If you sell online, it’s crucial to make it as easy as possible for your customers to pay you. The easier you can make it, the more likely that visitors to your website will take the plunge and click ‘checkout’.
But just as importantly, you need to find the most cost-effective ways to accept payments online. Remember that the more you pay in processing fees, the less profit you’ll make on each sale.
In this guide, we’ll cover how to take payments online, including the different methods you can use and how you can save money by using Wise for collecting international payments.
Direct debit and debit/credit card payments are the two main ways to collect payments online.
Let’s take a look at the ins and outs of both of these methods, to find the right one for your business.
A Direct Debit agreement gives your business permission to take an agreed amount from your customer’s bank account. This could be a one-off payment, but it’s most often used for recurring payments such as bills. This also makes it useful for charities and other subscription-based businesses such as gyms.
Here’s how it works¹:
- Join the UK Direct Debit scheme, run by Bacs
- Contact your bank, to check you meet all the requirements to be able to start accepting Direct Debit payments
- Use a Bacs-approved Direct Debit bureau (recommended for smaller businesses, although you can set it up yourself) to submit payment files to Bacs. These payment files contain your customer’s bank details and payment amounts, so that the transaction can be authorised.
Direct Debit can be quite cost effective, as you can avoid per-transaction fees charged on credit and debit card payments. It’s also reliable, secure and fully regulated².
With Direct Debit, payments can be automated. This is more convenient and time-saving for you, but it may not be so for the customer who is used to paying by card on your competitors’ websites.
You can start accepting payments through your website by following these steps:
1. Open a merchant account – this is like an online bank account that temporarily holds money paid to you by a customer, until the payment is cleared by their bank. Think of it like a waiting room for customer payments, before the money is transferred to your actual bank account. Many major UK banks offer merchant accounts, along with WorldPay and other dedicated providers.
2. Set up a payment gateway – this is software that connects up your ecommerce site with a payment processing network. It’s what you’ll use to capture customers’ card details and submit the payment. It can be integrated with your merchant account. You’ll know of many of the main merchant account providers – including PayPal, WorldPay, Sage Pay and Braintree.
With both of these essential building blocks in place, you can set up your webshop and start accepting card payments online.
Online card payments are secure and reliable, provided you choose a payment gateway with SSL and 128 Bit encryption, plus other key security features.
However, there are costs involved. Both merchant account and payment gateway providers charge monthly fees. For payment gateways, this can be between £10 to £20 a month, with a small per-transaction fee added on top.
Some providers offer an all-in-one bundle for businesses wanting to accept card payments online. These are known as payment service providers, or payment facilitators (PayFacs), and include the likes of PayPal, Stripe, SumUp, iZettle and Square.
Setting up with a full-service provider should be relatively straightforward. Simply sign up and follow their step-by-step process and you’ll soon be accepting card payments on your website.
Using a PayFac can be much cheaper and more convenient than setting up your merchant account and payment gateway separately. You’ll usually get access to a whole range of merchant services all in one place, and pay just fixed, flat rate percentages per transaction rather than monthly fees.
As well as being secure and extremely hot on anti-fraud measures, PayFacs can also help with PCI compliance.
A far simpler way to get paid online by your customers is via a money transfer specialist like Wise. It’s borderless and is the most cost effective option for collecting payments because it's free!
It’s particularly useful for businesses selling to international markets. When you open a Wise Business account, you’ll get your own local bank details (without the need for a local address) for a number of countries.
Your customers can use these details to pay you in their own currency, and you’ll receive the cash for zero or low fees. Crucially, you’ll always get the real, mid-market exchange rate. This can make it far cheaper to get paid, and you’re guaranteed a secure, reliable and fast service. There’s a small, transparent fee for currency conversion but it's up to 19x cheaper than PayPal.
Open a multi-currency Wise Business account and you can start receiving international payments from clients all over the world.
But that’s not all, as you can also use your account to withdraw your money from merchant accounts like PayPal.
The beauty of this is that you can use Wise to convert your earnings to your local currency. This means you’ll get the fairest, mid-market exchange rate – rather than losing money to the rate mark-up applied by services such as PayPal.
You can hold multiple currencies in your account at once, and choose the best way to use the funds. Hold it there to cover a future business expense or withdraw to your bank account – it’s up to you. To keep all your accounts in order, you can integrate your account with software like Xero or QuickBooks, and save time with automated payments using Wise’s powerful open API.
To see how much PayPal will charge you for cross-currency sales and to learn more about withdrawing to your Wise account, use our handy PayPal calculator.
Online businesses and retailers have a huge amount of choice when it comes to payment processing and merchant accounts. In fact, there’s so much choice that it can be a little overwhelming.
Hopefully, this guide has laid out a few of your best options for accepting payments online. We’ve covered convenience, costs, security, how to get set up and some of the main providers to look out for.
There’s no one perfect solution though. What works for one business may not be the right choice for yours. It’s important to find the setup that works best for your business, budget and of course, your customers.
Sources checked on 18-December 2020.
This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.
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