How to accept card payments

Accepting credit and debit card payments – in-store, online and/or over the telephone – can significantly increase your business’s revenues. This guide aims help you understand the UK card payments industry and select the best card payments partner for your business.

This is the main photograph for the How to accept card payments article. It shows a shopper inserting their payment card into a point of sale terminal.

Photo by Blake Wisz on Unsplash

Credit or debit card payments have become the most popular payment method for consumers in the UK. Customers increasingly want to use cards, and particularly contactless cards, rather than cash for transactions. Businesses that don’t take card payments can miss out on thousands of pounds of revenue and, of course, card payments are the lifeblood of ecommerce, a sector where the UK is a world leader.

However, choosing the right card payment provider for your business can be daunting. The card payment process is highly regulated, full of technical jargon and extremely complex. Furthermore, it can be difficult to differentiate between the wide range of merchant services providers active in the UK market to find the best solution for your business.

To help you navigate through the card payment industry we have provided the guides How the UK card payments process works and Card payments glossary to be read alongside our card payments articles.

This article sets out to give you an overview of how your business can accept card payments, compares the different card payment options that are available in the UK market, and aims to help you decide which card payment provider is right for your business.

In this article

What is a merchant account and why do you need one to accept card payments?

We have set out in our article, How the UK card payment process works, a step by step guide as to how the UK credit and debit card industry processes card payments.

The key takeaway is that your business cannot process a credit or debit card payment without using a merchant account (Note. this is not the same as your business bank account and is quite often provided by an organisation different to the one that you use for business banking).

You can access a merchant account in three ways:

Using a mobile card reader provider's merchant account

  • They have become very well known for providing easy to set up accounts, user friendly card reader terminals and offering competitive fees, and have become particularly popular with start ups and small businesses. Leading mobile card reader providers include iZettle, PayPal Here, Square, SumUp and Worldpay.
  • If your business is accepted by the mobile card reader provider it will operate under the card reader provider’s existing merchant account and MID rather than having its own merchant account with an acquiring bank. This means that you can get up and running extremely quickly but it also comes with some limitations.

Setting up a merchant account with an acquiring bank

  • An acquiring bank is an organisation that provides a merchant with the merchant’s own merchant account and the merchant’s own dedicated MID. You can apply directly to an acquiring bank for a merchant account.
  • Acquiring banks include both high street banks, such as Barclays, Lloyds and NatWest, and global payment processors such as First Data and Worldpay.
  • We would note that even if your existing business bank also offers merchant accounts it is not necessarily the case that it will be able to set up a merchant account quicker, offer it more cost effectively or provide as complete a range of additional merchant services as other third-party organisations. It is always worth shopping around.

Setting up a merchant account through an ISO

  • An ISO (‘Independent Sales Organisation’) acts as an agent for an acquiring bank, signing up new merchants to merchant accounts with that acquiring bank. ISOs also assist merchants with onboarding and provide ongoing support and ancillary merchant services.
  • Once onboarded the new merchant customer has its own dedicated merchant account and MID directly with the ISO’s acquiring bank partner. ISOs bring together large numbers of merchant customers which they use to negotiate very low rates from their acquiring bank partner(s).
  • Card Cutters, Handepay, Paymentsense and Payzone are well known UK ISOs.

Mobile card reader v. dedicated merchant account

Like many services that you need for your business, setting up a card payment facility can be simple or complicated depending on your business needs.

A start-up or small business with relatively low card payment volumes and/or low transaction values may only need a simple card payments solution.

However, you may already have an established business, or are looking to grow rapidly, in which case you may need a more comprehensive card payment service.

Do the following criteria meet match your business?

  • Your average transaction size is less than £10?
  • You are processing less than £5k per month?
  • You want an extremely quick and easy to set up solution?

If your answer is yes to the above questions then you may want to use a mobile card reader provider to take card payments. 

If your answers to the above questions are mostly, or entirely, no, or your business needs a more comprehensive card payments solution from the outset, then you are likely to need to arrange a dedicated merchant account for your business either directly with an acquiring bank or via an ISO.

Mobile card reader v. merchant account fee comparison

We have set out below a comparison between a mobile card reader and merchant account contract to give you some examples of how the two fee structures vary against each other as transaction values increase. The fees shown are for example purposes only.

This infographic shows a comparison of card payments fees between a mobile card reader and merchant account

As you can see mobile card readers tend to be more economic at lower transaction values while merchant accounts become more attractive as the card payment value increases. Similarly, mobile card readers tend to be more economic at lower transaction volumes with merchant accounts being  more competitive as the volume of transactions increases. In practice the outcomes may vary significantly depending on what fee rates you are offered and/or can negotiate.

