It’s easy to get lost in the payment processing industry maze. Processing a card payment involves at least 4 parties and can include many more. Understanding which entity does what and why they charge the fees they do can be an impossible task for any merchant, large or small.
We’ve collated the major players in the industry and explain their role in helping you process card payments. If you’re struggling to get a grasp on the payments industry, we’ve simplified the confusing language used by insiders to help you get a better deal.
Acquirers, also known as acquiring banks or merchant acquirers, provide your merchant account and maintain the necessary relationships (Card Scheme Memberships) with Visa, Mastercard, Amex, and the other card networks (also known as card schemes).
You can think of your merchant account as a virtual bank account you don’t have direct access to, but instead holds funds from the point they’re charged on your customer’s card to when they’re deposited into your bank account.
This is where risk and liability come into play, something you’ll know already if you’re in a high-risk industry and have been denied or charged extra for your merchant account. The acquiring bank underwrites your account, assuming the risk of fraud and chargebacks, essentially providing a line of credit to you.
It’s the acquiring bank that’s responsible for paying out when a cardholder asks their credit card provider to chargeback their purchase, not Visa or Amex as is commonly thought. This liability is why you’ll often need to fill out pages of forms more akin to a mortgage application than a simple way of taking payments, but this process is seeing continued improvements in simplicity.
Card scheme membership is an absolute requirement to gain the ability to process the respective card type, so every card transaction you put through will always flow through an acquirer, even if you haven’t heard of them. Attaining card scheme memberships is also an expensive, difficult and regulation-heavy process, so there’s relatively few of them. Here are the UK acquirers we know about:
|BOI (Evo Payments)|
|Lloyds Bank Cardnet|
|Secure Trading FS (Online only)|
Payment processors are responsible for actually moving money around the global card networks and between banks. This role was typically performed by the acquiring banks, but the last few years have seen them outsource this to specialist processing companies, the largest being First Data. The lines start to blur a little here as which parts of the system are handled by processors and even which companies function as processors depend on a number of factors. Ultimately, the processors are mostly invisible to merchants and shouldn’t be factored into a card processing provider decision.
Independent Sales Organisations
Whilst the acquiring banks were historically responsible for acquiring new merchants to accept cards, the last decade has seen a change in how they’ve approached this acquisition. ISOs (or Independent Sales Organisations, MSPs or Merchant Service Providers) are third-party businesses tasked with recruiting new merchants for their acquiring bank.
ISO’s don’t typically run any of their own payment processing technology and are focused solely on recruiting, onboarding and supporting new merchants. You might think these intermediaries would introduce additional costs to the mix, but in general, the opposite is true.
ISOs use their portfolio of many small to medium sized merchants to negotiate a very low rate from their acquiring bank partner(s), usually passing these savings on to their merchants. As ISOs don’t own the processing tech, they’re also able to resell multiple processing products and value-adds that the larger acquirers and processors are unable to do.
Many of the high street banks are now also ISOs, having sold or outsourced their merchant services divisions. In our experience they are the least competitive in the marketplace, relying on brand name recognition and existing relationships.
There’s no official list of all the accredited ISOs/MSPs in the UK, but here are the card-present focused ISOs we know about:
|Card Cutters||AIBMS, Evo Payments|
|Chip & PIN Solutions||Valitor|
|Card Saver||First Data, EVO Payments, AIBMS, Borgun|
|First Payment MS||First Data|
|Glorydale Merchant Services||Borgun|
|Intelligent Merchant Services||Elavon|
|Pago Payments||EVO Payments|
|Retail Merchant Services||Elavon, Global Payments|
|Universal Transaction Processing||Barclaycard|
|United Merchant Services||First Data|
|Wireless Terminal Solutions|
Payment facilitators (PayFacs) are a relatively new innovation in how payment services are provided to smaller merchants. In contrast to a traditional merchant account, where every merchant has their own account and corresponding Merchant Identification Number (MID), PayFacs will aggregate all of their merchants under one “master MID”.
Aggregating many smaller merchants under one account allows the PayFacs to significantly streamline the underwriting and compliance complexity for their customers. Signing up can be as quick as filling out a 10 minute online form.
As such, we’ll often recommend the PayFac providers listed below, as the best choice for smaller merchants taking less than £5,000 per month in card revenue.
However, there are restrictions with this new model. The card networks allowed the PayFac model to exist, in part, so merchants who traditionally had not accepted card payments would be incentivised to do so. But beyond a certain yearly card revenue, around £100,000, the card networks require merchants to have an individual MID and merchant account. For this reason, and the decreasing value of simplicity for large merchants, once you’re approaching higher turnover it’s best to move to a real merchant account from an ISO.
|PayPal||WorldPay, Global Payments|