Payment processing fees - too high?
Discussion
We use Worldpay and they charge us 1.5% on all transactions plus a small management fee. We use their portal to send payment links to our customers which works well enough but the numbers (in £) are adding up to quite a lot and we are wondering if there are better deals/options out there. We don't do any payments through our website or any e-commerce.
Can anyone shed any light on whether this is competitive or there are better options?
Can anyone shed any light on whether this is competitive or there are better options?
Card fees are all about risk, if you sell cars, sofas on a 6 week future delivery then risk of you going bust in interim and card company having to stump up the difference is high. If you are a restaurant, the product has been delivered and eaten so their is almost no risk (except fraud) to the bank.
Hence it's difficult to say whether that is high or low. I've seen as low as 0.4% for a T-Shirt seller at festivals - zero risk, low chance of fraud too.
Hence it's difficult to say whether that is high or low. I've seen as low as 0.4% for a T-Shirt seller at festivals - zero risk, low chance of fraud too.
Card fees are driven by 4 factors: Interchange Rate (the fee acquirer (e.g. Worldpay) has to pay to the issuer of the card on every transaction), the Scheme fee (the fee acquirer has to pay to Visa / MasterCard), the processing cost (the cost of running acquirer's processing system) and then the margin they want to make to contribute to overhead, the risk on the transaction / merchant and profit.
Interchange is 0.30% for credit cards and 0.20% for debit cards (this is regulated by the EU, interchange is higher for corporate cards but generally the acquirer will charge you a different price for transactions from these cards). Scheme fees are a lot lower and processing costs are also pretty small on a transactional level. Rule of thumb is that the total costs for a credit card is 0.35/0.40% and 0.25/0.3% for debit card
The amount of margin added on to cover overheads, risk and profit is driven by two main variables for SMEs (those businesses that do less than £1m card turnover)
i) value of transactions processed (e.g. those who process close to £1m of cards will pay a lower % than those who process £10k of cards) and
ii) negotiation of the merchant. Most acquirers have a form of rate card with some flexibility built in and those merchants who push hard can pay significantly less than a merchant who accepts the first price. So for a business doing say £150k of card turnover you will see rates under 1% all the way up to rates over 2.5%.
The risk profile does influence this but for SMEs, this influence is limited. The main difference will be around the security wanted - so a restaurant taking £150k in cards could well have a similar rate as a furniture shop doing the same volume BUT the furniture shop will have to post some form of security to offset the risk.
Hope that helps. In terms of whether your price is competitive, hard to tell without knowing volume. If i were you contact Worldpay and ask for a rate review and suggest you are tempted to leave if they don't give something. Or get a competitive quote from one or two others (although this will mean having to chat to their sales people...) and then use this to negotiate with Worldpay
Hope that helps
Interchange is 0.30% for credit cards and 0.20% for debit cards (this is regulated by the EU, interchange is higher for corporate cards but generally the acquirer will charge you a different price for transactions from these cards). Scheme fees are a lot lower and processing costs are also pretty small on a transactional level. Rule of thumb is that the total costs for a credit card is 0.35/0.40% and 0.25/0.3% for debit card
The amount of margin added on to cover overheads, risk and profit is driven by two main variables for SMEs (those businesses that do less than £1m card turnover)
i) value of transactions processed (e.g. those who process close to £1m of cards will pay a lower % than those who process £10k of cards) and
ii) negotiation of the merchant. Most acquirers have a form of rate card with some flexibility built in and those merchants who push hard can pay significantly less than a merchant who accepts the first price. So for a business doing say £150k of card turnover you will see rates under 1% all the way up to rates over 2.5%.
The risk profile does influence this but for SMEs, this influence is limited. The main difference will be around the security wanted - so a restaurant taking £150k in cards could well have a similar rate as a furniture shop doing the same volume BUT the furniture shop will have to post some form of security to offset the risk.
