A Comprehensive Guide to Merchant Services for Small Businesses in Europe

Merchant Services for Small Businesses in Europe

Ecommerce accounted for more than €717 billion in Europe last year, but if you want to take advantage of this thriving market, you need the right merchant services. We’ve developed this guide to help you get started in any of the major European markets, whether you’re building your online business in the DACH region, Benelux, Scandinavia, Eastern Europe, or even the United Kingdom.

What Are Merchant Services?

The term “merchant services” refers to a suite of financial services allowing online businesses to accept credit card payments, debit card payments, and alternative payments from remote customers. Your merchant services will typically include:

  • A merchant ID, your unique identifier as an online merchant.
  • A merchant account, the bank account established for your business that allows you to process payments.
  • A payment gateway, the encrypted channel through which credit and debit card data travels during a payment transaction. The merchant provider also notifies the customer of payment acceptance by transmitting that information through the gateway. Note that not all service providers offer a payment gateway; in some cases, this service must be purchased and configured separately.
  • The ability to accept debit cards and credit cards, including Mastercard, Visa, JCB, China UnionPay, and more. Whether your customers are paying with business debit cards, foreign currencies, or alternative payment methods, you should be prepared to accommodate them. Avoid any provider that doesn’t support international payment processing to foreign markets.
  • A merchant dashboard, which includes recent and long-term transaction data and analytics that you can use to monitor sales trends, review suspicious transactions, and improve your business.
  • Fraud and chargeback mitigation tools, which work around the clock to monitor your sales in real time and help you to minimise problematic e-commerce transactions.

A typical merchant services provider will charge a transaction fee (usually a small percentage), and some will also impose a monthly subscription fee.

How to Choose the Best Merchant Services for Your European Business

For businesses operating within the European Union, the following features are essential in a merchant services provider.

The ability to accept multiple currencies and payment methods

This is paramount. There are about 400 people living in 27 countries throughout the European Union, 66 million more in the UK, and billions across the world. The more payment methods you can process, the larger your customer base will be.

Premium security protocols

Cyberattacks in Europe have doubled since the COVID-19 pandemic, and ecommerce businesses are prime targets. To combat this alarming trend, you need a merchant services provider that is 100% PCI-compliant and that uses advanced SSL encryption protocols to secure customer data.

At Unicorn Payment, our secure gateway is SHA-256 encrypted, and every transaction is reviewed by our state-of-the-art fraud scrubbing technologies. We never skimp when it comes to security policies.

An all-in-one payment solution

If you have to purchase your payment gateway and merchant services separately, you’ll typically end up paying more. And in the event of a dispute, it can be difficult to know whether to work with the merchant services provider or the gateway provider.

The best way to avoid these frustrating and costly problems is to look for an affordable all-in-one solution that covers all of your payment needs.

Ease of use

Look for a provider that offers free integration assistance. The setup should be quick and easy, relying on only a quick plug-in or API installation, and your mobile dashboard should be user-friendly and easy to access from any desktop or mobile device.

This is especially important for small businesses, because chances are you don’t have a dedicated team of developers who can keep complex payment systems up and running around the clock.

Virtual terminal solutions

If your small business needs to accept MOTO, in-person, or other transactions outside of the usual online checkout process, make sure to work with a provider that offers a virtual terminal. It’s like a digital credit card terminal that allows you to manually input card information securely, such as for card-not-present transactions.

In addition, you might also want to opt for a merchant services provider that offers a digital wallet or e-wallet solution. Recent data reveals that digital wallets (like PayPal and Alipay) are now more popular than credit cards for European consumers shopping online.

Customers love the quickness and convenience of being able to check out quickly without manually entering card information, and these payment processing solutions have taken on new meaning as more and more consumers seek contactless payments in the age of COVID-19.

Paying for Merchant Services in Europe

When choosing a merchant services provider, you’ll find that there are three major pricing models, and it’s important to understand how each one works.

Tiered pricing: The tiered pricing model imposes a different transaction fee for qualified, mid-qualified, and non-qualified transactions. Non-qualified transactions have the highest fees while qualified transactions have the lowest fees. Unfortunately, it’s at the payment processor’s discretion to decide what constitutes each tier (with factors that include the type of card and the type of transaction). This is the most common pricing method, but it’s also the least transparent.

