5
Acquirers (+ISOs) WorldPay First Data Bluebird

As a merchant, you have a choice between an acquirer – which might come through something called an ISO – and a payfac, for payments.

This chapter will set out what an acquirer is, how it works, and how to choose between acquirers. We’ll also briefly go through an ISO, which can help get a cheaper rate through an acquirer.

I. What is an acquirer to merchants?

Even if you choose to have a relationship with a payment facilitator, all money taken by card comes through an acquirer at some point. They exist to be members of card networks – that’s their sole purpose.

The acquirer holds something called your “merchant account” – this is different from your business bank account. It’s another account your money passes through on the way.

Acquirers will pass on the fees from the card network, and add a negotiable fee themselves. They also rent you a card reader at around £10-20 per month.

Characteristics of Acquirers for Merchants

  1. It takes about a week to onboard.
  2. They are likely to bill via interchange + + or blended rates. This means they’re better for merchants with a high average transaction value (more than about £10) or with a high turnover. (It’s possible to negotiate a fixed rate with an acquirer – but it’s unusual.)
  3. There’s a contract. These typically last a couple of years.
  4. They will rent you the card machines. These are made by a manufacturer – and rented to you by the acquirer.
  5. Your fees are deducted in gross terms. So that’s a monthly bill, which takes the form of a paper statement.
  6. They will compete on rates with each other. There’s a knack to running the tendering process well.
Card Network (VISA, Mastercard)Customer BankAcquirerYour CustomerPayment FacilitatorYour Business Bank AccountYouThe Interchange

NOT SURE?

If you still need to decide between an acquirer and a payfac, go to chapter 1!

II. What acquirers have i heard of?

Acquirers you may have heard of

There’s loads of acquirers – we list them all in the final chapter. But the biggest ones, you’ll have heard of – worldpay, First Data, barclaycard, and many more.

Barclaycard, Wirecard, Valitor, Borgun, First Data, Worldpay, AIB

Some companies are ISOs – PaymentSense and Bluebird fall into this category. We’ll explain more about what ISOs do in a minute. But for now, they bring customers to acquirers.

ISOs you may have heard of

Bluebird, PaymentSense

III. How do I choose an acquirer

1
GET YOUR HANDS DIRTY

Should I just use my business bank provider as an acquirer?

Your business bank might have a payments division – e.g. Lloyds versus Lloyds Cardnet, or Barclays versus barclaycard.

There is no advantage or disadvantage to using your business bank. But, if they don’t think you’re likely to go elsewhere, they’re likely to offer you a bad rate.

If there’s one thing we can drill home in how to choose, it’s that you need to get your hands dirty if you want a deal. No ifs, no buts.

2.
INCLUDE ISOs IN THE BIDDING PROCESS

What’s an ISO – and how does it factor into my choice?

ISO stands for “Independent Sales Organisation”.

The job of an ISO is to get customers for banks – often by providing cheap deals on behalf of the bank or negotiating better deals through the bank on behalf of a bloc of customers. This means it’s frequently cheaper to go through an ISO than it is to go directly through a bank.

You might well be buying through an ISO already. It’s easy to get mixed up, because ISOs can manage all your communication with a bank. In some cases, you might have very little contact with your merchant acquiring bank – and not know which is which.

PaymentSense and Bluebird are examples af ISOs which you might have heard of.

So, if you decide to get your payments processed by Bluebird, they’d cite you the rate they’ve negotiated with their acquiring bank, which is AIB Merchant Services.

3.
NEGOTIATE!

How do I do the bidding bit?

The first of two big mistakes we see people make at StoreKit is that they don’t negotiate. They ask different acquirers or ISOs for different quotes, and then they go for the cheapest quote without asking the companies to outbid each other.

You need to actively play the companies off against each other for the best deal.

