If like many small businesses, you don’t have two years trading history, it might seem that accepting credit card payments online is out of your reach. This is because, in order to process them yourself, you need a merchant bank account, which you can't get without trading history.
Fortunately, there is a solution. Some banks have started offering a service designed especially for startups, allowing them to trade online without going through the strict application process. In return for the extra risk involved, the banks hold on to the credit card payment for a longer period of time – up to 45 days. You should ask your bank if it offers this service.
Moreover, in recent years companies such as PayPal and Worldpay have emerged offering to process online credit card payments on behalf of small businesses. These companies are also used by businesses that simply want someone to deal with internet payment processing for them.
If you use a company like this to handle your credit card payments, the payment point on your website will be located on their secure server. The page will continue to look like a part of your website but there may be a button to indicate that the page is managed by the specialist company.
When set up, customers buying something on your site will actually send their credit card details directly to the payment processing company. This company will confirm the order with the customer and forward all the order details to you. The payment company will then complete the credit card transaction and forward the money - minus its commission - onto you.
There are pros and cons to this route. On the plus side, the application procedure is a lot less strict. You won’t have to produce audited accounts or a long trading history and you could be ready to trade on the internet in a couple of days.
The payment point is on the payment company’s server, which means you don’t spend time forwarding credit card details. It also means that they are responsible for ensuring the protection of these details, which is one less concern for you to deal with.
Most companies offer features such as multiple currency ordering to enable customers to pay in one of several currencies. Some also sell insurance against credit card fraud, for recovering losses when you have sent out merchandise paid for by a stolen credit card.
However, because these companies have less rigorous criteria for the businesses applying to use them, they protect themselves by holding onto the credit card payment for a certain period of time, usually around four weeks. There is also an annual fee plus a percentage charge on each transaction, which varies depending on the company and whether it is inclusive of the card acquirer’s charge. The set-up fees start at around £50, there may be an annual fee of around £100 and an all-inclusive fee per transaction can go from 4.5% to as much as 8%. Pricing packages vary greatly so it’s worth shopping around.
Even if you already have an internet merchant account, you can still use one of these companies to manage the payment page on your website and take credit card details. In this case, the details will be forwarded to your merchant account provider, and payment will be within four days. There would still be a fee for their service, although it would be lower, starting at around 2% but remember that you would have to add the card acquirer’s fee to this.
