How to take payments online

Looking to take card payments online or set up Direct Debits from your customers? Here’s how to equip your website with secure online payment capabilities...

In this article, we’ll explain how to:

Perhaps you’re starting an online shop, and are keen to sell your products, services or subscriptions over the world wide web. Or maybe you’ve started a charity, and would love to gather donations digitally.

Whatever your reason, when it comes to taking payments online, there are plenty of options available to you – and some are cheaper and easier than others.

Whether you’re looking to take debit card payments online or would like to set 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, take Direct Debits, or both:

Debit and/or credit card payments

Paying for something online using a debit or credit card is undeniably convenient for the customer, and the go-to payment option for ecommerce businesses that require instant payment in exchange for their wares.

Click here to skip to options for accepting card payments.

Direct Debits

A Direct Debit is set up when 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.

While 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, regular charitable donations and B2B invoicing.

Click here to skip to options for accepting Direct Debits.

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):

  1. Open a merchant account
  2. Set up a payment gateway

How to 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, which you can read more about here. With this in mind, we’d advise shopping around to find the contract that suits you best.

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 fitting providers.

How to 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 the online realm’s version of a card machine.

Popular examples of companies that provide payment gateways include:

  • PayPal
  • Worldpay
  • 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.

To find the right option for you, we’d recommend checking out our guide to the best payment gateways for UK entrepreneurs, 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.

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:

Online PSPs will typically charge you either a percentage of each payment made, or a fixed cost each time a transaction occurs.

Taking Direct Debits online

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:

    01 | Directly, yourself. The cheaper option, Bacs recommends this for larger businesses with more payments to process
    02 | 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

An 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 an 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.

Jargon buster

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:

  • AccessPay
  • Bottomline Technologies
  • Cashbook Ltd
  • Elseware
  • Interbacs
  • Smarterpay
  • WPM

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 bureaux 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 bureaux can be downloaded from this page of Bacs’ website.

What’s next?

In this article, we’ve covered the ways in which you can 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, we would advise you take a look at our guide to the six best payment gateways available to UK entrepreneurs at the moment.

We’d also suggest filling in the form at 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.