  1. Call a few different acquirers and ISOs. Ask them to cite their rates to you. And insist for the full breakdown rather than just the headline stuff.
  2. Call the more expensive one.
  3. Show them the different quotes.
  4. Tell them that the first one was cheaper.
  5. Ask if they can be cheaper for you. Say you prefer them, and that you’d really like to just go with them – but you can’t justify it if they’re not cheapest. If you feel confident with what a good rate looks like, suggest a rate which would make it worth your while.
  6. Put down the phone. Wait for them to send their quote to you. Then, call the other acquirer, and repeat the process.
4.
UNDERSTAND THE MATHS.

What’s the other mistake?

The other mistake is that you are very likely to get the maths wrong. And not because you can’t do maths! It’s because unfortunately, acquirers and ISOs are often intentionally misleading – especially when they’re talking to smaller merchants.

Showing your best quote to the second cheapest is a good idea not just because it will allow them to outbid the other – but because if they think the first bidder is misleading you, they’ll be able to say so.

At StoreKit we see the CEOs of small chains get it wrong all the time. The reason they get it wrong is that most of the quotes you’ll get will be two lines in an email. It will include or exclude different things. And then they don’t ask for a cheaper rate.

A real quote looks like a spreadsheet and a couple of hours of analysis. Most banks won’t go that transparent, even if you push them to.

Want to see a dishonest quote?

What the quote looked like

Debit charge – 0.33%

Credit card – 0.65%

Authorised fee -3p

Card terminal portable -£18 per month

Compliance charge PCI - £35 PER YEAR plus £4.80 management fee

Here’s some quoted rates we were forwarded by a StoreKit customer. This was just written into the body of an email from an ISO. We’ve excluded names and company details – but otherwise this is verbatim.

We thought it was fishy because:

1) 0.33% – the most important figure – is VERY cheap. At the minute, VISA’s rate is 0.3% on debit cards like that. So the ISO is reselling here at cost, which never happens in payments.

2) This is a few lines in an email! The contract will look significantly more complex than this, so there’s plenty of room to stuff in hidden charges.

WHAT THE CONTRACT LOOKED LIKE

UK DEBIT CARDSUK VISA DeltaUK VISA ElectronUK MaestroUK Mastercard Debit0.33%0.33%0.33%0.33%£0.05£0.05£0.05£0.05INTERNATIONAL DEBITVISA International DebitMastercard Indetnational DebitMaestro International Debit1.8%1.8%1.8%CHARGESElectronic AuthorisationNon secure feesUnapproved transactionsChargebacksData Security FeeSecurity ServicePCI Compliance£0.030.85%1.8%£9.00£4.80£15.00£25.00AMEXCONSUMER CREDIT CARDSVISA (Credit Classic/Gold/Platinum)Mastercard Credit (Classic/Gold/Platinum)VISA Premium CreditMastercard Premium Credit0.65%0.65%0.65%0.65%COMMERCIAL CREDIT CARDSJCB CreditVISA CommercialMastercard Commercial1.8%1.8%1.8%VISA BUSINESS DEBIT0.58%£0.05

Here’s the contract they were about to sign. Let’s go through the way that it was different to the quote.

1) they’ve added £0.05 to debit transactions.


You see that £0.03 electronic authorisation fee in the bottom left? That’s the 3p originally referred to in the quote, and that applies to every transaction.

The further 5p which has appeared on the debit card purchases brings the cost of debit cards up to £0.08 + 0.33% – which moves this quote from being the best in the market, to bottom-to-mid market.

This isn’t selectively quoting, it’s outright lying about the cost of debit cards. They clearly should have included this in the quoted debit card prices.

2) they were selectively quoting credit card costs.


They quoted 0.65% for credit cards – but business credit card types are listed as 1.8%.

3) they didn’t mention international card costs at all in the quote.


We’d expect these to be higher, but we want to make sure we’re quoted them ahead of time. They’re listed in the contract at 1.8%. That’s not a great rate!

So how do I avoid getting punked?

