Our lives are increasingly maintained through our electronic devices. Whether from a PC or a smartphone, our obsession with performing routine daily tasks remotely is now becoming a way of life. Online commerce, be it your simple grocery shop or keeping up with current fashion, is no longer an activity for early adopters. Again – it’s now a way of life for many, and takes away a need to head down to the High St.
Along with this trend emerges even greater growth in online commerce, including mobile commerce and the new, and highly touted, social commerce. There is one common theme amongst those entrepreneurs entering these markets; “how can we accept payments?”
Sure, PayPal and other methods are out there and do provide an alternative to the traditional sources, but let’s face it; the market opportunity is much larger than the customer base of PayPal. New entrants want to accept payment from their customers using the same methods Harrods accept!
So what’s the problem? The problem is clear; despite the desire of our governments to stimulate growth in small business, our big banks missed the memo. They, in the UK at least, will in the first instance provide a range of glossy material telling you why their service is better than the other banks.
Take HSBC as an example. Fantastic brochure! But if you are a small business they don’t really want to support you. Instead they will put you in contact with Sage Pay and you will need to negotiate (accept!) the rates they offer, rather than incorporate a merchant solution into your overall needs. In addition to this, if you are a start-up with limited trading history, the chances of being accepted have rapidly decreased while your costs have just increased. If we focus on the commercial side of things, there are exorbitant establishment costs, monthly account keeping fees, a myriad of transactional fees, and a general starting point on merchant fees of 3% to 5%. Oh how our big banks support small business!
Not to worry, a small start-up business should go to a small start-up bank right? Wrong! Metro bank, the new dog friendly bank in London can’t even give you indicative rates unless you first set up an account with them. Only at that point will they follow suite with HSBC and go on to introduce you to a third party. In Metro’s case it is World Pay (AKA Streamline). At that point you get a three page letter requiring you to basically pass a business test. Then, and only if you meet their unknown criteria, will they start to discuss rates with you.
The reality is that small online businesses are what will stimulate growth in our ailing economies, and are the places where we are going to find our next online bargains. Surely there must be a solution for these businesses.
There are solutions, just not in the usual places or from the usual players. As they say, you need to think outside of the box on this one. Most of these businesses don’t need a traditional merchant facility like you find down at your corner store or on the counter at Harrods. They simply need a secure and PCI DSS approved solution which allows them to accept credit and debit card payments via their websites or mobile applications. The answer – find a IPSP (Internet Payment Service Provider).
A PSP should provide you with a solution for accepting online credit and debit card transactions. They should also provide the latest security and fraud prevention services to metro blog online ensure the transactions are safe.
Ideally they will also provide options for you and your customers and other technical solutions that give you a variety of ways to accept payments, as not all small businesses are the same. This might include payments over the phone or in person.
Obviously the back end is very important and all business will require reporting and administration facilitates as well as technical support.
There is the initial set-up fee, which varies from provider to provider and depends really on how much you’re willing to pay for a safe and reliable service. Most businesses complain of the hidden costs involved in the PSP.
Then there are the transaction charges. First there is the percentage rate. The processor will deduct anywhere from 1-5% (this goes to the card issuer…). Some PSP’s will add their own percentage on top of this fee.
If you have a poor credit history, you’re a small business or a start-up you are looking at the higher end of the scale, that’s if you get accepted at all. In that case there are third party merchant services for business that don’t qualify for their own merchant account. These service providers bear the risk and can charge up to 15%.
Second you have the transaction fee which fluctuates depending on the type of credit card you’re processing. Debit cards usually have a flat rate.