Hope that helps. In terms of whether your price is competitive, hard to tell without knowing volume. If i were you contact Worldpay and ask for a rate review and suggest you are tempted to leave if they don't give something. Or get a competitive quote from one or two others (although this will mean having to chat to their sales people...) and then use this to negotiate with Worldpay
Hope that helps
Mashwort said:
Card fees are driven by 4 factors: Interchange Rate (the fee acquirer (e.g. Worldpay) has to pay to the issuer of the card on every transaction), the Scheme fee (the fee acquirer has to pay to Visa / MasterCard), the processing cost (the cost of running acquirer's processing system) and then the margin they want to make to contribute to overhead, the risk on the transaction / merchant and profit.
Interchange is 0.30% for credit cards and 0.20% for debit cards (this is regulated by the EU, interchange is higher for corporate cards but generally the acquirer will charge you a different price for transactions from these cards). Scheme fees are a lot lower and processing costs are also pretty small on a transactional level. Rule of thumb is that the total costs for a credit card is 0.35/0.40% and 0.25/0.3% for debit card
The amount of margin added on to cover overheads, risk and profit is driven by two main variables for SMEs (those businesses that do less than £1m card turnover)
i) value of transactions processed (e.g. those who process close to £1m of cards will pay a lower % than those who process £10k of cards) and
ii) negotiation of the merchant. Most acquirers have a form of rate card with some flexibility built in and those merchants who push hard can pay significantly less than a merchant who accepts the first price. So for a business doing say £150k of card turnover you will see rates under 1% all the way up to rates over 2.5%.
The risk profile does influence this but for SMEs, this influence is limited. The main difference will be around the security wanted - so a restaurant taking £150k in cards could well have a similar rate as a furniture shop doing the same volume BUT the furniture shop will have to post some form of security to offset the risk.
Hope that helps. In terms of whether your price is competitive, hard to tell without knowing volume. If i were you contact Worldpay and ask for a rate review and suggest you are tempted to leave if they don't give something. Or get a competitive quote from one or two others (although this will mean having to chat to their sales people...) and then use this to negotiate with Worldpay
Hope that helps
Great overview on the costs. Don't forget all the additional costs that tend to be fixed such as authorisation fees (typically 2-4 pence per transaction), payment gateway / processing fees (5-15 pence) and settlement fees (typically a few quid weekly). Some acquirers also charge a PCI fee of £5-10 per month, which is a bit of a con. Interchange is 0.30% for credit cards and 0.20% for debit cards (this is regulated by the EU, interchange is higher for corporate cards but generally the acquirer will charge you a different price for transactions from these cards). Scheme fees are a lot lower and processing costs are also pretty small on a transactional level. Rule of thumb is that the total costs for a credit card is 0.35/0.40% and 0.25/0.3% for debit card
The amount of margin added on to cover overheads, risk and profit is driven by two main variables for SMEs (those businesses that do less than £1m card turnover)
i) value of transactions processed (e.g. those who process close to £1m of cards will pay a lower % than those who process £10k of cards) and
ii) negotiation of the merchant. Most acquirers have a form of rate card with some flexibility built in and those merchants who push hard can pay significantly less than a merchant who accepts the first price. So for a business doing say £150k of card turnover you will see rates under 1% all the way up to rates over 2.5%.
The risk profile does influence this but for SMEs, this influence is limited. The main difference will be around the security wanted - so a restaurant taking £150k in cards could well have a similar rate as a furniture shop doing the same volume BUT the furniture shop will have to post some form of security to offset the risk.
Hope that helps. In terms of whether your price is competitive, hard to tell without knowing volume. If i were you contact Worldpay and ask for a rate review and suggest you are tempted to leave if they don't give something. Or get a competitive quote from one or two others (although this will mean having to chat to their sales people...) and then use this to negotiate with Worldpay
Hope that helps
It might be worth you contacting some Independent Sales Organisations to see if they can beat your rates. Google that term or reach out to two leading ones in the UK, Take Payments or HandePay.
Edited by Sevenon on Monday 20th July 12:40
Frimley111R said:
We use Worldpay and they charge us 1.5% on all transactions plus a small management fee. We use their portal to send payment links to our customers which works well enough but the numbers (in £) are adding up to quite a lot and we are wondering if there are better deals/options out there. We don't do any payments through our website or any e-commerce.
