Experience with merchant accounts / rates / pricing models

[Ironic Namesake]

This may be a long shot - just wondering if anyone with a Ltd company here has been involved with setting up new merchant accounts for e-commerce recently?

I've been looking at providers recently and researching online has proven tricky and there's a lot of older information out there, with of course rates constantly changing those don't seem to be too relevant.

Then there's the added confusion of 2 different pricing models being used : Bucket and IC++ ... the scheme fees don't seem to be public which make it difficult to compare one set of providers to the others.

So if anyone is in the know - what rates for processing cards are considered to be "good" currently? I expect initial quotes are probably higher than they should be and are open to negotiation ... although the ones I've spoken to so far haven't been to interested in budging from their initial quotes.

 

[Iamzod]

I work in merchant services and it's amazing how many companies go for larger expensive providers, even OCUK are probably being ripped off using "Braintree" which I believe is part of Paypal.

The interchange fees are published for European countries but it gets trickier when looking at countries outside the EU, scheme fees will vary from one merchant account provider to the next but they will be broadly similar.

I presume by "Bucket" you are referring to blended pricing which about 95% of providers seem to prefer, this is the simplest pricing method & therefore easier to sell but as a provider has to ensure it is covering all card types in their pricing structure it's also generally the most expensive, due to it's complexity most companies can't be bothered to train their staff in how I++ works & would rather them just use off the shelf pricing to smash through leads at a quicker rate.

Interchange ++ as it sounds like you are aware is based on the cost of processing a transaction with a margin added on, you will usually end up with a cost plus a flat margin pricing model which can work well if you go in armed with the interchange rates, generally speaking on domestic UK consumer Credit Cards the rates are not much more than 0.11% (Again off the top of my head) higher than the equivalent consumer Debit Card, therefore if someone is charging you 0.38% on a debit card & 0.9% on a credit card they are making a massive margin on Credit Cards. International rates should also follow the same Cost + Margin structure which means you will benefit from payments taken on cards issued in countries with lower interchange rates rather than a blended model which has to cover a worst case scenario & therefore often just adds something like 1.5 - 2% on international transactions.

It is worth noting that many EU countries have lower interchange rates than the UK, if you take many payments from EU countries I'd highly recommend an I++ pricing model if you can get anyone to actually quote it for you.

Personally, I won't quote "Blended" pricing any more and will even offer I++ to a coffee shop processing £2k a month, it means I can squeeze the margins without having to worry about the company making a loss & therefore I don't get whinged at from anyone above.

I'd offer my contact number to quote you myself but I'm not sure if that's against OCUK's terms.

Hope that helps, if you've got any questions fire away!

 

[Ironic Namesake]

I work in merchant services and it's amazing how many companies go for larger expensive providers, even OCUK are probably being ripped off using "Braintree" which I believe is part of Paypal.

The interchange fees are published for European countries but it gets trickier when looking at countries outside the EU, scheme fees will vary from one merchant account provider to the next but they will be broadly similar.

I presume by "Bucket" you are referring to blended pricing which about 95% of providers seem to prefer, this is the simplest pricing method & therefore easier to sell but as a provider has to ensure it is covering all card types in their pricing structure it's also generally the most expensive, due to it's complexity most companies can't be bothered to train their staff in how it works & would rather them just use off the shelf pricing to smash through leads at a quicker rate.

Interchange ++ as it sounds like you are aware is based on the cost of processing a transaction with a margin added on, you will usually end up with a cost plus a flat margin pricing model which can work well if you go in armed with the interchange rates, generally speaking on domestic UK consumer Credit Cards the rates are not much more than 0.11% (Again off the top of my head) higher than the equivalent consumer Debit Card, therefore if someone is charging you 0.38% on a debit card & 0.9% on a credit card they are making a massive margin on Credit Cards. International rates should also follow the same Cost + Margin structure which means you will benefit from payments taken on cards issued in countries with lower interchange rates rather than a blended model which has to cover a worst case scenario & therefore often just adds something like 1.5 - 2% on international transactions.

It is worth noting that many EU countries have lower interchange rates than the UK, if you take many payments from EU countries I'd highly recommend an I++ pricing model if you can get anyone to actually quote it for you.

Personally, I won't quote "Blended" pricing any more and will even offer I++ to a coffee shop processing £2k a month, it means I can squeeze the margins without having to worry about the company making a loss & therefore I don't get whinged at from anyone above.

I'd offer my contact number to quote you myself but I'm not sure if that's against OCUK's terms.

Hope that helps, if you've got any questions fire away!

Thanks for the input - It looks like I’ve found a suitable plan now.

And yes, majority of providers had no interest in quoting IC++, and some surprisingly had no clue about it at all

I had a quick peek at your trust - and what can I say, it’s a small world!

 

[Iamzod]

I had a quick peek at your trust - and what can I say, it’s a small world!

Indeed, your response made me look at your trust too, very small world!