UK payment processing simplified: A founder's guide to choosing the best payment company

For UK business owners, founders, and online merchants, choosing the right payment processing solution is one of the most critical decisions you will make. But with so many UK payment companies and payment processing services available, how do you find the best payment processor for your SME? This comprehensive guide cuts through the confusion, immediately compares the top UK payment processors, and answers all your key questions so you can make a decision with confidence.

Your UK options: The 4 best payment processing companies for SMEs

1. Wonderful

Wonderful is an innovative UK payment processor that leverages open banking for digital and in-person transactions. Their API integration and mobile POS app offer instant payments and settlements at a low, predictable cost.

Fee structure:

• Flat fee model: Wonderful’s ‘Plus’ plan is priced at £19.99 plus VAT and includes 2,000 monthly transactions. They also offer a free plan for UK-registered charities.
• Additional charges: The fee for transactions outside the bundle is just 1p per transaction. There are no hidden fees or percentage-based fees on sales volume. 

Key Features:

• Instant settlement: Powered by open banking, payments are processed and settled with the merchant's account almost immediately.
• Seamless integration: It can work alongside your existing payment options, requiring no extra infrastructure.
• Built for scale: The flat fee framework means you are not penalised with higher costs as your sales volume increases. 

Ideal for:

Wonderful is a great payment processing solution for small businesses and charities looking for affordable, flexible, and innovative ways to cut transaction costs. 

2. SumUp

SumUp is a popular payment processor for UK SMEs and smaller retailers, known for its easy-to-use mobile card readers and point of sale (POS) systems.

Fee structure:

• Pay-as-you-go: A low, flat rate for all card transactions, with no monthly fees or binding contracts.
• Card reader cost: Pay a one-off fee for the card reader itself. 

Key features:

• User-friendly hardware: Simple to set up and use, with a range of hardware options.
• Flexible payments: Accept contactless, chip and PIN, and mobile payments.
• Reporting and insights: Track sales and monitor business performance from the SumUp app. 

Ideal for:

Small businesses, market traders, cafes, and sole traders who need a simple, reliable, and affordable payment processing service without long-term commitments. 

3. Shopify Payments

Shopify Payments is a payment processing service exclusively for businesses on the Shopify eCommerce platform. It enables merchants to manage payments straight through Shopify, eliminating third-party transaction fees.

Fee structure:

• Integrated pricing: The credit card rates vary by Shopify plan. For example, 2.9% + 30p per transaction on the Basic plan.
• POS rates: In-person rates are slightly lower when using Shopify’s POS system.
• No extra transaction fees: If you use Shopify Payments, there are no additional fees, but external gateways incur a fee. 

Key features:

• Full integration: Ensures a seamless and consolidated experience.
• Built-in fraud analysis: Integrated fraud detection tools help protect your business.
• Multi-currency support: Ideal for UK businesses selling internationally. 

Ideal for:

eCommerce enterprises that use the Shopify platform and need a fully integrated, user-friendly payment processing solution. 

4. Square

Square is a popular payment processor known for handling both in-person and digital transactions effectively. It is a favourite among UK small businesses, individual stores, and restaurants due to its ease of use and flexible pay-as-you-go model.

Fee structure:

• In-person payments: Competitive flat rates per transaction.
• Online and invoice payments: Different flat rates apply.
• No monthly fees: Ideal for smaller enterprises with variable sales volumes. 

Key features:

• Free POS software: Square offers free, comprehensive POS software.
• Hardware options: Provides a diverse selection of hardware options, including registers and mobile card readers.
• No long-term commitments: Its pay-as-you-go model offers maximum flexibility. 

Ideal for:

Small businesses that want a flexible, affordable, and easy-to-use payment processing solution for both online and in-person sales. 

Choosing the right payment processor: A step-by-step guide

How to evaluate payment processing companies

With numerous options available, UK businesses must thoroughly evaluate payment processing companies based on their specific needs. To identify the most suitable choice, consider these key criteria: 

1. Pricing and fee structures
Understanding a payment processor's pricing model is crucial. Some processors offer tiered pricing, allowing high-volume merchants to benefit from lower transaction fees. Compare costs, including transaction fees, monthly charges, and any additional service fees, to find a cost-effective solution that fits your budget.

