Taking Payments Online and Over the Phone: Our Business Guide

With ecommerce growing at a breakneck speed – an ongoing trend accelerated by the COVID-19 pandemic – you may be wary of missing out precious revenue by not claiming a lot in the digital space.

To do that, you’d need to set yourself up with merchant account – and if the fancy name puts you off, we get it. It can feel herculean to put your foot in the door, but we can help. If you give our free comparison tool a try, we can quickly match you with the merchant accounts best suited to your business. They’ll then get back to you with bespoke quotes for you to compare – and once you pick one, you’ll be selling online in no time!

However, if you’d like to know more about the ins and outs of taking payments online (or over the phone, for that matter), stick around. We’ve prepared a short guide to help you out and you can find it below.

Your first step towards taking payments

Before your start your ecommerce journey, you’ll need to sign up with a merchant account provider. Merchant accounts are electronic services that act as a buffer account between your customers’ banks and yours. They provide card machines and process payments, allowing you to charge your clientele.

There are two types of merchant account and the way you take payments online and over the phone will depend on which you choose. They are:

• Contract merchant accounts, which offer their service through fixed-term agreements. They charge lower (and usually negotiable) transaction fees in exchange for a monthly fee.
• Mobile merchant accounts, which don’t require you to sign a fixed-term contract, providing their service on a pay-as-you-use basis. While they don’t incur fixed costs, they charge higher transaction fees.

How to take payments online

In order to take payments online, you’ll need a payment gateway, which is a software that authenticates and secures payments made through your website. This gives you a safe way to tap into a market that’s going digital by the day: by 2025, 90% of UK shoppers are expected to buy goods on ecommerce.

A payment gateway is hosted either on your website (to help maintain a consistent customer journey) or on the website of your payment gateway provider (cheaper and PCI compliant, but potentially disruptive to your customers’ user experience). Either way, it can usually be customised to fit the look and feel of your business’ colours and brand. So how do you get one?

Well, how you source your payment gateway service will depend on the type of merchant account you’ve selected. Take a look at your options below.

With a contract merchant account

If you’ve opted for a contract merchant account, a payment gateway is usually available to purchase as an ‘add-on’. Most providers offer it as a service for which you’ll pay a monthly fee (typically around £20), and in return get a set amount of ‘free’ transactions (usually between 350 and 400 per month).

If you exceed your number of transactions, you’ll then be eligible for a small per transaction fee (most likely around the 10p mark). This fee is very likely to apply even if the payment gateway is advertised as free.

To reiterate, most merchant account providers offer a payment gateway. But if yours, for whatever reason, doesn’t, then stress not. You can also integrate your merchant account with a payment gateway from a third-party provider.

Many providers (Authorize.Net, Braintree, and Amazon Pay included) specialise in such a service. Some, such as Stripe, are customisable to the extent that they’re almost a white label solution (read our Stripe review). So, if you’re tech-savvy (or have a software engineer or two at your disposal), then this could be the best option for you.

Be warned, though – this is a more complicated solution, and will probably be pricier, too. We always recommend entrusting your credit and debit card payments to a single provider, such as takepayments or Clover.

Don’t forget to make sure the payment gateway you create for your online store is secure. You can read up on this in our guide. You will also need to ensure you have a CPA set up to take recurring payments.

With a mobile merchant account

If you’ve opted for a mobile merchant account such as Dojo and SumUp, accepting payments online is a fair bit easier (read our SumUp review). That’s because these companies offer an ‘all-in-one’ service: they simultaneously act as payment gateways, virtual terminals, and invoicing tools. Some providers, like Square (read our Square Review) or Zettle, will even work as electronic point of sale (EPOS) systems as well, allowing you to charge customers in-store.

Going down this route is surprisingly affordable, too. Unlike with certain contract merchant accounts (where there can be hidden fees), you’ll pay only a small fee on each transaction you accept via your website. This cost will be a bit more expensive than it would be if you were accepting card payments in person (because of the higher level of data risk involved with ecommerce transactions), but it’s still minimal.

How to take payments over the phone

When it comes to taking payments over the phone, the gist is pretty much the same. The software you’ll need in this case is a virtual terminal, which is a secure webpage that allows you to accept payments over the phone. You simply log into the page from your device, enter your customer’s card details (which you’ve received either over the phone, or via mail), and take the payment. These payments are called MOTO (Mail Order/Telephone Order) transactions.

Once mainly the domain of freelancers, tradespeople, and food delivery businesses, MOTO payments might just be exactly what your SME needs to send sales back in the right direction. And they’re simple to accept, too – virtual terminals are basically an online version of a card machine.

Virtual terminals can also be used to process invoices, and you can save customer card details to speed up service. Better still, they’re highly secure: they use AVS (Address Verification Service) to authenticate the payment and the best virtual terminals are fully PCI compliant too.

The way to getting them, once again, depends on the type of merchant account you go for.

With a contract merchant account

Like payment gateways, virtual terminals are also usually available as an optional add-on on contract merchant accounts. It’ll set you back a monthly fee, usually starting at £10, plus a small cost per transaction beyond an agreed limit of sales made through the terminal.

With a mobile merchant account

If you opt for an all-in-one provider, a virtual terminal will be included as standard – no monthly fees or hidden costs in sight. However, you will pay a percentage-based fee for each transaction you accept through it. For example, Square, Zettle, and SumUp all charge 2.5% for this.

5 questions your business should ask a potential merchant account provider

Now you’ll know how paramount a merchant account is if you plan on taking payments online or over the phone, you may be wondering how to go about finding the one most suited to your business.

Before (or during) your search, do make sure to ask your potential provider the following questions:

1. How much is the setup cost?

This is a way of gauging your initial investment. Some merchant accounts charge a setup fee, like Barclaycard (read our review of Barclaycard) which you need to consider. Others, like Revolut, don’t – but require you to buy their hardware (read our review of Revolut).

2. Do you charge monthly fees? If so, how much?

You should know whether you’ll be incurring fixed costs when getting your merchant account. By and large, contract merchant accounts tend to charge monthly fees while mobile merchant accounts tend to forego then.

3. What are your transaction fees? And are they negotiable?

This is important as transaction fees can add up and take a big chunk of your income if you’re not careful. Contract merchant accounts tend to charge lower transaction fees than their mobile counterparts. They’re also usually open to negotiate bespoke fees for customers – something mobile merchant accounts will only do for customers of high revenue.

4. Do you charge different fees for different payment methods?

There are many ways your customers can pay you and wise money is on you knowing exactly the size of your merchant account’s bite for each one. Some, like Square, keep it simple and have the same fee for all cards. Others, like Tyl, have many different fees. Read our Tyl review for more information.

5. Am I tied to a contract? If so, for how long?

Should things not go the way you want them to with your chosen merchant account, you’ll need a safe plan to jump ship, so it’s good to get familiar with the terms of your contract before signing up. Contract merchant accounts normally require you to stick with them for a fixed term and enforce termination fees should you want to leave early. Mobile merchant accounts, on the other hands, tend to be offered as pay-as-you-use services, with no contracts.

Next steps

TL;DR: to take payments online and over the phone, you’ll need a merchant account.

If you pick a contract merchant account, you’ll need to pay extra for the additional pieces of software required (namely, a payment gateway and a virtual terminal), as they usually make them available as chargeable add-ons. However, if you go for a mobile merchant account, they are usually included in the solution from the get-go.

To choose the best merchant account for your business, it’s important to compare various providers and the easiest way for you to do that is through our free comparison tool. It’ll allow us to quickly match you with the providers most suited to your needs. They’ll then be in touch with you with bespoke quotes for you to compare!