Can anyone shed any light on whether this is competitive or there are better options?
Hi Frimley, it's not really a competitive rate. Even it includes PCI management and compliance payments. If you want to drop me a line I can probably help you out with that. I work for one of the ISO's that was mentioned elsewhere in the threadCan anyone shed any light on whether this is competitive or there are better options?
We moved from WorldPay to Checkout.com, we found WorldPay a nightmare to deal with and their support just too slow when needed. Chargebacks we’re also a pain to sort out.
Checkout.com so far have been a breath of fresh air. We’re just implementing G Pay and Apple Pay options through Checkout, something that wasn’t offered by WorldPay.
Checkout.com so far have been a breath of fresh air. We’re just implementing G Pay and Apple Pay options through Checkout, something that wasn’t offered by WorldPay.
Sevenon makes a fair point but these aren't costs as far as the acquirer goes, they are just a different way for the acquirer to cover their costs (the four elements i mentioned above). Back in the early 2000's many acquirers moved to create low 'head-line' rates (a 'low' % quoted for the core credit card transaction) and then protected their profit by adding a whole pile of other fees to keep their margin high (authorisation fee, refund fee, paper statement fee, chargeback fee, non qualification fees, tiered billing, PCI fees, faster settlement fees, online reporting tool fees, discount on gross gross, minimum monthly fees etc). From the merchant point of view you absolutely need to consider the total cost when comparing (the headline rate and all the add on fees) - not always easy as a lot of these additional fees are by their nature obscure. My favourite statement had over 90 different fees on it and the guy that designed the pricing structure struggled to explain it to me!
Someone else mentioned ISOs - most ISOs will compete on price but its worth pointing out they are resellers of the core acquirers service, they don't own or deliver the that fundamental product (e.g. in the old days Cardsave resold Worldpay's service and from memory RMS is in effect reselling Elavons core product, can't recall which other ISOs resell which other acquirers service as they tend to move around a little). Their are loads of ISOs knocking around, some very well established pretty mature businesses, other very small with little real substance to them
Typically the ISO will rent you a terminal (be careful on the terms here, most merchants in the UK legally can't be locked into a contract more than 18 months since the rules changed a fair few years ago but I have seen plenty of ISO contracts that try not to adhere to this) and then resell the acquirer service (this is the service that authorises the transactions, processes the transaction and settles the cash back to you) plus any other service / product that relates to the overall payment service to offset the low profit they are making on the core service (remember the ISO AND the Acquirer are now trying to make margin on the transaction). The low rate the ISO offers for the core transaction might be attractive but if there is a problem with authorisation, the processing, the settlement then the ISO has little control / ability to fix as they aren't the providers of that service. Pays your money, takes your choice...
My personal experience would say if you are happy with Worldpay service get the quotes and then ring Worldpay to get them to match. If you aren't happy do a little research and move on over!
Someone else mentioned ISOs - most ISOs will compete on price but its worth pointing out they are resellers of the core acquirers service, they don't own or deliver the that fundamental product (e.g. in the old days Cardsave resold Worldpay's service and from memory RMS is in effect reselling Elavons core product, can't recall which other ISOs resell which other acquirers service as they tend to move around a little). Their are loads of ISOs knocking around, some very well established pretty mature businesses, other very small with little real substance to them
Typically the ISO will rent you a terminal (be careful on the terms here, most merchants in the UK legally can't be locked into a contract more than 18 months since the rules changed a fair few years ago but I have seen plenty of ISO contracts that try not to adhere to this) and then resell the acquirer service (this is the service that authorises the transactions, processes the transaction and settles the cash back to you) plus any other service / product that relates to the overall payment service to offset the low profit they are making on the core service (remember the ISO AND the Acquirer are now trying to make margin on the transaction). The low rate the ISO offers for the core transaction might be attractive but if there is a problem with authorisation, the processing, the settlement then the ISO has little control / ability to fix as they aren't the providers of that service. Pays your money, takes your choice...
My personal experience would say if you are happy with Worldpay service get the quotes and then ring Worldpay to get them to match. If you aren't happy do a little research and move on over!
