Merchant Services

In the modern age, the ability to accept debit and credit card payments is absolutely vital to your business, and will be expected by your customers, especially in the post-pandemic era when cash payments have suffered a steep decline. In 2020, card payments accounted for £4 of every £5 that was spent in the UK.
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In order to take card payments of any type, whether in person, online or MOTO (Mail Order/ Telephone), you must have a merchant account.

What is a merchant account?

A merchant account is a specific bank account that acts as a holding pen for money before it is moved into your business account, and applying for one is something you must do before you can start taking card payments.

Merchant accounts are usually found from a Merchant Acquirer or an Independent Sales Organisation (ISO), which will assign your business with a unique ID reference known as a Merchant ID (MID). Each card payment channel that you have, for example telephone and online, or online and face to face, would give you a separate MID.

Once the transaction is authorised, it will be processed and funds would be paid into your merchant account. Ordinarily it will be within 3-7 days that the funds are delivered to your business bank account, minus transaction fees, although some providers do offer same day transfer of funds into your business account.

What is a merchant acquirer?

A merchant acquirer is charged with obtaining funds from your customer’s bank, before then paying it into the business account that’s attached to the business MID. This is done in conjunction with the card issuer, and the merchant acquirer will charge a percentage of the transaction value for providing this service (known as a Merchant Service Charge). The transaction rates will vary according to the card type (Visa, Mastercard, Amex etc) and whether they are credit, debit, or business cards for commercial use.

What are the costs involved with setting up a Merchant Account?

There are several potential outlays expected of you as the merchant when setting up your merchant account, some of which are necessary and incurred by your Merchant Service Provider, and others that are avoidable.

Merchant Service Charge

A Merchant Service Charge is a fee taken on every credit and debit card transaction that a business accepts. These rates can vary from one provider to the next, and the cheapest doesn’t always represent the best deal. It is worth noting that debit cards come with a lower merchant service charge than credit cards.

Set Up Fees

Set up fees are a fixed fee that some Merchant Service Suppliers will charge for things such as the cost of application and paperwork.

Transaction Fees

Each type of payment card comes with a per-transaction fee that is charged to the merchant for each payment. This is typically between 1% and 3% of the payment, and is often the reason why some merchants insist on a minimum transaction value for card payments.

Authorisation Fees

A common cost which will come on top of transaction fees, some merchant service providers will charge the authorisation fee for each transaction, which will typically be between 1p and 3p per authorised transaction.

Minimum Monthly Service Charge (MMSC)

Typically around £10 - £20, Minimum Monthly Service Charge will occur if your monthly transaction processing fees don’t hit the minimum requirement that you agreed for your account. It is a safety net for your merchant service provider to ensure your account is paying for the work required to maintain the relationship. If your transaction processing fees exceed the MMSC cost, then you pay those fees and nothing more. If your transaction fees are lower than the MMSC, then you will be required to make up the difference.

Card Machine Rental Fees

When you rent a card reader or terminal, there will often be a monthly fee for the benefit, and the price can depend on whether it is a static desktop terminal for your premises, or a mobile GPRS terminal. As with many contracts in various other industries, the longer the contract length the cheaper the monthly payment, but you may be faced with early termination fees should you wish to cancel the contract. Whilst the best card readers are PCI PTS compliant for in-person contactless or chip & pin payments, if you accept telephone payments and expect to use the terminal to process those payments then you will be liable should a chargeback happen.

Virtual Terminal Fees

If your business takes remotes payments, for example through online or MOTO orders, then you are likely to use a Virtual Terminal to process those payments. A Virtual Terminal is a web-based portal that would be accessed through your computer, tablet or smart phone, and card details would usually be entered into this, including card number, expiry date, security code, and often the cardholder address too. There are a series of costs associated with Virtual Terminals, with the main fees being a monthly cost and then a transaction fee. However, as orders processed remotely with the cardholder not present at the point of order, these are not classed as secure payments. This means that additional charges may arrive at your door in the form of a fraud-related chargeback, if the cardholder challenges the transaction and says they never made the order or validated the payment.

PCI-DSS Compliance Fees

The Payment Card Industry Data Security Standard (PCI-DSS) is a set of requirements that a business must adhere to in order to ensure card data used in any transaction is secure and that customers are protected against the misuse of their personal information. It doesn’t matter whether you process five transactions a month or five million, you are contractually obliged to maintain PCI-DSS Compliance. Most merchant service providers will help to support a business with this, for a monthly fee. It is important to know that you will be required to provide evidence of your PCI-DSS Compliance on an annual basis, otherwise you may be charged additional fees, such as higher transaction fees due to the risk posed by your business processing non-secure payments, chargebacks caused by cardholders challenging the validity of the payment, and the cost of stock stolen in the fraud.


These are an entirely avoidable cost, provided you have the necessary security measures in place to accept telephone or online payments where the cardholder is not present (known as a CNP transaction). Chargebacks happen when a cardholder disputes a transaction and attempts to regain the money they have been charged. Whilst there are a variety of reasons a cardholder might try to get a chargeback, it is quite often because their card data has been acquired by a third party and goods or services have been purchased without their knowledge or authorisation. If you use a Virtual Terminal and manually input card details, it is highly recommended that you ensure the goods are only delivered to the cardholder address, to reduce the risk of fraud-related chargebacks.

What can I do to gain PCI-DSS Compliance and avoid chargebacks?

You can avoid the risk of chargebacks by adopting a payment gateway that supports authentication of a CNP payment in whichever form you accept them. 3D Secure is a common authentication tool, and with the introduction of Strong Customer Authentication (SCA) which asks a customer to provide further confirmation in the form of something like a One Time Passcode or a Fingerprint when a payment appears out of the ordinary, for example it is unusually high or there have been several small orders in a short space of time. The SOTpay+ payment gateway from Gala Technology is a cloud-based solution which can enable businesses of all size authenticate their CNP transactions and therefore shift liability to the card issuer or the customer, and avoid chargebacks in the process. As a PCI-DSS Level 1 gateway, it can also greatly simplify your PCI-DSS requirements.

Whilst it might seem like taking card payments is filled with costs and charges of one kind or another, and switching acquirers or card processing options might appear like a daunting prospect, it doesn’t have to be, and you could save as much as 50% on your transaction fees by simply allowing Gala Technology to find the right solutions at the best rates.

Our vast network of industry partners means we are able to effectively compare the market on your behalf, and make switching providers as easy as possible. We will find all of the hidden charges, as well as compare what you’re paying on fees such as Virtual Terminals, Card Machines, Authorisation and Transaction fees, and find the merchant acquirer that not only suits your business, but saves you money in the process. Best of all, this payment review is completely free, so you have nothing to lose.

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