Other key differences between mobile card reader and merchant accounts

We have shown below other key differences between a mobile card reader and a dedicated merchant account.

This infographic shows a table setting out the key differences between a mobile card reader and merchant accounts card payments options.

A final point to note is that when mobile card readers launched into the market their initial focus was on face to face transactions with their innovative card reader technology.

Some, but not all, of the mobile card reader providers have expanded their offerings to support ecommerce and MOTO (‘Mail Order/Telephone Order) transactions although with varying levels of sophistication.

If you think that a mobile card reader arrangement is right for you then we have provided more information on these companies in our article Guide to the UK mobile card reader providers.

If you want more information or already know that you need a merchant account then read on.

What types of credit card payments do you want to accept?

Fortunately, this is a fairly simple decision as your card payments solution should accept nearly all major card networks e.g. Visa, Mastercard, Maestro.

The exception to this rule is American Express (Amex) which you may already be aware comes with more technical complexity and higher costs. However, you may be missing out if your customers wish to pay with Amex.

If you have decided on the mobile card reader solution then American Express should be included automatically although your fees may be slightly higher for Amex transactions. If you are setting up a dedicated merchant account you will need to contact Amex directly or via your acquiring bank to set up an Amex account. Again, you will need to do the calculations but it is very possible that it could be economic for you to accept American Express payments.

The different ways to accept card payments

Depending on your business you may want or need to accept card payments in a number of different ways. Some mobile card reader companies and merchant account providers can support your business across all of the payment methods shown below, while others offer more limited solutions.

Accepting card payments can be divided into:

Card present transactions

These are face to face transactions with your customer sometimes called ‘Point of Sale’ (‘PoS’) transactions. You will need to rent or buy a PDQ (‘Process Data Quickly’) machine to process the physical card. PDQ machines can be:

  • Countertop: A fixed card machine which sits on the counter next to your till.
  • Wireless: A portable PDQ machine that uses the local WiFi and can be taken to customers for instance to accept card payments at a restaurant’s tables.
  • Mobile: A portable PDQ machine that connects to a tablet or smartphone allowing you to take card payments on the move.

Card not present (‘CNP’) transactions

These include:

  • Ecommerce/Online card payment transactions.
  • Mail Order and/or Telephone Order (‘MOTO’) card payment transactions.

Broadly speaking, all of the above ways of taking card payments use the same card payment process. However, they each have their specific requirements particularly in how to link (or integrate) the card payment processing system with the relevant shopping software. In the case of a physical shop this will be the EPOS (‘Electronic Point of Sale’) system while in the case of online sales it is the ecommerce platform.

Once you have determined what types of card payments your business needs to accept you can then look for the right merchant account and supporting merchant services to support those payment needs. This is where it can get complicated as there are companies who can provide:

  • Individual card payment software (such as payment gateways – required for online payments) which will need to be integrated into your overall system.
  • A solution integrating your card payment processing with your shopping software package (such as the ecommerce system Shopify).
  • A one stop including all of the different card payment methods that you need (e.g. PoS, ecommerce and MOTO).

Alternatively, you may want to take a more bespoke approach and it is possible to create a network of suppliers across and along the card payments process that specifically match the needs of your business.

Whichever route that you decide to take we would urge you to check the small print, particularly around fees, as there can often be hidden costs in what, at first glance may look like a good deal.

This is the second photograph for the How to accept card payments article. It shows an open laptop and person holding a credit card ready to make online card payments.

Photo by Negative Space on Unsplash

Merchant account fees

As your business grows the majority of the fees charged on your merchant account will be driven by the volumes and size of card payments that your business generates as many card payment processing fees are derived as a percentage of your card payments’ value.

However, there are a number of other fees that are charged monthly, and some as a one-off, to bear in mind.

This infographic shows a table setting out the constituent card payments fees applicable to merchant accounts
  1. More information on PCI compliance is set out below.
  2. Payment Gateways are software used to enable online card payments. A Payment Gateway may be included in the merchant services package but can also be sourced independently.
  3. A Virtual Terminal is software used to enable MOTO card payments. A Virtual Terminal may be included in the merchant services package but can also be sourced independently.
  4. Fees correct as at June 2020.

Many quotes that you will receive will be in a ‘blended’ form. This can make it easier to compare between quotes but there can also be costs hidden in a blended quote and you should look at the detail of each quote that you receive. Also remember, be prepared to negotiate!


