Once you have registered your limited company with Your Company Formations , it is time to sort out how you will take payments from your customers or business clients.

Accepting online payments has become a necessity for businesses of all sizes. Whether you are a seasoned online entrepreneur or just starting your online business journey, understanding the world of payment gateways is crucial.

Payment gateways bridge your online store or platform and the vast world of credit card processing. They securely capture and process customer payments, ensuring a smooth and seamless transaction for both you and your customers.

While setting up a merchant account and payment gateway is the norm, there's a more accessible option that's gaining popularity among small businesses: payment facilitators.

Payment facilitators, like PayPal and Square, handle the entire payment processing process for you, from setting up the account to managing transactions and handling chargebacks. This simplifies the process and allows you to focus on what you do best – running your business.

With rising inflation and the cost-of-living crisis straining small businesses, payment gateways are a more cost-effective option than traditional merchant accounts. Their flexible pricing models and lower fees can significantly impact a business's bottom line.

Taking payments online from debit and credit cards

Two main options for online card payments exist - self-setup and payment facilitators.

Self-setup involves establishing a merchant account and a payment gateway, which can provide greater control and potential cost savings for high-volume businesses. However, it requires technical expertise and additional responsibility for fraud and security.

Payment facilitators offer a hassle-free solution, handling the entire process from setup to transaction management. They often charge a flat fee per transaction, making them ideal for lower-volume businesses. However, they may involve higher fees for high-volume businesses and provide less control over account settings.

Merchant Accounts: Most major banks provide merchant accounts, but you're not limited to your business bank. Independent companies called ISOs (Independent Service Organizations) also offer merchant accounts.

Payment Gateways: Payment gateways ensure secure transactions by transferring customer funds into your merchant account and exchanging crucial information between banks, merchant accounts, and payment processors.

Payment gateways are often included with merchant accounts, but you can opt for a third-party provider for better features or rates. Popular options include PayPal's integrated gateway, Stripe's integrated gateway, and Square (payment gateway only).

Here are some examples of the most popular payment gateways:
  • Worldpay
  • PayPal
  • Stripe
  • Amazon Pay
  • Shopify Payments
  • Opayo
  • Cardstream

PCI compliance

Remember, PCI compliance is not a negotiable option when embarking into the world of online payments. It's a mandatory requirement that safeguards your business and your customers' valuable information.

Partnering with a hosting provider that adheres to the Payment Card Industry Data Security Standard (PCI DSS) is crucial. These providers have implemented robust security measures that meet the industry's stringent standards.

Entrusting your data to a PCI DSS-compliant hosting provider ensures that your customers' cardholder information is safe. Their expertise will protect your systems from data breaches and unauthorised access, shielding your business from the reputational damage and financial repercussions of a security incident.

Choosing an all-inclusive payment facilitator

Payment facilitators are becoming increasingly popular among small businesses due to their ease of use, affordability, and convenience.

Unlike traditional merchant accounts, payment facilitators offer an aggregated merchant account, combining your transactions with other merchants' transactions for processing. This allows them to provide lower processing fees and a more straightforward setup process with minimal underwriting requirements.

Key Benefits of Payment Facilitators:
  • Reduced costs: Payment facilitators typically charge a flat-rate processing fee, eliminating monthly or setup fees.
  • Easy setup: The setup process is often straightforward and may not require a credit check.
  • Streamlined payment processing: Payment facilitators handle the entire payment process, from authorisation to settlement.
  • Mobile payment options: Many payment facilitators offer mobile card readers for in-person payments.
Popular Payment Facilitators include:
  • Square
  • Stripe
  • PayPal
There are a few considerations for Businesses when choosing a payment facilitator, including:
  • Transaction volume: Payment facilitators may have limitations on transaction volume.
  • Industry restrictions: Some payment facilitators may not support specific industries.
  • Customer data handling: Review the payment facilitator's data security policies.

Payment facilitators can be a good option for businesses with poor credit, but they have stricter rules and regulations than traditional merchant accounts. Accounts can be suspended quickly for any suspicious activity, and it can be challenging to get them reinstated.

How to take direct debit payments online

Accepting direct debit payments allows your business to collect recurring payments from customers without requiring them to enter their payment information manually each time.

To set up direct debit payments, you must enrol in the Bacs Direct Debit scheme, undergo identity and financial checks, and decide on a payment submission method.

Once approved, you can submit payment files to Bacs, which will process the payments on your behalf.

There are two ways to submit these files to Bacs: You can either do it yourself or through a direct debit bureau.

  1. Submitting payment files yourself is the most cost-effective and complex option for direct debit payments. You will need a SUN number, a unique six-digit license to manage direct debit payments, and approved Bacstel-IP software, a secure channel for submitting payments to the Bacs system. A list of approved software is available on the Bacs website.
  2. Outsourcing direct debit processing to a direct debit bureau is more convenient but slightly more expensive than submitting payment files yourself. Bureaus handle the entire direct debit process on your behalf, using either your SUN number or their own. They are a good choice for businesses with low turnover, low direct debit volumes, or inexperienced payment systems. To find a bureau, consult Bacs' directory of approved providers.

Finding the right online payment system for you

Selecting the right payment platform to use is akin to choosing a trusty guide for your business's financial journey. With many options available, each with its unique features and benefits, making an informed decision can be tricky.

Let's look at four key criteria that will steer you towards choosing the perfect online payment solution for your business:

1. Security: Your Shield Against Cyber Threats

Ensure that your chosen payment gateway boasts robust security measures, such as SSL encryption, 128-bit encryption, a digital signature, and a dynamic IP address. These safeguards will act as a shield, protecting your business and your customers' sensitive financial information from prying eyes.

2. Customer Experience

Your customers' online payment experience is a crucial touchpoint that can make or break their satisfaction with your business. A seamless and straightforward payment process, free from unnecessary steps and complexities, fosters trust and encourages repeat purchases. Prioritise a user-friendly payment gateway that guides customers effortlessly from product selection to payment completion.

3. Fees: Aligning with Your Budget and Sales Volumes

Payment gateways typically charge transaction fees, which vary depending on the provider and your business's sales volume. Carefully analyse each gateway's fee structure to ensure it aligns with your budget and revenue expectations.

4. Customer Support

Technical glitches are inevitable and can significantly impact your business's bottom line. Opt for a payment gateway provider that offers reliable customer support, ideally around the clock, to ensure prompt assistance whenever you encounter technical difficulties.

Taking online payments summarised

Now that you're armed with an understanding of the key criteria for taking online payments let's summarise your steps:

  • Choose Your Payment Method: Decide whether to open a merchant account and set up a payment gateway or use a payment facilitator.
  • Direct Debit Payments: If accepting direct debit payments is a priority, join the UK direct debit scheme and determine your payment submission method.
  • Compare Merchant Account Fees: Look at your budget, compare costs, and find the best fit for your specific needs.

Remember, your choice of online payment platform is an investment in your business's success. Choose a system that prioritises data security and customer experience and is cost-effective.

With the right system, you can empower your customers with a seamless payment experience, which in turn will foster trust in your business, drive sales, and propel your business to new heights.

Further recommended reading:

Many entrepreneurs find themselves stymied by their credit history, unable to access the funding they need to realise their visions. Read our post, Small Business Financing Options That Bypass Traditional Banks , for helpful tips.

Do you need help to get your company recognised? For helpful guidance, read our post, " Make Your Business Standout through Branding. "

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