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Cost to merchants

The pricing for transactions or card acceptance that merchants will negotiate with their acquirer is known as their merchant service charge (MSC).

It is not possible to provide facts and figures on pricing as this will depend on the nature of a merchant’s business and how it operates; pricing will be decided by negotiation between the merchant and its prospective acquirer. However, we can provide information on the key elements involved in pricing to help merchants understand the basis on which pricing is determined and how a MSC is calculated.

As with all costs to merchants they will want to negotiate the lowest rates for their card acceptance devices. It is worth reflecting on how cards could improve a merchant’s business when making a judgment as to whether accepting them represents good value for money.

Below are a few areas to consider:

  • By not accepting cards, a merchant may be at a competitive disadvantage.
  • Cards are a highly effective way of taking a payment. Merchants should consider what would be required to take cash or cheques, for example providing change and making sure any notes are not counterfeit, and banking the takings.
  • With a comprehensive statement of what has gone through the terminal merchants can easily track sales and create a better understanding of their customers’ payment preferences.
  • An acquirer's service may also include access to a comprehensive call centre to help merchants experiencing difficulties with their card transactions e.g. if a merchant’s acquirer-owned terminal is not connecting properly, the acquirer will advise what course of action should be taken. In addition, the acquirer will help with any requests for information or chargebacks made on card transactions it has accepted.
  • With card purchases credited directly to merchant’s bank accounts by direct debit, merchants can track sales on a daily basis to spot the busiest times in the week and staff accordingly.
  • An agreed MSC, enables merchants to easily track their card processing costs and budget for these.
  • The MSC is taken by direct debit from a merchant’s bank account thereby reducing administration.

Typically, these are some of the other costs an acquirer may levy:

  • Joining fees or set up fees – to cover the costs of setting up a new account.
  • Minimum monthly service charge (MMSC). This is a minimum fee which will be applied by an acquirer where their merchant service charges (MSC) for accepting cards during the month is less than the MMSC. For example, with an MSC of £17.50 for that month and a MMSC of £20, an acquirer would make a charge of £20 for the month. Over time, as merchants' businesses grow, they are less likely to pay a MMSC.
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