pay a fee when you make a sale
• Obtain your payments quickly
• No long contracts required
• Additional services available

Visit Square

Prices:

• Card terminal fee per transaction: 1.7%
• Payment gateway fee cost: between 1.9% and 2.59 plus a fixed fee
• Virtual terminal fee cost: 2.5%

Square offers merchant account services without a monthly fee structure. The only time you will pay Square a fee is when you make a sale, helping your business’ finances when sales are low.

When joining Square, you will not be tied into a long contract. However, you can add additional services to your account, such as QR-payment availability.

Some merchant services leave your business waiting for payments for as long as a week. However, Square ensures that you receive your payments fast, sometimes the very next day.

Prices for a Square merchant account are per transaction only, requiring a 1.7% fee when a transaction is made by debit or credit card. 

Fees for payment gateway transactions are priced between 1.9% and 2.5% of the transaction value when processed. A fixed fee is also applicable. However, a transaction processed via a virtual terminal requires a set fee of 2.5%.

What Is a Merchant Account?

A merchant account is a type of bank account that processes transactions in your business. So, every time your business makes a sale, the merchant account processes the sale and ensures the financial transaction is safe and secure.

Your business cannot accept debit and credit card transactions without a merchant account.

An example of a merchant account service provider is Visa merchant services. You can use Visa to process payments in your business, acting as a go-between or third party between your business and the customer. 

The purpose of Visa is to safeguard the payment from the customer’s bank account to your business account when a purchase transaction is made.

Another popular example of a merchant account service provider is Mastercard merchant services, a provider that is growing in popularity across Europe although their fees tend to be higher.

How Does a Merchant Account Work?

Merchant accounts work to process transactions so that customers can make sales with a debit card or credit card. 

Here is the 4-step process of a debit card or credit card transaction and how a merchant account works:

• Step 1 — the first step of the merchant account process involves a transaction made by the customer. You need to take a card payment from your customer.

The customer wants to buy a product or service and offers their debit card or credit card for payment. This could be through using the debit or credit card chip and PIN or its contactless card payment capability.

• Step 2 — Once the customer touches their contactless debit or credit card on the reader, or enters their PIN, the customer’s details are sent to the merchant account from the card reader.

The merchant account is held inside of an acquiring bank. Examples of merchant accounts include Visa and Mastercard.

• Step 3 — The merchant bank acts as an intermediary between the customer’s bank account, known as the issuing bank, and the business’ bank account. This determines whether the transaction can occur.

• Step 4 — The customer’s bank, the issuing bank, informs the acquiring bank and merchant account whether the transaction has been approved. 

Transactions are approved as long as the customer’s bank account has enough money to pay for the purchase. 

How Can Customers Make Card Transactions?

Card transactions are typically made via one of three processes:

Card Reader

When customers make purchases with debit or credit cards in a store, the business owner needs a card reader for this transaction to take place. 

Today, most people will choose to use the contactless function of their debit or credit card, with 15.4 billion contactless transactions made in the UK to date. There are now 135 million contactless cards in the UK, making 88% of all debit card transactions.

However, almost all card readers will still accept chip and PIN payment whereby the customer will insert their debit or credit card into the card reader for the transaction to take place.

Card readers vary according to the merchant account adopted by the business. However, you could opt for a countertop card reader or a wireless card reader. Mobile card readers are becoming increasingly popular, however.

Online Payments

Increasingly, online payments are becoming more common as the rise in online shopping dominates retail. 82% of the UK population now prefer to shop online.

When online payments are made, the business utilises a payment gateway that emits the payment details of the customer to the merchant account. Businesses might choose to use an internet merchant account if they are predominantly an e-commerce online business.

Telephone Transactions

Taking payments for purchases over the phone is a secure payment method that requires a virtual terminal. 

The employee answering the customer’s telephone call will use a webpage supported by the merchant account, requiring the employee to enter the debit or credit card details of the customer.

Does My Business Need a Merchant Account?

Your business only needs a merchant account if you plan to accept debit card and credit card transactions from customers. If you want to remain as a cash-only business, you do not need a merchant account.

However, online businesses also require merchant accounts as customers do not have the option to pay for purchases in cash.

How Do I Get a Merchant Account?

To apply for a merchant account, choose the best merchant account provider for you and your business. Make an application and complete all necessary documentation, submitting any evidence required.

Once your application is complete and all documentation has been submitted, the merchant account service provider will assess your application and inform you of the approval.

Approval for a merchant account is not typically a fast process, however. Setting up the merchant account can take a while to complete due to the necessary checks and approval processes.

How Can I Get a Merchant Account?

Your business must be registered officially so that you can open a merchant account. In addition, you will need to provide your business name and contact information as well as your employer identification number.

Further details concerning your business could also be required, such as the nature of your business and financial documents, such as tax returns. You will also need to declare any previous merchant accounts held by your business.

Your credit history and the age of your business will also be assessed. A business that has been open longer will be viewed more favourably, as will a business with a good credit history.

Are There Different Types of Merchant Accounts?

There are 4 different types of merchant accounts that you could use in your business:

1. Aggregate Merchant Accounts

If you run a small business, the aggregate merchant account option is a great choice to pursue. There are typically zero set-up costs and zero monthly costs. 

The only fee that an aggregate merchant account will charge you is a small percentage of the transaction every time you make a sale.

In a way, an aggregate merchant account acts as a shared merchant account, teaming you up with other businesses of a similar nature in a pool. This payment processing method ensures that your merchant account fees remain low so your business can prosper. 

