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February 4, 2022

Taking card payments: a beginner’s guide

By: Peter Gregory

Want to make it easy for your customers to spend money with you? Then you need a card machine! 

Whether you’re a brand-new clothing startup or a fashion designer who occasionally sells items at trunk shows, there’s never been a better time to start accepting card payments. But which card machine do you go for? What do you have to do to get set up and what’s the best system for your business?

In this beginner’s guide for clothing businesses, we’ll help you navigate the card payments maze! We’ll explain the main differences between taking card payments online and face-to-face, help you decide which company you should go with for your card machine and give you a quick overview of the costs and compliance issues you need to expect. 

Taking Card Payments Online:

When a shopper wants to buy from you online, your website needs to send that shopper to a page where they can enter their card details safely. This kind of secure, encrypted payments system requires a lot of IT knowledge to build and maintain. 

Thankfully, these days, you don’t have to set up these card payment pages yourself! A lot of online platforms have built-in card payment systems that you can use. The best card payment system for your business will depend on how your online shop is set up:

  • Marketplace sites like eBay and Amazon give you the tools to set up an online shop in about an hour. When someone buys something from you on a marketplace site, the website handles the shopper’s card details securely, takes the money on your behalf, then sends you the money (less commission and fees) a few days later. It’s very simple. As long as your business has a bank account and an email address, you can start selling very quickly.
  • E-commerce platforms like Shopify and Squarespace offer the same sort of built-in card payments services, but you sometimes have to pay extra for a premium hosting package to get the best rates. There will still be fees and commission rates to pay on each transaction, too. Some platforms allow you to hook up your own third-party card payments system, so you can start on the ‘house’ payments system and upgrade or switch when the time is right.  
  • DIY online shops are much more complex. If you have built your own bespoke website, then you will have to connect your website to a separate payments portal. This can involve a lot of different technical steps, security certificates and banking forms. If you know what you’re doing, you can save a lot of money on fees and commission by building everything yourself, but the risks are higher and everything will take longer to set up.

If you’re just starting out, our advice is to keep it simple and go for whatever out-of-the-box solution is offered to you. You can always upgrade to a more advanced card payments system at a later date. 

Taking Card Payments Face-to-Face:

If you’re standing in front of your customers when they buy clothes from you, then you are selling face-to-face and you will need a card machine. There are lots of card machine options to consider: some have receipt printers and LED screens built-in (PDQ machines or chip and pin terminals) and others are the size of a keyring (these smaller terminals are ideal for contactless transactions). To figure out which card machine option is best for your business, you first need to ask yourself: what kind of internet connection have you got?

If you have a landline internet connection, for instance if you rent a shop or if you sell from a concession in a department store, then you can plug your card machine into the wall. This means that you don’t need to worry about battery life, mobile signal or wifi range. Any PDQ machine on the market will work for you. You just need to check that it can talk to your till (also known as ePOS).

If you rely on mobile internet, you’re probably selling from a weekend pop-up, market stall or exhibition space. For this kind of business, you need a lightweight card machine that can take card payments without being physically plugged in to anything. Your card machine either needs to have its own SIM card or it needs to be tethered to your mobile phone. It also needs to have enough battery life to last you a full day of trade. 

You might think that a traditional PDQ machine would be cheaper than the smaller mobile-ready options, but these days that’s not always the case. If you’re mainly selling at festivals, markets and weekend concessions, then a mobile card reader can work out much cheaper. 

How difficult is it to get a card reader?

It’s not hard to get a card reader, but you have to make sure you choose the right structure for your business. There are two main ways that you can set yourself up with a card reader. You can talk to your bank about getting one, or you can sign up to a third-party card machine provider

Setting up with your bank:

You might feel more comfortable setting up a card machine with your bank. As a rule of thumb, card machines linked to your bank take longer to set up, but they can work out cheaper per-transaction in the long run. 

Before you can get a card machine, most bank-based card payment systems will require you to get a special type of account called a merchant account. A merchant account isn’t like a normal bank account. It is basically an added layer of security that card networks like VISA and Mastercard want you to have before they’ll let you take payments from their cards. You pay your bank a set monthly or annual fee for a merchant account, and in exchange you are given a merchant ID. You then share this merchant ID with the provider of your card machine, and they set your business up on their systems. 

