How to equip your small business to accept plastic
By Benjamin Salisbury
Consumers can whip out their cards (or phones) at almost any major retailer, but small businesses don't always have the capability to accept plastic. If your small business takes cash or cheque only, you may be missing out on potential business.
A December 2015 study by mobile network and Internet service provider EE showed about 25% of shoppers had abandoned transactions due to lack of card or contactless payment facilities, and four in five shoppers expected to be able to pay by card anywhere they shop. According to Yahoo! Finance, 71% of British consumers carry less than £20 at any time, and half say they wouldn't walk more than 100 metres to find a cash machine.
Even not accepting contactless payments can be a deterrent. Barclaycard research shows contactless transaction values reached £1 billion in October 2015. According to the research, 48% of consumers prefer contactless payments, yet only 34% of merchants can accept contactless payments. With the new, higher tap-and-go transaction limit of £30, the number of consumers looking to pay via contactless will likely only go up.
Not only will accepting cards make your customers happy, but you'll benefit from payment at the time of sale. With less cash on the premises, your business is more secure and you won't have to make as many trips to the bank to deposit receipts.
How to start accepting cards
"Although some small businesses are aware of the benefits of accepting cards, many are reluctant to take this step as they perceive the process as costly and complicated," says Jeff Woods, managing director of FSB's mobile card payments.
The first thing you'll need to do is get a merchant service agreement with a company that processes credit card payments, known as an acquirer. There are various options in the UK that can be tailored to how a retailer operates. You will get a terminal that connects to the acquirer to process a card transaction.
When applying to an acquirer, you must sign a service agreement that sets out the terms and conditions of the contract. This will include details on pricing, how you will accept cards and which card types you will accept.
Choosing a terminal
Most retailers need a terminal that is serviced for them. The acquirer will generally provide one as part of a package.
"The merchant services contract in particular is seen as something of a ‘dark art'," Woods says. "Businesses aren't aware they don't have to source their terminals from their merchant services provider, which can commit them to lengthy and restrictive contracts, but can use a specialist to provide this service instead."
You can source your own terminal by asking your acquirer for an approved list of suppliers of terminals that are compatible with your system. You will likely rent the terminal on a monthly basis. Contactless terminals work similarly to regular terminals, in regard to cost and process.
How card payments will work
There are two ways you can accept a card transaction: face-to-face, known as a card-present transaction, or remotely (online or over the telephone), known as a card-not-present transaction.
The terminal gives an authorisation after a transaction is processed, which checks that the card is not reported as lost or stolen and that the account has sufficient funds. The acquirer receives the accepted card payment, usually within four days. The UK Cards Association offers an excellent visual overview of the complex steps that go on behind the scenes when a customer makes a card payment.
A contactless-enabled terminal has an antenna to allow it to securely transmit the transaction information to and from the contactless reader. To pay with a contactless device, the customer moves their contactless card or device toward the terminal. It has to be within 10cm of the terminal to work. The terminal will then confirm that the payment has been accepted.
If you want to take payments online, you need a secure facility or payments page to allow customers to input their card details.
Cost to you
You must negotiate the cost of the merchant service charge (MSC) with the acquirer. Costs vary depending on how you use the acquirer's facilities, which will depend on the nature of your business.
Some common costs include initial set up fees and a minimum monthly service. However, you should only pay the service charge if you don't make enough transactions to meet the minimum threshold. If you do, you'll simply pay the cost of the transactions without paying extra for a service charge.
"I'd suggest that before you invest in the requisite payments processing hardware, the first step [you] should take is to seek impartial expert advice," says Woods. "For example, FSB members are entitled to a free payments review from 123Send to ensure they get the most cost-effective card payments option for their requirements."See related: Small businesses especially vulnerable to data breaches, Credit cards no longer just for big-ticket items
Published: 27 January 2016
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