7 best payment processors for small business

In the UK, 80% of the population makes online purchases, a trend that continues to grow year-on-year. Your business can take advantage of this boom with a seamless online checkout and payment processor to complement in-person sales. 

It’s important to remember that not all payment processors are created alike, with some catering more effectively to small businesses than others.

What does a payment processor do, and why your business needs one

A payment processor facilitates transactions between two parties, such as a merchant and a customer, by transferring information from the customer's bank account or card issuer to the merchant's bank, ensuring a successful payment. They come into play when a customer provides their payment information through a payment gateway or physical terminal, verifies the data, conducts anti-fraud checks, and requests transaction approval from the issuing bank. 

Beyond simply processing transactions, payment processors offer services like reporting tools for sales tracking and advanced fraud protection. They often assist in setting up merchant and special bank accounts that allow businesses to accept credit and debit card payments. 

7 reasons why your business will benefit from a payment processor

• Accept various payment options (bank payments, credit and debit card payments)

• Facilitate online sales

• Improve cash flow

• Enhance security

• Offer convenience to customers

• Provide reporting and analytics

• Handle currency conversion (for international transactions)

There are two basic options to consider when deciding on the best payment processor for a small business, as follows:

• A transaction processor which charges a fee per transaction (via cards or bank accounts)

• Merchant account, which sets a monthly fee, but charges less per transaction

Ultimately which option you go for will depend on the requirements of your business. For example, e-com, hospitality, or retail businesses will likely need to accept the high fees and failure rates associated with card payments due to a payer preference for these payments. Others, such as B2Bs, sole traders and many subscription businesses, may find bank payments more cost-effective and convenient.

In some cases, the best payment processor for a small business might involve a full-scale Point of Sale (POS) system, which, as well as processing payments, manages the inventory for your business, deals with cyber-security matters and helps with issues related to compliance. When it comes to the best payment processor for a small business, we’ve analysed the possible options.

GoCardless

GoCardless is a great payment processor for small businesses with its user-friendly dashboard and streamlined integration. Rather than focusing on card payments, GoCardless is a leader in automated bank payments. With GoCardless, you can choose from two primary payment options: Direct Debit and Instant Bank Pay.

Instant Bank Pay is powered by open banking to enable one-off, same-day payments.

Pull-based Direct Debit payments are ideal for recurring subscription payments and invoices, putting the merchant in control to reduce costly payment delays and failures. 

GoCardless Direct Debit offers businesses a cost-effective and reliable automated payment collection service with lower fees, higher success rates and more automation than card payments.

Square

Whether you’re launching a website or have an established retail presence, Square makes accepting and processing payments easy. You only need to set up an account and purchase a virtual terminal or card reader to use online or in-store. 

You’ll then be able to accept Chip and PIN cards, mobile payments, credit cards, and contactless payments. Transaction fees vary by payment type, ranging from 1.75% to 2.9% per transaction.

Stripe

Due to its customisation potential, Stripe is often mentioned as one of the best small business payment processors. This all-in-one payment gateway and processor offers plentiful APIs, allowing you to customise your checkout page with the help of a developer and scale up as your business grows. 

There’s also an integrated service if you want basic access to its services. You’ll be able to accept over 135 currencies and multiple payment types, with fees ranging from 1.4% to 2.9% per transaction, plus a 20p surcharge.

WorldPay

WorldPay offers packages for start-ups and SMEs like other small business payment processors on this list. Pick and choose a pricing plan with accompanying equipment to match your needs. This entails a virtual terminal and app allowing online businesses to accept a wide range of international payments, including all major credit cards. If you sell products in person, you can also hire a terminal to support trips to trade shows or fairs and boost your online business. 

One thing to note is WorldPay charges a monthly fee starting at £4.99 per month, in addition to per-transaction costs.

Zettle

Owned by PayPal, Zettle is one of the best online payment processors for small businesses with its comprehensive e-commerce platform. Features include full payment processing, an integrated checkout page, and real-time sales analytics. 

You can also manage inventory and follow up on abandoned shopping carts to improve conversion rates. In addition to credit card processing, Zettle handles invoice payments, including embedded payment links and QR codes. 

Depending on the method and location, fees range from 1% to 2.5% per transaction.

Adyen

Adyen is a good option for small businesses on a budget as it doesn’t charge monthly set-up or integration fees. You’ll only be charged a set processing and transaction fee for every sale. 

This all-in-one gateway takes online payments directly from your website or mobile app. You can also send links by email or text and take recurring subscription payments. A robust fraud protection system keeps customer details safe. 