Examples of aggregate merchant accounts include PayPal business services as well as Payzone, providing accessible options so your business can begin to accept debit and credit card transactions.

2. ISO Merchant Accounts

If you prefer to create your own merchant account as opposed to pooling resources with others, an ISO merchant account could be the best option. This type of merchant account is the best option for businesses that experience high sales volumes already.

An ISO merchant account will allow a flexible merchant account agreement to be created, tailored to the needs of your business and your own desires. 

You will need to pay an upfront one-off cost when joining a merchant account service provider offering an ISO merchant account, however, as well as monthly fees and charges. 

To be considered for an ISO merchant account, you will need to reach the required sales threshold to be considered. The lowest sales threshold for an ISO account falls at around £80,000 per year for Visa, whereas the highest sales threshold is required by Mastercard at £800,000.

Typical examples of merchant account service providers that utilise ISO merchant accounts include Lloyds Bank, Worldpay and HSBC Bank.

3. High Risk Merchant Accounts

High-risk merchant accounts are a good option if you currently have a bad credit score. Nothing is stopping a person with a bad credit history from running a business, so accepting credit and debit card transactions from customers should also be accessible.

However, it is not just the credit history of the business and business owner that could determine a high risk enterprise. The nature of your business can also impact this, with travel businesses being considered high risk due to the possibility of cancellations in travel.

Businesses that deal in international transactions of a high value could also be considered high risk by a merchant account service provider.

Examples of providers who offer high risk merchant accounts include Verotel and Durango.

4. Internet Merchant Accounts

Accepting online payments requires an internet merchant account and is essential for e-commerce businesses that do not possess a store to accept cash payments. 

Some business owners make the mistake of thinking that only one merchant account is required for a business. 

However, you might need an aggregate merchant account to accept debit and credit card payments in store as well as an internet merchant account to accept online payments if customers purchase items from your website. 

Examples of internet merchant accounts include PayPal, Clover, and Paymentsense.

How Much Does a Merchant Account Cost?

The cost of a merchant account will vary according to the merchant account used as well as the volume of transactions processed. The financial details of the merchant account will be included in your merchant account agreement.

However, your business may need to pay monthly costs, a one-off set-up cost, and charges per transaction.

Fees Per Transaction

Debit card and credit card transactions are typically charged per transaction, at a rate of 1% or 2% of the transaction value. Some rates may reach as high as 5%, however. 

So, if a customer makes a purchase of £100 to your business and the merchant account charges a fee of 1%, you will be charged a fee of £1.

Merchant account providers will offer lower charges to businesses that experience high volumes of transactions on a regular basis. Typically, a higher fee will be charged by a merchant account provider for credit card payments.

Further fees may be charged for authorisation of the transaction, although this fee is usually a few pence per transaction. 

Monthly Fees

Your business may need to pay monthly fees to the merchant account provider, predominately a card terminal rental fee. This fee may cost anything from around £10 per month to £40 per month. A monthly service charge is also required.

Further monthly fees could include a payment gateway to process online payments, costing your business between £10 to £30 per month. Additionally, to complete telephone payments, a virtual terminal is required, costing your business between £10 to £20 per month.

A monthly fee some business owners may overlook is the fee for PCI compliance. PCI compliance is a legal requirement that all businesses must abide by when accepting card transactions and safeguards the data of customers. Most merchant account providers will add this fee to your merchant account however, for a small charge.

One-Off Costs

To acquire a merchant account, you will need to join the merchant account service provider and pay a joining fee of up to £100. A similar amount will also be payable if you decide to terminate the contract earlier than agreed and anticipated.

What Are the Benefits of a Merchant Account?

The benefits of a merchant account include the added convenience provided to the customer, allowing the customer the choice to pay via debit card or credit card, as well as by cash.

Providing greater options for your customers will increase customer satisfaction and encourage a higher volume of sales for your business.

What Are the Disadvantages of a Merchant Account?

A merchant account can be vulnerable to fraud, just like other areas of technology. The process involving a merchant account incorporates numerous steps, with each step equally vulnerable to fraud.

Further disadvantages include the costs involved. You will need to pay an upfront one-off cost, if applicable, as well as monthly costs. These costs are the same regardless of the volume of purchases generated by your business. Therefore, if you do not sell as many products in one month, you will still need to pay the monthly costs.

Additional fees are charged for every transaction paid for via a debit card or credit card. This is typically a percentage of the amount paid for the purchase, usually between 1% to 5%.

Another disadvantage is the longer approval process to obtain a merchant account as well as the possibility of chargebacks. A chargeback occurs if the customer disputes the transaction and so a contingency should be available within the business to cover such instances.

Leading Merchant Account Providers for Business: The Verdict

With many merchant account providers available for your business, it is essential to gain the best deal and most suitable terms.

If you want a simple merchant account provider, choose SumUp. You will only pay fees when a transaction has been made, keeping your monthly costs low.

However, if you are looking for the lowest transaction fees, Worldpay could be your best choice, offering transaction fees of only 0.95% of the transaction value. Monthly costs are lower than some other providers, and you can grow your merchant account with the business. 

Furthermore, although a Worldpay contract could be required, you can choose to opt for a monthly or a pay-as-you-go account to suit your business needs.

Related Guides:

• Best Business Bank Accounts for Freelancers
• Best Cloud-Based Payroll Software Companies
• What is the Purpose of a Cash Flow Statement?
• Best Fuel Cards for Self-Employed & Sole Traders
• Best Merchant Accounts with No Credit Check