How to take payments online

To take online payments you can either sign up for a merchant account and payment gateway yourself, or use a payment facilitator such as PayPal or Square. Payment gateways tend to be cheaper, with competitive card processing fees, so they are likely the better option as small businesses continue to fight rising inflation and the cost of living crisis.

Whether you’ve started an online shop, or need to take digital donations for a charity – this article will talk you through some of the best payment gateways and the step-by-step process of taking card payments online.

Note: Some of the methods we’ll be talking about today include additional costs that will need to be considered, such as credit card processing fees. To discover the best rates, you can use our free 🔍card processing comparison tool below to compare quotes from top payment processing providers:

How to take payments online: debit and/or credit card payments

When taking card payments online, you can choose either to set things up yourself using a payment gateway and a merchant account, or you can use a payment facilitator. We’ll go through the pros and cons of each option below.

Option 1: Set it up yourself

A merchant account is where all your online transactions will go as the first port-of-call for authorisation purposes, and your payment gateway is how the money will get there (via your customers making their purchases).

How to set up a merchant account

A merchant account is where your money will go when someone orders something from your business to be checked and verified, and where the relevant processing fees can be taken before reaching your business bank account as its final destination. For more information, check out our full guide: what is a merchant account?

Merchant accounts are not your business bank account. They should be thought of as more of a waiting room, where funds go to be authorised before they arrive in your account. They charge transaction fees, monthly minimum fees, authorisation fees and more. Examples include WorldPay, Stripe and Zettle.

You may be wondering why you can’t simply link your business bank account with your payment processor to receive sales, but this way is honestly the more convenient for you as a business owner – otherwise, there would be long delays between your bank and customers’ card-issuing banks as they scramble to verify each transaction before authorising each sale. Merchant accounts are more optimised for online sales.

All in all, you can expect to pay £5 – £15 per month for a merchant account, or a percentage on each sale you make.

Most major banks offer merchant accounts, although your merchant account doesn’t have to be held with the same bank as your business account. You can also get one through an independent, third-party company called an ISO (Independent Service Organisation).

How to set up a (separate) payment gateway

A payment gateway works by moving customer money into your merchant account, helping to send all the vital info between banks, merchant accounts and payment processing companies so you can get paid, and keeps everything safe from prying eyes.

Payment gateways are typically included once you’re approved for a merchant account – but you can also choose a third-party provider if you so choose, perhaps to take advantage of better features and rates. Examples include Paypal’s integrated gateway, Stripe’s integrated gateway and Square (which is a payment gateway only, merchant account not included).

For more information and to find the best option for you, check out our guide to the best payment gateways for small businesses, where you’ll find impartial reviews, prices and pros and cons.

Here are some examples of the most popular payment gateways:

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BEST OVERALL
Worldpay	PayPal	Stripe	Amazon Pay	Shopify Payments	Opayo	Cardstream
Cheapest paid-for plan: £19.95 per month 1.5% transaction fee for Mastercard and Visa Card transactions	Cheapest paid-for plan: 2.9%+ £0.30 per transaction (no monthly fee)	Cheapest paid-for plan: 1.5% + 20p (no monthly fee)	Cheapest paid-for plan: 2.7% + £0.30 (no monthly fee)	Cheapest paid-for plan: £19 per month	Cheapest paid-for plan: £27 per month for 350 transactions	Cheapest paid-for plan: £18 per month for 350 transactions
Best for: Businesses selling personalised goods	Best for: Businesses selling internationally	Best for: Online clothing stores	Best for: Businesses younger than one year	Best for: Shopify stores	Best for: Creative sectors	Best for: Service industries

Want to find the best provider for your business? Compare

Remember, if you’re going to accept card payments, then you need to be PCI compliant. This means you’ll need to store any data your business collects from cardholders totally securely using a hosting provider that complies with the Payment Card Industry Data Security Standard.

Option 2: Choose an all-inclusive payment facilitator

Payment facilitators provide merchant services for businesses, allowing them to accept credit and debit cards online, as well as in person and over the phone. They are typically the more aesthetically pleasing, front-facing system your customers can go through in order to purchase from your business in the form of their card machines and mobile card readers.

Instead of a dedicated merchant account service, facilitators offer an aggregated merchant account. That means a facilitator ‘batches’ your credit and debit card transactions together along with those of many other merchants, to be processed together. This allows them to offer a service that’s much cheaper for small businesses.

Payment facilitators tend not to charge monthly or setup fees. Instead, processing fees typically comes as a fixed, flat rate percentage of each sale you make with a credit or debit card. They also typically offer a setup process with minimal underwriting – some, such as Square, don’t even run a credit check.

