The Cost Of Contactless Payment

If you run any kind of retail business then it’s vitally important that you offer customers the widest possible range of payment options. From mobile payments to direct debits and bank transfers, the more choice you offer to people, the more likely they are to shop with you. If you run a bricks and mortar operation then the people buying from you will want to be able to pay quickly and securely in person, using methods such as contactless payments. One factor which needs to be fully understood is the cost of contactless payment from the merchant’s point of view.

Contactless payment machine cost

The cost of operating a contactless payment machine within your business can be divided into several different aspects, one of which is the minimum monthly service charge (MMSC). This is something you need to look out for when deciding which merchant services provider to work with, as the figure charged each month can vary from £10 to £30, and not all merchant services providers even charge a MMSC. The key to calculating whether any MMSC being charged is fair or not lies in keeping track of how many contactless payments your business is likely to accept each month. Any business which accepts multiple contactless payments, or payments which are relatively high value, will find that the transaction fees charged amount to more than the MMSC anyway, meaning it doesn’t become an issue. If you accept very few card payments, however, or multiple payments but only for low amounts, you could find yourself in a position where the actual transaction fee for a month amounts to as little as £5.75, but you’re still contractually required to pay the MMSC of £30.

Authorisation fees

The next contactless payment machine cost to consider is that of authorisation fees. These are fees which some merchant service providers add to every purchase in order to cover the cost of processing the payment. This involves the acquiring bank and card scheme in question – such as Visa – checking that the card hasn’t been reported as lost or stolen, and that the card carrier has sufficient funds in their account to cover the payment. Even if the payment fails to go through, a fee of this kind will still be charged, and is generally a sum of between 1p and 5p, no matter what the size of the transaction was.

Not all providers charge an authorisation fee, but for those that do the merchant in question will have to balance the amount involved with the transaction fees charged. The transaction fee is charged on payments using methods such as debit cards, and is usually a specific percentage of the cost of the transaction. For example, one provider might charge a transaction fee of 0.6% of each transaction, and an authorisation fee of 4p. For a transaction valued at £20, this would mean an overall charge of 16p, made up of 12p transaction fee and 4p authorisation fee.

Another provider, however, might charge a higher transaction rate of 0.75% for payments made by debit card, but no authorisation fee. In this case the charge for taking a contactless payment of £20 would be just the transaction fee of 15p.     

Reporting fees

The data collected by contactless payment machines can be used to create detailed reports of the cash flow moving through your business, making it easier to monitor and even predict sales patterns. Some merchant services providers charge a separate fee for providing online payment reporting of this kind, whereas, for others, it is a service included as part of the standard contract.

We can help

If you’re interested in finding out more about the cost of contactless payment, then get in touch with our financial experts. Discover how GoCardless can help you with ad hoc payments or recurring payments