Interchange plus pricing: Interchange plus pricing is a fluctuating pricing model whereby the merchant pays a different rate for each transaction depending on the interchange rate of that card or transaction type. For example, debit cards tend to have lower interchange fees than credit cards because they’re considered lower-risk (since the customer is paying with immediate funds). It can be confusing to read your statement and estimate your costs when using this model, but it’s more transparent than tiered pricing as the interchange fees aren’t arbitrarily set by the payment processor.

Flat-rate pricing: With flat-rate or subscription pricing, you pay the same transaction fee every time. This is the most straightforward payment model, but it can sometimes come at a higher cost since the financial institutions still have to account for the interchange rates on their end. Often, the payment processor will make up the difference in the form of a monthly membership fee.

The best pricing model will depend on the most common payment methods your customers use, though interchange plus and flat-rate pricing both have their merits. Tiered pricing should generally be avoided if possible.

Things to Avoid When Choosing Merchant Services for Your European Small Business

When searching for a payment processor in Europe, always read the fine print and avoid the following.

Hidden fees

As previously noted, most providers will charge a per-transaction fee and a monthly maintenance or subscription fee. But some will also add hidden fees like wholesale/base fees, markup fees, service fees, statement fees, processing fees, incidental fees, foreign handling fees, PCI compliance fees, and various penalties.

Note that many payment processors use a tiered pricing model whereby different transactions incur different fees depending on the transaction type. Make sure you know exactly what you’re paying, and watch out for companies that advertise low-cost merchant services while imposing a wide range of fees that aren’t initially disclosed. As a small business, you don’t want to pay any more than you have to.

Convenience fees

Many merchant services providers in North America and other regions still impose—or allow merchants to impose—convenience fees for customers who pay with a credit card.

But in the European Union and the United Kingdom, these types of surcharges are illegal as of January 2018. If you find a foreign payment processor that automatically imposes these charges on credit card customers, you should avoid them altogether.

Payment aggregators

A payment aggregator is a third-party middleman that processes online payments on your behalf using its own merchant account and payment gateway.

Companies like PayPal and Square are well-known examples in the digital payments industry. As a transaction is processed through the payment gateway, the aggregator appears as the merchant (and not you). The aggregator then transfers the funds to your account.

Aggregators appeal to a lot of small businesses because of their easy payment structure and integration, but be warned. These services can be risky for established businesses because the aggregator assumes all risk on your behalf (and will often freeze your account without warning if any suspicious card payments occur), and they can be costly because you can’t negotiate better rates for high transaction volume.

Always go with your own dedicated merchant services; it’s better for customer service and for your long-term brand-building efforts. When you consider that there are millions of businesses vying for the same customers, you don’t want to put yourself at any sort of disadvantage.

How to Integrate Your Merchant Services Into Your Store

Once you’ve selected a merchant services provider, you’ll need to integrate the solution into your store. This can sometimes be accomplished by installing an API or a custom piece of HTML code on your website, or it may be accomplished by installing and configuring a plug-in or extension that’s compatible with your shopping cart solution.

For example, if you use WooCommerce, many payment processors will allow you to download and activate their custom WordPress plug-in. Then you just have to configure the plug-in from your WordPress dashboard, often by entering your merchant services login information and entering your unique API key.

Your payment processing provider should help you with the initial setup. This is a service that Unicorn Payment offers free of charge to help you ensure that there are no disruptions to your cash flow.

Get the Merchant Services You Need

Eurostat data reveals that 32% of European consumers shopped online 1 or 2 times in the last three months, and 16% shopped at least six times in the same period. In addition, J.P. Morgan notes that the ecommerce industry trends in Europe remain strong. The European nations are experiencing an ecommerce gold rush, and now is the perfect time to equip your small business with everything it needs to accommodate this growing online sector.

So while you’re figuring out your business loans, marketing plans, accounting software, and product lines, remember that dedicated merchant services are a must for online business owners, and you need a solution that’s affordable, transparent, easy to implement, and all-inclusive. Once your services are up and running, you can start reaping the rewards.