Mashwort said:
Sevenon makes a fair point but these aren't costs as far as the acquirer goes, they are just a different way for the acquirer to cover their costs (the four elements i mentioned above). Back in the early 2000's many acquirers moved to create low 'head-line' rates (a 'low' % quoted for the core credit card transaction) and then protected their profit by adding a whole pile of other fees to keep their margin high (authorisation fee, refund fee, paper statement fee, chargeback fee, non qualification fees, tiered billing, PCI fees, faster settlement fees, online reporting tool fees, discount on gross gross, minimum monthly fees etc). From the merchant point of view you absolutely need to consider the total cost when comparing (the headline rate and all the add on fees) - not always easy as a lot of these additional fees are by their nature obscure. My favourite statement had over 90 different fees on it and the guy that designed the pricing structure struggled to explain it to me!
Someone else mentioned ISOs - most ISOs will compete on price but its worth pointing out they are resellers of the core acquirers service, they don't own or deliver the that fundamental product (e.g. in the old days Cardsave resold Worldpay's service and from memory RMS is in effect reselling Elavons core product, can't recall which other ISOs resell which other acquirers service as they tend to move around a little). Their are loads of ISOs knocking around, some very well established pretty mature businesses, other very small with little real substance to them
Typically the ISO will rent you a terminal (be careful on the terms here, most merchants in the UK legally can't be locked into a contract more than 18 months since the rules changed a fair few years ago but I have seen plenty of ISO contracts that try not to adhere to this) and then resell the acquirer service (this is the service that authorises the transactions, processes the transaction and settles the cash back to you) plus any other service / product that relates to the overall payment service to offset the low profit they are making on the core service (remember the ISO AND the Acquirer are now trying to make margin on the transaction). The low rate the ISO offers for the core transaction might be attractive but if there is a problem with authorisation, the processing, the settlement then the ISO has little control / ability to fix as they aren't the providers of that service. Pays your money, takes your choice...
My personal experience would say if you are happy with Worldpay service get the quotes and then ring Worldpay to get them to match. If you aren't happy do a little research and move on over!
This is all true, always be mindful of the low headline rates, and make sure whoever you talk to tells you what a bill will consist of, and doesn't just focus on your card transactions alone.Someone else mentioned ISOs - most ISOs will compete on price but its worth pointing out they are resellers of the core acquirers service, they don't own or deliver the that fundamental product (e.g. in the old days Cardsave resold Worldpay's service and from memory RMS is in effect reselling Elavons core product, can't recall which other ISOs resell which other acquirers service as they tend to move around a little). Their are loads of ISOs knocking around, some very well established pretty mature businesses, other very small with little real substance to them
Typically the ISO will rent you a terminal (be careful on the terms here, most merchants in the UK legally can't be locked into a contract more than 18 months since the rules changed a fair few years ago but I have seen plenty of ISO contracts that try not to adhere to this) and then resell the acquirer service (this is the service that authorises the transactions, processes the transaction and settles the cash back to you) plus any other service / product that relates to the overall payment service to offset the low profit they are making on the core service (remember the ISO AND the Acquirer are now trying to make margin on the transaction). The low rate the ISO offers for the core transaction might be attractive but if there is a problem with authorisation, the processing, the settlement then the ISO has little control / ability to fix as they aren't the providers of that service. Pays your money, takes your choice...
My personal experience would say if you are happy with Worldpay service get the quotes and then ring Worldpay to get them to match. If you aren't happy do a little research and move on over!
Just a small point though. Paymentsense is now it's own acquirer, no messing about with First Data or Global. (Caveat, on our new product Boost). That new product will also be offering a 1 month rolling contract.
Mashwort said:
Magnus, just out curiosity which auth switch and processing / settlement system are they using - have they built in house or using an off the shelf solution?
All done in house now, for new customers on the new product. Legacy customers will stay with FD. Steady roll out of the new product so as not to overload the systems and stress test properly. Risk is being managed very carefully at the moment as that ball is fully in our court now! Gassing Station | Business | Top of Page | What's New | My Stuff