2. Security and compliance
Robust fraud prevention tools and adherence to industry standards, such as PCI DSS, are essential. A reliable payment processing company should offer advanced security measures including encryption, tokenisation, and comprehensive fraud detection systems to protect both your business and your customers.

3. Integration and scalability
Seamless integration with your existing business systems, eCommerce platforms, and accounting software is key to operational efficiency. Choose a payment processor that can scale with your growth, to avoid the hassle of switching companies later.

4. Customer support and reliability
Responsive customer support is essential, especially for businesses processing a higher volume of transactions. Evaluate a processor’s support channels, response times, and overall reliability to ensure smooth operations. 

Supported payment methods

The ideal payment processor will support the payment methods your customers prefer. Consider whether they support:

• Major credit and debit cards (Visa, Mastercard, etc.)
• Digital wallets (Apple Pay, Google Pay)
• Open banking payments
• Buy Now, Pay Later (BNPL) options
• Recurring billing for subscriptions

Ease of use and setup

The setup process should be as straightforward as possible. Evaluate the payment processor based on these factors:

• Onboarding process: How simple is it to get started and integrated with your existing systems?
  
• Checkout experience: Is the checkout smooth and intuitive for your customers to prevent cart abandonment?
  
• Reporting and analytics: Does the dashboard offer comprehensive, easy-to-understand reporting to help you track sales and monitor cash flow?

UK payment processing rates: What is a competitive price?

Choosing the right payment processor for your UK business involves understanding the costs involved. Grasping the elements that impact pricing frameworks can help you secure the best possible rates, balancing cost with essential services. 

Key elements influencing UK payment processing rates

The cost of payment processing depends on several variables, including:

• Type of business: Certain sectors, often deemed higher risk, may incur elevated fees.
  
• Volume of transactions: Processing larger transaction volumes could qualify your business for reduced rates.
  
• Methods of payment: Card payments, digital wallets, and open banking transactions often have different fee structures.
  
• Service features: Some payment processing companies impose additional charges for features like fraud protection, chargeback management, and premium customer support. 

In the UK card processing sector, typical fees range from 1.5% to 3.5% for each transaction, along with an approximate fixed charge of 20p per transaction. It is also vital to be aware of other potential costs, such as setup fees, monthly fees, and chargeback expenses, as these can significantly affect your total spend.

How to identify the best payment processing rate for your business

A competitive rate should be evaluated based on the full package: the payment processing services, security, and scalability provided by the payment processing company. While many UK businesses focus on finding the lowest transaction costs, it is crucial to consider the following:

• Dependability and speed of settlement: Reliable and fast access to your funds is vital for cash flow.
  
• Measures for preventing fraud: Robust fraud protection safeguards your business and your customers.
  
• Integration with current business systems: Seamless operation with your existing accounting software, eCommerce platform, or POS system is essential for efficiency.

Identifying the best payment processing rate goes beyond just the headline transaction costs. Businesses should prioritise reliability, security, and seamless integration alongside pricing to ensure a smooth payment experience. By evaluating these factors together, UK businesses can choose a payment processor that truly supports long-term growth and operational efficiency. 

Everything you need to know about payment processing in the UK

Here's a deeper look into UK payment processing, including the different payment processing solutions and services available to businesses in the UK. This section covers everything from the fundamentals of how payments work to the technologies and benefits involved.

The flourishing landscape of UK payment processing

The UK payment processing sector is booming, playing a crucial role for UK business owners, founders, and online merchants. Valued at approximately $490.7 billion in 2024 and projected to reach $849.6 billion by 2029, with an impressive annual growth rate of 11.6%, the market underscores the rapid embrace of digital payments by both businesses and consumers.

This vibrant payment processing industry is shaped by a comprehensive network of banks, payment processors, payment gateways, and UK payment companies. Regulated by authorities like the Financial Conduct Authority (FCA), the market responds to rising consumer expectations for simple, secure, and fast digital transactions. For UK businesses, staying ahead of the curve in payment processing technologies is essential to remain competitive.