The first thing you want to make sure you do is to check the interchange rates, which are published here for VISA and here for Mastercard. This will tell you exactly what the acquirer’s costs are. If they’re telling you their rates very close to or below cost, then they’re probably citing their rates selectively or excluding bits.

The second thing is to get the full quote! We’ve included a downloadable template which you can ask for your quotes to be formatted in. The key reason people get confused is that quotes include and exclude different things. We can’t stop people lying, but we can ask specific questions which forces them to lie rather than simply omit details.

The third and final thing is, always read the contract in full before signing. This decision is likely to cost you £1000s – so treat it like that!

Part of the thing that was tough about this case is that they didn’t really see the full price until they had decided to go ahead with this provider – that’s the point at which they saw the contract. So they were using this quote to compare to other quotes – which might have been dishonest themselves! That’s the other reason we’ve built the template – it makes it super easy to compare between the different numbers.

Good luck! And remember, if you’re keen to check your working, StoreKit is happy to look over a quote you’ve been sent and confirm that it’s the cheapest you’re likely to be able to get.

IV. Acquirer epos integrations

Want to get your EPOS automatically linked to your payments?

Most companies big enough to use an acquirer rather than a payfac will need a substantial EPOS system and will want to make sure their payments are integrated – meaning when someone pays by card, their system updates.

This is a little different to a payfac, with whom everything’s done already, and you just need to check whether the integration is available. Here, three parties are involved in an integration, and you need to contact all three.

They are:

The EPOS Software Provider

Most EPOS have a helpdesk or can be contacted by phone – and they’re the best port of call to ask how an integration is possible with your payments provider. They won’t be doing the main part of this, but they can always point you in the right direction.

The Acquirer

They’re going to do one thing, which is to “certify” the integration (give the thumbs up to the lawyers). They’re not a technology company, so they’re not involved in the building of an integration themselves.

A Third Party to build a “Payment Application”

This is the main part of the integration, and it’s a technical term. There are three kinds of companies which generally build payment application. They are an ISO, the card reader manufacturer, or a software company.

Route 1: your ISO builds a payment application

We work with two ISOs who have built payment applications – Bluebird, and PaymentSense.

Not many ISOs do this, so it’s pretty cool! If you choose this you shouldn’t get any extra fees, but it may need specific card readers which can affect price. If you have gone via an ISO in the past, such as PaymentSense, call them and check. But remember to call your EPOS company too before you agree anything!

Route 2: your card reader manufactuer builds an application

If you have a traditional card reader – the big silver kind – that’s probably made by Ingenico and Verifone, Spire, PAX or Miura. They’re manufacturers, but they also make the native software involved in the sending of signals to and fro. This software is sometimes what integrates with an EPOS. If you rent a terminal which has an integration included, it will be a tad more expensive.

Route 3: a payment software company builds an application

An example of a third party building an integration would be a company like Payment Express. These guys will charge for the integration in a discrete bill, and so if you’ve been asking, “who are Payment Express, and what are they billing me for?” Now you know.

Acquirer integrations

PAYMENT APPLICATIONby third partyISOCard Machine ManufacturerSoftware CompanyCERTIFICATIONby acquirerINTERGRATIONby EPOS company

HOT TIP

Occasionally, to clinch a sale, an ISO will insinuate an integration is available where it is not.

Your EPOS provider is your best bet to check!

IV. WHAT’S NEXT?

1
Understand Card Fees In 5 Minutes
Learn what you’re looking at when you read your payments bills.
3
Other ways of taking payments
Accept cards over the phone and by invoice.
5
Acquirers (+ISOs) WorldPay First Data Bluebird
When would an acquirer be better?
6
Card Networks, The Interchange and all that
The academic view: how do payment actually work?
7
When Can I Negotiate?
How to get on better rates than your mates
8
E-Commerce 101
Ready for the next frontier?
Find out about StoreKit