Merchant services are an essential purchase for virtually all businesses and business owners will usually turn to their own bank for these services. Unfortunately, this is not usually the cheapest way to source payment processing.
The difference between deals might seem negligible with just one or two percent in difference but those small differences will quickly add up as your business grows. Getting a bad deal on your payment processing can cost you tens of thousands of pounds every year.
In this article, I’m going to look at five popular merchant service sales channels. I’ll touch on how competitive the pricing is and quickly explain whether or not I’d recommend you use it.
Banks ( )
First up, banks! Almost every bank will sell merchant services to its business customers. If you have a relationship manager, you’ll probably have already heard the sales pitch.
The reality is that most banks don’t actually own their own merchant service products. Instead, they partner with a card processor and resell their service. RBS is a sales agent for Worldpay, HSBC resells Global Payments and Santander uses First Data.
So why do business owners trust banks to provide a third-party service? Perception!
People see banks as reliable and they assume that their staff have extensive product expertise.
Sadly, that’s not the case.
There’s one main reason why I would strongly recommend you avoid buying merchant services through a bank: Price.
Card processors love selling through a bank because it’s an easy win. You see, most businesses will turn to their bank for merchant services and tend to accept their pricing without question.
This allows the banks to ratchet up their fees and make a small fortune off their business customers. Worse still, the banks are given very little wiggle room by the card processors so can’t reduce their fees even if you push them on pricing.
Card Processor ( )
The digital age has made it simpler for consumers to buy directly from manufacturers or suppliers and cut out the expensive middlemen.
Merchant services is, in theory, the perfect example. Instead of going to your bank and buying a product at an inflated rate, you go straight to the card processor and buy from them. That’s one less step in the buying process so it must save you money, right?
Unfortunately not. While cutting out the middlemen should mean a better deal for customers, it’s not always the case.
Card processors know that any business owner who calls them has pretty much decided that they want to use their product. That means they can bump up the price without losing too much business. The price you get direct from a card processor isn’t quite as high as the bank rates but it’s certainly not competitive.
Now, unlike the bank salespeople, sales staff at card processors do have leeway to negotiate on price. So, if you decide to buy directly through a card processor, negotiate as hard as you can to secure the best deal possible.
Referral Sites ( )
The internet is awash with referral sites, which claim to allow users to compare services and select the option that’s best for them. Some smaller referral sites have recently started offering merchant services with Companeo, Approved Index and Expert Market amongst the leaders.
Most referral sites work in largely the same way. You fill out a form, they call you back to confirm your details, they distribute that information to their partners and then you get bombarded by sales calls for the next few weeks.
It’s a really intrusive sales process and you don’t necessarily end up getting the best deal.
Firstly, you have no idea of who your data is passed to, you have no say over how many suppliers call you and you don’t know how many partners the referral site has. Sometimes your data is passed to one supplier and other times it’s passed to ten.
Second, the service from suppliers is also pretty patchy. You might receive a callback from all suppliers for one quote and none for another. Whether you receive a quote is entirely at the whim of their sales department.
Third, referral sites aren’t really built for comparison. If you receive one hundred quotes for a service, you have to pick through them individually and manually compare the rates. That’s awful!
Finally, referral sites are not product experts. They will sell you a payment processing bundle without any real knowledge of the products, which can result in you receiving a package that doesn’t actually work for your business.
As you may have guessed, I wouldn’t recommend buying through a referral site, either. Well, unless you want to deal with dozens of pushy phone calls every day!
Independent Sales Organisations ( )
First things first, what is an ISO?
Independent Sales Organisations term imported from the US imported term and refers to organisations that resell a specific product, acting as a partner for the product provider. While ISOs are owned and operated independently of the card processors for whom they recruit customers, they are officially licensed or authorised by the card processor to resell its merchant accounts.
So, why should you buy through an ISO when you could go directly to the card processor itself?
The headline reason is that ISOs are typically 40 percent cheaper than other channels and sell the exact same service. And I don’t mean a comparable service or a like-for-like service, I mean the exact same service with the exact same technology.
But how can ISOs be so much cheaper if they’re selling the same product?
Well, when a single business owner goes to a card processor, they’re negotiating with their card turnover. An extra £20,000 passing through the card processor is nice but it isn’t going to pay their Christmas bonuses.
ISOs, on the other hand, negotiate collectively on behalf of all their members. If you buy services through an ISO, you tap into their buying power, which is hundreds of times larger than yours.
For a bit more information about ISOs, check out our article 6 Reasons To Use An ISO For Card Processing.
It’s no secret that we think ISOs are the best sales channel for merchants and that’s why we help promote them through Cardswitcher.
Now, buying through an ISO is a good idea and will get you a good deal but it’s not the only sales channel I’d recommend.
Price Comparison Websites ( )
If you want to very best deal, it’s not enough to pick an ISO at random. While ISOs are substantially cheaper than other sales channels, there will always be variation between their deals.
To find the best deal, you’ve got to search and compare what each ISO offers.
And that’s where Cardswitcher comes in. As the only specialist price comparison website for merchant services in the UK, we make sure that you find the best deals out there.
We have partnerships with many leading ISOs and allow users to search, compare and select merchant service deals from across the market. And unlike referral sites, we don’t release your data to anyone unless you tell us to. We give you all the information upgront, allowing you to make an informed decision.
Our comparison process only takes about two minutes and can cut a huge chunk off your card processing bill. Click here to see for yourself.