Some of the most popular payment facilitators include:

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Square	Lightspeed	Zettle	Epos Now	Touchbistro
Overall Score Based on our in-depth research and user testing 4.7	Overall Score Based on our in-depth research and user testing 4.4	Overall Score Based on our in-depth research and user testing 4.4	Overall Score Based on our in-depth research and user testing 4.2	Overall Score Based on our in-depth research and user testing 4.1
Pricing from £0 for Square for Retail Free	Pricing from £59 per month (excl. VAT) for Lightspeed Restaurant £75 per month (excl. VAT) for Lightspeed Retail	Pricing from Zettle Go app – free £29 – card reader £189 – store kit	Pricing from £225 per year for retail POS bundle	Pricing from £65 per month

Payment facilitators are a solid option if your credit rating is less than ideal, but be warned – payment facilitators have stricter rules and regulations. Accounts have been known to be suspended at the first sign of anything untoward, and are difficult to get back.

How to take direct debit payments online

Accepting direct debit payments means your business is given permission to take an amount of money out of a customer’s bank account at regular intervals, without the need for the customer to resubmit their details.

To do this, you’ll need to sign up for what is known as the Bacs direct debit scheme.

Contact your bank to request to join. From there, you’ll undergo a series of checks, confirming your integrity, your financial standing, and your administrative capabilities.

If the results are satisfactory, you’ll be accepted onto the scheme. Your bank will advise on what your business specifically will need to do before it can offer direct debits to customers.

Next, decide how you’ll submit direct debit payments.

In order to take direct debit payments from customers, you’ll submit payment files – which detail your customers’ bank account numbers and sort codes, payment amounts, and relevant dates – to the Bacs system. Bacs then sends the data to your customers’ banks, which then approve and organise the payments.

There are two ways to submit these files to Bacs: You can either do it yourself or through a direct debit bureau.

1. Submit payment files yourself

This approach is ultimately the cheapest option, but also more complicated. To do it, you’ll need a SUN number, and approved Bacstel-IP software.

• What is a SUN number?
  This is a unique six-digit number, which basically acts as a license for you to start managing your direct debit payments yourself. You can obtain a SUN from your bank, so when you consult them about joining the direct debit scheme, you should also talk to them about getting your own SUN.
• What is Bacstel-IP software?
  Bacstel-IP is the secure channel through which you can submit payments directly into the Bacs system. Any approved software will work with their channel. There’s a full list of approved software available on the Bacs website.

2. Submit payment files through a direct debit bureau

Using a direct debit bureau may cost a bit more, but it makes things much easier and lets you get on with running your business.

Essentially they act as a third party which handles direct debit payments on your behalf. They can do this using either your SUN or their own, meaning a bureau can be a great option for convenience, or if your business was denied a SUN number by the bank for any reason.

Direct debit bureaus are perfect for businesses which:

• Have a relatively small turnover
• Process a fairly small number of direct debits each month
• Have inexperienced payment systems that haven’t been worn in yet

To get started, check out Bacs’ free directory of approved direct debit bureaus.

Which method of taking payments online is right for me?

When choosing the right online payment platform for your business, consider the options in terms of these five criteria:

1. Security

Ensure the payment gateway you choose features SSL and 128 Bit encryption, as well as having a digital signature and a Dynamic IP address. These security layers will ensure that you and your customer’s money is kept safe.

2. Hosted vs integrated payment gateways

Hosted payment gateways are cheaper and easier to set up than integrated payment gateways – however, an integrated payment gateway hand is set up via API integration, which is customisable and can boost conversion rates.

3. Customer experience

Your customer’s journey from selection to payment completion is really important. If there are too many steps and things aren’t clear, you could lose sales – so make sure the payment gateway process is as clear and simple as possible.

4. Fees

Each gateway has a different fee structure – make sure this is in-line with your budget and sales volumes.

5. Customer support

Technical problems could really put a dent in your revenue. Does your payment gateway provider offer 24/7 support, or just during regular working hours? Check to see if the support you require will be there when you need it.

Next steps

We’ve gone through the two ways to take credit and debit payments online: opening a merchant account to set up a payment gateway or using a payment facilitator.

To accept direct debit payments, join the UK direct debit scheme and decide how to submit direct debit payments.

If you opt for the merchant account route, the next step is to use our simple provider comparison tool to see how the costs match up with your specific budget. Just tell us a bit about your needs and get your 🔍free cost comparison quotes from some of the UK’s leading merchant account providers.