A brief understanding into merchant banks
Merchant Acquirers
Despite the presence of numerous merchant card acquirers and payment facilitators, a significant majority of 97% of UK card transactions are handled by only 11 merchant acquirers and 3 payment facilitators.
It is interesting to note that more than 95% of UK businesses with an annual card turnover exceeding £60,000 choose to partner with a merchant acquirer or merchant service provider.
On the other hand, the remaining 5% opt for a payment facilitator such as Square or Zettle.
Typically, these businesses have lower card turnover. Overall, the dominance of a select few merchant acquirers and payment facilitators highlights their expertise and reliability in efficiently processing a vast majority of card transactions in the UK.
What is a merchant acquirer
A merchant acquirer refers to a licensed financial institution or bank that undertakes the task of processing card payments for merchants. These entities, also known as acquiring banks or merchant banks, offer businesses their own designated merchant accounts and establish and maintain the essential relationships with card schemes such as Visa, Mastercard, Amex, and other card schemes like Diners and JCB.
What do merchant banks do for you
An acquiring bank plays a crucial role in facilitating sales transactions by handling the merchant’s payment authorization requests and forwarding them to the issuing bank for approval or rejection. Once the payment is approved by the issuing bank, the acquiring bank transfers the funds to the merchant’s bank account.
Additionally, the acquiring bank is responsible for managing refunds and returns on behalf of the merchant.
They also bear the responsibility of paying the card scheme fees associated with utilizing payment networks like Visa, Mastercard, and American Express.
These services provided by acquiring banks cater to a wide range of businesses, from small-scale micro-businesses with an annual card turnover exceeding £20,000 to large multinational corporations with a turnover surpassing £50 million.
Acquiring fees
Transaction fees can vary depending on different factors such as annual card revenue, average transaction value, business sector, and the risk of chargebacks.
Some acquirers provide fixed transaction fees for businesses with low card turnover, but these fees can be expensive and come with volume restrictions that may not be feasible for most businesses. However, acquirers usually publish fixed monthly fees for the use of their payment gateway and card terminals.
The total fee that merchants pay to acquirers for card-acquiring services, known as the merchant service charge (MSC), can vary significantly and is open to negotiation.
JU Lord Payment Consultancy, have the ability to secure preferential rates from merchant acquirers. If you are looking to reduce your fees, we encourage you to try our services. We can often offer lower costs by working directly with the merchant bank.