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.
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
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.
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.
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.
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.
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.
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.
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.
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.
Here’s the contract they were about to sign. Let’s go through the
way that it was different to the quote.
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.
They quoted 0.65% for credit cards – but business credit card types
are listed as 1.8%.
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!
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.
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
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.
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.
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.
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.
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!