Merchant services and ecommerce: what’s the link?

Merchant Advice Service's Libby Jones explains the importance of choosing the right merchant services when growing an ecommerce business.

No matter your e-commerce offering, your online business requires a merchant account to accept debit and credit card payments. It’s important that your merchant provider is convenient for both your customers and your business needs. With so many providers with various options available, it can be hard to decide which merchant service to choose.

The basics

When taking payments online you need both a merchant account and a payment gateway. A payment gateway encrypts your customers’ payment details for security. Once approved, the money is transferred into your merchant account for processing.

A merchant account serves as the connection between your money and your bank account. Once a sale has taken place, money is transferred into your merchant account and is then transferred to your bank account. Many payment gateway companies provide recommend and ‘sell’ merchant accounts; alternatively merchant accounts can be opened with high-street banks that provide such services.

But before deliberating over the above, you’ll need to establish a business bank account if you don’t have one already. You won’t get too far without one!

Compatibility and usability

When choosing your merchant provider you have to make sure that it is compatible with your shopping cart software, be it WooCommerce, Magento, Shopify or any of the others available on the market. This compatibility to enable a transaction needs to be a seamless as possible to create a pleasant experience for the customer. It’s definitely worth testing the system across mobile and tablet devices too, for the ultimate customer experience.

Your options

Sage Pay and Worldpay are trusted payment gateway providers. But they come at high price points. With an offering of 1,000 transactions per quarter for £25 a month, with any extra transactions costing an extra 10p each, Sage Pay may not be the best option for a small business processing small transaction volumes.

Stripe UK, GoCardless and Charity Clear are other payment gateway contenders, with varying prices and contract stipulations. As an ever-growing business, Checkout by Amazon was an inevitable new contender. Checkout by Amazon allows companies to integrate Amazon checkout into their site, which allows customers to purchase items through their Amazon account too, making it much easier for end users.

See also: 11 of the best payment processors for UK small businesses

As well as having a mainstay gateway provider, it may be worth including PayPal to your offering to widen your customer base. PayPal is seen as a secure payment option and is favoured by many online customers.  It’s also great for when a customer doesn’t have their card details to hand but has auto access to their PayPal login details; preventing them from abandoning their shopping cart. Be aware; PayPal can be expensive and charges higher transaction fee than most other merchant account providers.

After securing you’re your payment gateway it’s definitely in your best interests to shop around for your merchant provider. Merchant providers have access to the best deals on the market and can tailor your plan to your specific needs.

Merchant accounts and the fees involved

Fees are a deal breaker when it comes to choosing your merchant provider. All providers will charge a fee for every transaction you make. Depending on the average sale price of each transaction taken on your site, you should decide between paying:

  • A flat fee
  • A fee based on a percentage of the transaction value
  • A flat fee plus a percentage of the transaction value

As well as transaction costs, you should consider the volume of sales that you take. If you know you’ll be taking a high volume of sales you should find out whether your potential provider offers discounts for high volume sales, which usually comes in the form of lower fixed monthly costs.

If you’re predicting a low volume of sales you’d benefit from a service plan where you pay a high fee per transaction, which will likely be offset by a low fixed monthly fee. A merchant broker will be able to advise you on the best route to take.

Security and technical support

When choosing a merchant account, a key feature is security and support. If things go wrong, what response time will your provider offer? Will they be contactable 24/7 via telephone? This may not be as important as the price in the short term, but if you experience teething problems with your provider you may be wishing you negotiated better technical support.

Look out for SSL certificates and CVV2 verifications. The more secure your site, the more secure your customers’ details. As a large business can you afford to put a huge amount of customer data at risk?

Think ahead

There’s nothing worse than being stuck in a lengthy contract that’s proving unproductive for your company. So don’t settle for the cheapest gateway provider if you know you’ll be accepting large volumes of transactions in the near future. Think long-term for long-term profits.

Conducting a thorough examination of the payment terms, features, charges and contract commitments of your merchant provider will ensure you choose the right service for your ecommerce business.

Libby James is the co-founder of Merchant Advice Service.

Praseeda Nair

Praseeda Nair

Praseeda was Editor for from 2016 to 2018.