smallbusiness.co.uk: Helping your business think big

Nowadays we all take card payments for granted, both in the high street and online. For most businesses, being able to accept card payments is a necessity. Unfortunately, the requirements are complicated and choosing a provider can be difficult.

The following checklist provided by SmallBusiness.co.uk and Phil Rothwell, managing director of e-commerce software supplier Actinic, covers the main things to consider when setting up card payments.

Will our bank allow you to process card payments?
With hundreds of millions of pounds lost every year to card fraud, banks are understandably careful about who they allow to process card payments. Offering the facility to the wrong person puts them at all kinds of risk.

The service you use, how much you pay and the time it takes to set up will depend on the age of your company and its track record. The better established and more profitable your business, the quicker and cheaper the service will be.

Have you got the right type of account?
To take card payments you will need a merchant account with an acquiring bank that will be responsible for moving money from your customers’ accounts and yours. Most companies use one of the high street banks. If you can’t get “merchant status”, a bureau service is a viable alternative; but to mitigate their higher risk, they charge more.

What level of security do you want?
With the introduction of the Payment Card Industry Data Security Standard (PCI DSS), it became illegal to store credit card details, either written or electronically – unless you have a level of physical and electronic security that is beyond the capacity of most small businesses. So you need a system that automates the handling of card details and the transfer of funds.

For processing payments in store, your bank will rent you a ‘PDQ’ machine. This will provide 'Chip and PIN' for greater security.

To process online you will need a payment service provider (PSP). They will not only process transactions for you, but you can take security one level further through a 3-D Secure scheme – the main schemes are “Mastercard Secure” and “Verified by Visa”. Merchant and customer must both register to use the scheme, after which the customer must enter a password to confirm their online orders. This provides added security for the merchant and the bank. 


Does the payment system integrate with your point-of-sale system?
If you have an electronic point-of-sale (EPOS) system, you may want an integrated 'Chip and PIN' terminal to avoid having to re-key the cost of each sale. It speeds up transactions, reduces errors and limits opportunities for fraud. To ensure compatibility with both your EPOS system and your bank, use the service recommended by your EPOS supplier.

Does it integrate with your online shopping cart?
To process payments online, choose a PSP that is already integrated with your online shopping cart. They work by transferring customers to the PSP’s secure server for the financial transaction, then back to your site for the order confirmation.

Have you considered the PayPal or Google Checkout options?
The PayPal email payment system, made popular by eBay, is now becoming more widely used. It can support credit card payments but also enables the customer to pay using their PayPal account. Some sites have reported up to a 20 per cent increase in orders by adding PayPal as an option. Google Checkout is a similar offering, with a growing number of users.

What will it cost?
Charges are usually a combination of a monthly service charge and a percentage fee on each transaction. There may also be a set up fee. Charging structures vary and it can be difficult to compare them. As a rule of thumb:

- For low order volumes or low-value transactions, choose to pay a higher percentage per transaction
- For higher order volumes, choose to pay a higher monthly fee and lower cost per transaction.

To compare online payment processors, see www.electronic-payments.co.uk.

What fraudulent activities are you most vulnerable to?
Finally, consider your vulnerability to fraud. In-store, EPOS can really help here. Online, if you are selling high-value goods or large order volumes, consider using a reputable third-party security service. Otherwise, it is usually sufficient to verify suspect orders manually, by checking the shipping address against that of the cardholder and/or by phoning the buyer.