Many SMEs leverage the power of the internet to broaden their horizons and trade with companies overseas. It’s also allowed micro-businesses and freelancers to compete with much larger suppliers, both in the UK and elsewhere, without the costly fees associated with a traditional merchant account.
If your business is thinking of extending its reach, you should figure out a way to take electronic payments from credit and debit cards, without eating into profits or risking your customers’ personal data, writes Safe Collections.
Where Are Your Customers?
Electronic payments are a huge topic, with dozens of providers jostling for your custom. You’ll need to decide whether you’ll be taking payments face to face, which is called Cardholder Present, or remotely: Cardholder Not Present.
Cardholder Present Payments
If you’re going to go down this route, look for a card reader product that offers Chip and PIN, rather than just a signature. Without Chip & PIN, fraud protection is negligible.
PayPal is arguably the best known brand in online payments, and its Here card reader makes transactions easy. It charges a one-off fee for its PayPal Here card reader of £99, and then a per-transaction fee of between 1.9% +20p and 3.4% +20p, depending on whether you use Chip & PIN.
It’s accessible, recognisable and trusted by many, but there will always be a few people who are reluctant to use PayPal because of its historical association with Ebay scams.
Similar to PayPal Here, your business purchases an iZettle card reader and then pays a percentage of each transaction to the provider. You’ll need a fully charged, reasonably modern smartphone to use some of its hardware.
iZettle offers a free card reader, branded Lite. If you want wireless operation, contactless payments or Apple Pay support, you’ll need the Pro hardware at £59, or the Contactless reader.
Cardholder Not Present
If you deal with customers remotely, you’ll need a way to take payments without them being able to tap in a PIN.
Paym is a new initiative from the UK’s leading banks, designed to make bank transfers simpler. Each party connects a mobile phone number to their account and can send money using an app on their phone.
Barclays’ PingIt app is business-friendly, and Paym-compatible. However, these solutions are only viable if your customers are in the UK.
Payatrader offers a card reader, but it also lets you take card payments online. You do this via a virtual terminal, or by asking your customer to call the Payatrader contact centre or website. Payatrader also lets you add a payment link to your invoices, and you can upgrade to a Chip & PIN reader if you need that versatility.
Some customers could be wary of paying a third party, but the fees here are attractive: from 2.3% to 2.95%, depending on volume and card type, with a minimum fee of 30p. There is a 2% charge for refunds, and an optional fixed fee option for high volume accounts.
GoCardless is a good solution for Direct Debit instructions, such as rolling subscriptions or regularly monthly work. Its fees are low: 1%, capped at £2 per transaction.
This method is only useful for clients in the UK, but it can completely automate recurring payments – a real productivity booster. It also provides multi-user access, so your bookkeeper or virtual assistant can check off payments as they come in.
We’ve put these two services together, as they offer a similar focus on simple invoice payments. They also have some flexibility in terms of payments that come in over the phone.
Stripe charges 1.4% +20p for European cards, and 2.9% +20p for US cards. The charge for American Express cards is the same, and Stripe integrates nicely with some bookkeeping tools like FreeAgent. You can also take phone payments, but Stripe is quick to point out that this should not be your primary method of payment acceptance.
IntuitPay is QuickBooks’ version of the same solution, but it can be used by non-QuickBooks customers. SMEs can take payments over the phone by filling in an online form with the cardholder’s details, even without a QuickBooks login.
Making the Decision
If all else fails, international bank transfer is a reliable and simple solution for UK and international payments, but accepting credit and debit cards can be a good selling point that can increase conversions and boost loyalty.
Don’t offer your customers too many payment methods. Choose one or two, based on four key factors:
- The likely location of your customer: remote, face to face, or over the phone. This determines the service features you will need.
- The customer’s location: UK, Europe or the rest of the world. Some providers charge more for payments outside your own country, while some don’t offer this at all.
- The need for speed: Contactless is a great way to increase checkout times in a busy retail store, but will be overkill for a company taking occasional payments
- AmEx fees: American Express is sometimes more expensive than other cards
Your chosen payment method should streamline payments, rather than making the process more complex. Get it right, and you’ll slash the chances that your invoices will be paid late, or worst still not at all.