  • Mobile card readers: Those businesses or organisations that manage small transaction sizes or volumes, only transact irregularly and/or wish to get up and running extremely quickly with limited complications, will find a mobile card reader an attractive, cost-effective solution.
  • Merchant accounts: Business’s looking for a more comprehensive card payments solution, that already accept higher volumes of payments and/or larger payment sizes, or have ambitious growth plans are likely to be better suited to a merchant account from an acquiring back or ISO.

If you think that a merchant account is right for your business then we have provided more information on merchant account providers in our article Guide to the best UK merchant accounts.

If you are interested in a mobile card reader solution then read our Guide to UK mobile card reader providers article for the options.

Selecting the right merchant account for your card payments

How you select the right merchant account will very much depend on your unique business needs. However, in comparing the different merchant account providers active in the UK market you may want to consider:

  • What fees and fee structure do they charge?
  • How quickly can they transfer funds to your business account?
  • Can they offer all the card payment services and features that you will need (e.g. online payments, virtual terminal processing, mobile payments) or will you need to set up one or more of these processes separately?
  • Do they have a track record of working with other businesses in your industry so that their systems are appropriate to your particular business’s needs?
  • Can they accept all major credit cards?
  • Do they fully comply with the PCI Data Security Standard?
  • How easily do their services integrate with your other software e.g. ecommerce shopping cart?
  • What is the level and extent of their customer support function?
  • How much training do you and your team need and/or what does the merchant account provider offer?
  • What is their reputation in the market? Will they provide you with references and/or case studies?
  • What are their contractual terms?

Note: PCI, or the Payment Card Industry Data Security Standard (‘PCI DSS’) in full, is a set of data security standards designed to ensure that all companies involved in the credit card payment process, that accept, process, store or transmit credit card information, maintain a secure environment for that data. 

The PCI DSS is set by the PCI Security Standards Council which provide extensive information on the standard and its implementation. The UK Cards Association also has helpful guidance in this area.

How to set up a merchant account

Merchant account application process

Once you have decided on the right merchant account provider for your business you will need to complete an application form.

Your merchant account application form will usually be provided online (although in the case of a high street bank you may be able to provide the information in person). Most merchant account providers will:

  • Review your business plan.
  • Assess the type of business you operate.
  • Assess the size of your business.
  • Analyse your expected sales volumes.
  • Review your pricing structure.
  • Carry out a credit check which will include the credit history of your business and potentially yourself if you are the owner and/or director.
  • If you are a small business you may be required to provide a personal guarantee on the account.

Application times can vary from 24 hours to two weeks until approval.

Merchant account contract

If your application is approved you will be provided with a merchant account contract which will include:

  • Contractual terms.
  • Contract length.
  • Costs and fee structure.

All of the above can vary significantly between merchant account providers. Finally, don’t be afraid to negotiate. This is a competitive industry and most providers will provide better terms than they quote on their rate card.

Merchant Identification Number

Once you have accepted the terms of service you will be assigned a merchant Identification Number (MID) which is required to process your card transactions. Typically, in the case of physical transactions, you will receive a unique MID for each physical store.

Why accept card payments?

Increase your revenue

It is very simple, if you don’t accept card payments then you are very likely to be missing out on revenue. Clearly if you are running an ecommerce business, or a business that relies on telephone orders, then accepting card payments is a key part of your business model.

However, for face to face businesses as well, card payments, particularly with the huge expansion of contactless payments, have become the most popular form of purchasing for consumers.

As an example, as can be seen in the chart below, debit card transactions alone overtook cash transactions in 2017 for the first time.

UK payment volumes (millions) 2007 - 2027

This infographic shows graph setting out how UK card payments volumes have changed between 2007 and 2027. It includes cash, standing orders, credit cards, debit cards, cheques, BACs direct credit, direct debit, faster payments and other.

In the UK there are 97 million debit cards (85 million of which are contactless) and 61 million credit cards (47 million of which are contactless). There are 51 million UK credit card accounts, 35 million of which are active.

There were 1.7 billion debt and credit card transactions in November 2019 alone (up 8.6% on the same period in 2018). Contactless cards accounted for 32% of credit card transactions and 46% of debit card transactions. Contactless transactions increased by over 10% on the same period in 2018.

The forecasts indicate that card transactions, and particularly contactless transactions, are only going to continue to grow in the future.

Improved security

Fewer cash transactions mean a lower risk that you or your staff will make honest mistakes such as giving wrong change. Less cash in your tills also reduces the risk of pilfering, accepting counterfeit banknotes and, at worst, robbery.

Improved customer service

Card payments, and particularly contactless payments, are quick, easy and can speed up the transaction process. More importantly credit and debit cards are how your customers increasingly expect, and want, to transact with you.

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