However, one thing to remember is that Adyen is best for established businesses to generate a minimum of 1,000 monthly transactions.

Opayo

You might have heard of Sage Pay, now known as Opayo, which offers many of the same services. It’s one of the best online payment processors for small businesses due to its tiered pricing plans, fraud screening tools, and extensive customer support. 

With 24/7 phone lines, you can ring up Opayo’s experts to help with any technical issues – a bonus for e-commerce newbies.

Case study

Bigblu, a satellite broadband provider, grappled with the time-consuming and resource-intensive process of managing customer payments. The company dealt with multiple banks to process monthly Direct Debits and high credit card failure rates. This led Craig Allen, Head of Billing & Credit Control at Bigblu, to seek a more streamlined solution: GoCardless.

GoCardless offered Bigblu a single, integrated solution for managing recurring payments. The switch eliminated the need for Bigblu to engage with multiple banks and reduced the administrative burden associated with expired credit cards. Craig notes,

Integrating GoCardless with Bigblu's CRM and billing systems saved the company two hours daily admin time. This allowed the team to focus on improving the service they offer to customers. Moreover, the cost of collecting payments with GoCardless was significantly lower than dealing with individual banks.

The streamlined process also increased the proportion of customers paying through Direct Debit from 12% to nearly 80%. This shift ensured a secure revenue stream and resulted in a 97-98% success rate in collecting payments across all territories.

The success of the initial UK-based integration led Bigblu to expand the use of GoCardless to other territories, including Spain, Portugal, Germany, France, and Italy. To encourage customers to switch to Direct Debit, Bigblu implemented incentive campaigns, such as avoiding a proposed price increase.

A good payment processor like GoCardless can help businesses save time and money by streamlining payment processes, reducing administrative tasks, and increasing the success rate of payment collections. As Craig says,

We can help

With GoCardless, you can switch to Direct Debit and say goodbye to the hassle and stress of chasing invoices and dealing with late payments. Whether it's for one-off or recurring payments, Direct Debit is a simpler, more cost-effective alternative to card payments.

Here's why GoCardless Direct Debit can be the right choice for your business:

• Reliable cash flow: With Direct Debit, your business can establish a regular and predictable cash flow. Unlike card payments, which can fail due to expired cards or lack of funds, Direct Debit ensures that the agreed payment is collected from your customers' accounts on the due date.

• Lower costs: The fees associated with card payments are high, especially for small businesses. Direct Debit, however, often comes with lower transaction fees, meaning you can keep more of your hard-earned money.

• Reduced administrative costs: Chasing unpaid invoices can be both time-consuming and stressful. Direct Debit eliminates this by automatically collecting payments. This reduces the administrative burden and allows you to focus on growing your business.

• Enhanced customer experience: With Direct Debit, your customers won't have to remember to make payments, improving their experience and increasing their satisfaction. This can lead to higher customer retention rates, which are crucial for the growth and sustainability of small businesses.

• Scalable solution: Whether collecting a few payments or managing a large customer base, GoCardless scales with your business. Our Direct Debit solution is designed to grow with you, providing a flexible and robust payment platform.

In a world where online payments are increasingly becoming the norm, GoCardless offers a simpler, more cost-effective alternative to card payments. By switching to Direct Debit with GoCardless, you can say goodbye to the hassle of chasing invoices and losing money on late payments. Embrace a payment solution that's about transactions and building solid and lasting relationships with your customers.

Frequently Asked Questions — FAQs

What payment method is good for small businesses?

Direct Debit is a highly effective payment method in the UK for small businesses, especially those with regular, predictable income streams like subscriptions or memberships. It offers lower transaction fees and promotes efficient cash flow.

For online businesses, a service like GoCardless is ideal. Setting up and supporting one-off, recurring, and international payments is easy. However, the choice ultimately depends on the specific needs of your business, and a combination of several methods might be the most beneficial.

How do small businesses collect payments from customers?

Small businesses in the UK collect payments from customers through various methods tailored to their specific needs. Direct Debit, facilitated by platforms like GoCardless, is a particularly effective option. It allows businesses to collect payments directly from customers' bank accounts, making it ideal for companies with regular and predictable revenue.

GoCardless also provides flexibility for online, one-off, and international payments. This makes it a robust solution for businesses operating in the digital space or looking to expand globally. The selection of a payment collection method should be based on factors such as transaction fees, ease of use, and the business's specific requirements.