If your card reader ishandling thousands of pounds every day, then a merchant account could save you a lot of money in commission fees and transaction costs. You could potentially get card-based payments into your normal bank account much faster, too. 

Having said all that, if you’re running a small clothing startup, then you’re probably better off opening an account with a third party payment facilitator service. It’s much simpler and faster.

Using a third party system:

Brands like Sumup, iZettle and Square are all third-party card payment systems known as payment facilitators. If you’re still a small business, just testing the waters or if you only expect to need a card machine for a couple of days a month, a payment facilitator (sometimes called ‘PayFac’) is probably all you need. 

Payment facilitator’s card machines work in the exact same way as ‘normal’ machines, but these companies use their own merchant IDs to process each transaction. You don’t need to set up a merchant account of your own, which saves you money and time. 

When your customer uses the card reader in your shop, they are technically paying the payment facilitator, who then handles the complex financial side of the transaction before passing the money on to you. Third party payfacs charge a fee for their card processing services, and it’s normally more expensive per-transaction than if you set yourself up with a merchant account at your bank. You also need to expect to pay for equipment up-front (card machines, receipt printers, mobile chargers, wifi boosters and so on). 

Which card reader is better: bank or third party?

So which option is better? A PDQ card machine backed up by a merchant account at your bank, or a third-party app like Sumup, Square or iZettle? We spoke to a cross-section of our customers and there’s no clear pattern or preference on this. Whatever you do, you will need to pay a little money for the privilege of taking card payments, and either way it will probably take a few days for money to land in your account. The decision is up to you.

One word of advice: if this is your first card machine, avoid long-term contracts. You don’t know how many card transactions you’ll have to handle in a typical day, or even how many devices you’ll need, until you’ve had a machine on the go for a few months. Pick a simple, scalable option, even if it costs you an extra 1% or 2% per transaction. You can always switch providers later on. 

Another thing to watch out for is chargeback fees. Some card processing companies promise a low rate on every sale you make, but then they’ll charge whopping penalties an any refunds you have to process. In the clothing business, refunds happen more frequently than almost any other industry. Make sure you factor in the cost of returns before you commit to a card payments system.

AML (Anti Money Laundering) and ID Checks

When you set yourself up to take card payments, you will inevitably be asked to complete a few ID checks. It doesn’t matter if you sign up with a high street bank or a third party app — by law, whoever is handling card payments for you needs to know that you are who you say you are. 

This is one of the areas where a few of our customers got caught out. Some payment providers will ask you for some very basic information and then allow you to start taking card payments. What they don’t always tell you is that your account might have some limits on it until you complete some more in-depth ID checks. 

Some payment providers will let you start taking card payments in a matter of hours and all you have to do is fill in a few forms online. You might not get asked for photos of your ID or authorisation from your bank up-front. That doesn’t mean that you can skip the ID checks completely — it just means that your ID will be checked at a later date. Typically, these kinds of quick-start-up card payment systems won’t release money to your business bank account until you pass the relevant fraud checks. 

Other systems will ask you for a bit of information up-front (photos of your ID, companies house information etc), but they will put a limit on how many card transactions you can process in a single day. These systems can be really frustrating, as you normally don’t find out that there is a limit on your account until you’re half-way through a really busy day of sales and your machine stops working.

The best way to avoid problems like this is to read the terms of business on your card machine providers’ website carefully. Scan and sign every document you’re asked for as soon as you possibly can, and log in to your dashboard regularly to make sure that there’s nothing you haven’t done. 

Always invest in a well-known card machine brand

If you want to accept card payments, there’s one other option that we haven’t discussed here, and that is using your phone as a card reader. We have heard about smartphone apps that let you turn your phone into a contactless payment device, and we thought that some of our customers might have tried this already. When we spoke to a few of them for this article, we were surprised to find that nobody has done this successfully yet. 

The general feeling amongst our clothing startup customers is that shoppers are nervous about touching their card against somebody’s smartphone. It doesn’t feel safe. In fact, shoppers are nervous about using their card if they don’t recognise the brand name of the chip and pin machine. 

If you have a choice, try to pick a recognised brand name when investing in a card machine. It might cost a few pennies more, but it will help reassure your customers and make more sales. And at the end of the day, that’s the main reason for taking card payments in the first place! 

Let us know how you get on, and if you need labels, you know who to call!

Thanks for reading!

Pete

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