How to take payments online
Boost your business website and take payments online. Here’s how to set up your online payment process for card payments or Direct Debits today
In this article, we’ll explain how to:
Starting an online shop? Or, maybe you’ve set up a charity, and would love to gather donations digitally…
Whatever the purpose, when it comes to taking payments online, there are plenty of options available to you.
Whether it’s taking debit card payments online or setting up recurring monthly fees for your patrons, we’re here to help you decide how to go about securely charging your customers via your website.
The way you take payments online will depend on whether you’d like to accept card payments, Direct Debits, or both. But, what’s the difference?
Direct Debit enables you to take agreed payments from your customer’s bank account. Customers sign up to a Direct Debit using their bank account number and sort code.
A CPA (Continuous Payment Authority) is taken via a credit card – for which customers must supply you with their 16 digit card number to then be linked to your bank account.
Debit and/or credit card payments – further detail:
A Direct Debit payment means that your business is given permission to take an amount of money out of a customer’s bank account at regular intervals – typically monthly – without the need for the customer to supply their details again after the first instance.
A Direct Debit doesn’t have to come to the same amount every month, but you’re obliged to let your customer know how much their next payment will be, and when it’ll come out of their account.
Whilst Direct Debits aren’t right for businesses that ask for a one-time charge and call for pretty instantaneous payments – like online shops, for example – they do work really well for things like recurring subscription payments (at the gym, for example), regular charitable donations and B2B invoicing.
Taking debit and/or credit card payments online
If you’re looking to take card payments online, you’ve got two main options:
Read on for an explanation of both of these options…
Set it up yourself
To DIY your card-accepting capabilities, you’ll need to follow these simple steps (assuming you’ve already set up your website):
- Open a merchant account
- Set up a payment gateway
Step 1: open a merchant account
A merchant account is a mandatory online bank account that temporarily holds the money a customer pays you while the payment is approved by said customer’s bank.
Once that happens, the merchant account processes the payment, transferring it into your actual business account (sometimes minus a cut of the money, depending on your arrangement).
Most major banks offer merchant accounts, so you can start by talking to yours – though it’s worth remembering that your merchant account doesn’t have to be held with the same bank as your business account.
Unfortunately, you can’t take payments online for free – merchant account providers can charge transaction fees, monthly minimum fees, authorisation fees and more (you can read more in our merchant accounts guide. With this in mind, we’d advise shopping around to find the contract that suits you best.
|Merchant Service||Best for…||Merchant account fees|
|BarclayCard||Service focussed at a fair price||0.85% + 3p|
If you’d like a helping hand in finding the right merchant account provider for you, try filling in the form at the top of this page to receive bespoke quotes from providers.
Step 2: set up a payment gateway:
A payment gateway connects your website to a payment processing network. It asks for customers’ card details, and then submits the charge for settlement. Think of it as an online card machine.
Popular examples of companies that provide payment gateways include:
- Amazon Pay
- Sage Pay
Some payment gateways are limited in terms of the types of cards they can accept and bank accounts they can work with, so it’s worth finding one that fits well with the way your customers tend to pay.
|Payment Gateway||Best for…||Price Range|
|WorldPay||Popularity and familiarity||£19.95|
To find the right option for you, we’d recommend checking out our guide to the best payment gateways for small businesses, where you’ll find impartial reviews, prices and pros and cons.
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: use a payment service provider
An online payment service provider (PSP) is a full-service platform that, much like a payment gateway, accepts and transmits payments on your behalf via your website.
The difference between an online PSP and a payment gateway is that the former will also typically incorporate a merchant account. This means you don’t have to set up a merchant account of your own, and gives you the full card-accepting package in one software platform.
PSPs can also come with a variety of other features built in, ranging from critical additions like fraud management capabilities to helpful extras like subscription billing.
Another advantage of using an online PSP is that the burden of PCI compliance doesn’t rest solely on your shoulders, as you won’t personally handle any of your customers’ card details.
Popular examples of online PSPs include:
- Payzone UK
- Sage Group
Online PSPs will typically charge you either a percentage of each payment made, or a fixed cost each time a transaction occurs.
Which method of taking payments online is right for me?
There are a few things to keep in mind when choosing the right online payment platform for your business.
Remember these five points to make sure you’re making the most informed decision possible:
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 as safe as can be.
- Hosted or integrated
A hosted gateway is easy to set up and great for getting your ecommerce platform up and running, however, a hosted gateway can be more costly due to conversion rates.
Alternatively, an integrated gateway connects you ecommerce site via a gateways API – meaning that customers will never have to leave your website to input information and submit orders.
- The customer experience
Your customer’s journey from selection to payment completion is really important. Too many steps and not enough clarity could really jeopardise a sale, so make sure the payment gateway is as clear and simple as possible.
Each gateway has a different fee structure – make sure this is in-line with your budget and sales habits.
- Customer support
Technical problems could really put a dent in your revenue. Does your provider offer 24/7 support, or just during regular working hours? Check to see if the support you need will be there as and when you need it.
Taking Direct Debits online
Now we’ve been through the different providers out there, and what’s best to keep in mind when choosing an online payment provider, let’s tuck into the nitty gritty details on the step-by-step journey to taking online payments.
Step one: Join the UK Direct Debit scheme
In order to take Direct Debits online via your website, you’ll first need to join the Direct Debit scheme, which is run by an organisation called Bacs.
The first step to take is to speak to your bank. 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.
Step two: Decide how you’ll submit Direct Debit payments
Put simply, 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:
- Directly, yourself. The cheaper option, Bacs recommends this for larger businesses with more payments to process
- Via a Direct Debit bureau. Bacs recommends this for smaller businesses with limited numbers of payments to process
Read on for an explanation of both of these options.
Submit payment files directly yourself
In order to do this, you will need:
- Your own SUN (Service User Number)
- Bacs-approved Bacstel-IP software
A SUN 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.
Bacstel-IP: The secure channel through which you can submit payments directly into the Bacs system.
Next, you’ll need to install Bacstel-IP software that has been approved by Bacs. Using this software, you’ll be able to submit Direct Debit payment files to the Bacs system.
Examples of Bacs-approved Bacstel-IP software include:
- Bottomline Technologies
- Cashbook Ltd
These are just a few examples – you can find a list of approved software on Bacs’ website, here.
Use a Direct Debit bureau
A Direct Debit bureau is 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 businesses who’ve been denied a SUN by their bank.
Though using a bureau costs more than handling the payments yourself, Direct Debit bureaus tend to be recommended to businesses who:
- 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
A free directory of Bacs-approved Direct Debit bureau can be downloaded from this page of Bacs’ website.
We’ve covered how to upgrade your website to accept card payments – be it by doing it yourself or by using a payment service provider – as well as providing instructions on how to take Direct Debit payments.
If you’re keen to take card payments online, take a look at our guide to the six best payment gateways on today’s market.
We’d also suggest filling in the format the top of this page. Tell us what you’re looking for in a merchant account, and you’ll receive tailored quotes from selected merchant account providers.