Which is the best and cheapest way to buy offshore merchant services?
Merchant services are an essential purchase for near enough all businesses and business owners will typically turn to their own bank for these services. Unfortunately for business owners, this is not usually the cheapest way to source payment processing.
At first, the difference between deals might seem negligible with just one or two percent difference but those small differences will quickly add up as your business grows. Getting a bad deal on your payment processing can cost you tens of thousands of pounds every year.
In this article, I’m going to look at the most popular merchant service sales channels and touch on how competitive the pricing is.
Banks
Near enough, all banks will sell merchant services to its business customers. If you have a business bank account then most certainly you would have been asked the question about card acceptance by a banking manager or representative.
The fact is that most banks don’t actually own their own merchant service products. Instead, they partner with a card processor and resell their service. RBS and Natwest is a sales agent for Worldpay, HSBC resells Global Payments, Santander uses Elavon and Lloyds and Halifax use First Data.
- So why do business owners trust banks to provide a third-party service? Perception!
- People see banks as reliable and they assume that their staff has extensive product expertise.
- Sadly and surprisingly, that’s not the case.
- There’s one main reason why I would strongly recommend you avoid buying merchant services through a bank: Price.
Card processors love selling through a bank because it’s an easy win as leads are handed on a plate. You see, most businesses will turn to their bank for merchant services and tend to accept their pricing without question, simply because the business owner may be new to the whole process and doesn’t know any better and they assume by going directly to the bank will get them a better deal as it removes any middlemen.
This allows the banks to rack up their fees and make a small fortune off their business customers. Worse still, the banks are given very little wiggle room by the card processors so can’t reduce their fees even if you push them on pricing. This may seem surprising but it's very true.
Merchant bank/Card Processor
The worldwide web has made it simpler for consumers to buy directly from manufacturers or suppliers and cut out the expensive middlemen.
Merchant services are, in theory, the perfect example. Instead of going to your bank and buying a product at an inflated rate, the other option for you is to go straight to the card processor/merchant bank direct and buy from them. That’s one less step in the buying process so it must save you money, right?
Unfortunately not. While cutting out the middlemen should mean a better deal for customers, it’s not always the case.
Card processors are well aware that any business owner who calls them has pretty much decided that they want to use their product. That means they can bump up the price without losing too much business. The price you get direct from a card processor isn’t quite as high as the bank rates but it’s certainly not competitive, especially as a new business owner, as the merchant banks take advantage of this fact.
Now, unlike the bank salespeople, sales staff at card processors do have leeway to negotiate on price. So, if you decide to buy directly through a card processor, negotiate as hard as you can to secure the very best deal possible.