Navigating key players, understanding emerging payment solutions, and keeping abreast of the regulatory environment, especially regarding aspects like fraud prevention, are all vital steps in choosing the ideal payment processor for your business. A well-informed decision ensures not only seamless transactions but also robust security and full compliance, empowering your business to thrive in our increasingly digital economy.

How UK payment processing works, in simple terms

For UK businesses, payment processing is the system that allows you to accept and receive payments securely and efficiently. Whether your customer is paying by card in a high street shop, using a mobile wallet online, or checking out on your eCommerce site, this service ensures the transaction is handled correctly.

When a customer pays your business, the payment processor begins a series of behind-the-scenes steps. This includes verifying the customer’s payment details, checking for fraud, authorising the payment, and initiating the transfer of funds from the customer’s account to your own. This entire process happens securely and in the background, giving you confidence that the payment has been properly authorised and will be paid into your account.

For UK businesses asking:

How does payment processing help my business?
It enables fast, secure transactions, builds customer trust by offering a seamless checkout experience, and minimises the need for manual handling of cash or bank transfers.

What do I need to start accepting card or digital payments?
A payment processor and often a merchant account are typically needed. Some payment companies combine these into a single payment processing solution, while others may require separate setups. The payment processor handles the transaction, and the merchant account temporarily holds funds before transferring them to the business bank account.

The right payment processing setup enables businesses to accept card, contactless, and digital payments quickly, securely, and reliably, whether a café in Glasgow or a consultancy in Bristol.

The key steps behind every payment

Behind every customer payment is a process with several primary phases. Understanding these fundamentals helps UK business owners and founders grasp how transactions are authorised, secured, and settled, whether in person or online.

The five phases of payment processing

1. Payment initiation: A customer begins a transaction by choosing a payment method, such as swiping their card, entering details online, using a digital wallet, or paying directly from their bank account via open banking.

2. Payment authorisation: The payment processor receives the transaction data and sends an authorisation request to the customer’s bank. The bank confirms the customer has sufficient funds or credit before responding with an approval or a decline.

3. Payment authentication: In this step, the transaction details are verified to prevent fraud. Card transactions require authentication (e.g. CVV code), while Open Banking transactions use Strong Customer Authentication (SCA), typically via a mobile banking app with biometric security, without collecting or storing sensitive financial data.

4. Clearing: Once authorised and authenticated, the transaction details are sent to the acquiring bank. The acquiring bank holds the funds before transferring them to the merchant's account.

5. Settlement: In the final stage, the acquiring bank transfers the funds to the merchant’s account, completing the transaction. While standard settlement can take a few days, faster options are available. Open banking settlements are often near instant.

Key elements of payment processing explained

To ensure a smooth transaction, several key elements work together behind the scenes.

• Merchants: As a merchant, you are central to the ecosystem, receiving payments from customers in exchange for your goods or services.
  
• Customers: Customers are the ones who initiate the payment by submitting their payment information.
  
• Payment gateways: Acting as a secure link between you and the payment processor, gateways transfer transaction details while encrypting sensitive data to prevent fraud. They integrate with your website or point of sale system.
  
• Payment processors: The payment processor manages the entire transaction workflow, including authorisation, authentication, clearing, and settlement, ensuring security for all parties.
  
• Acquiring bank: This bank is associated with the merchant and receives the funds from customer transactions before they are transferred to your business account.
  
• Issuing bank: The bank associated with the customer, which authorises transactions by confirming payment details and ensuring adequate funds or credit are available before releasing the payment.

What are payment processing companies?

Payment processing companies provide solutions and services that facilitate secure and efficient financial transactions between buyers, sellers, and financial institutions. They handle the technical elements of payment processing, which include data encryption, fraud prevention, regulatory compliance, and transaction settlement. By ensuring that payments are authorised, authenticated, cleared, and settled according to UK financial regulations, these companies help businesses maintain smooth and secure payment operations.

While top international players like Visa, Mastercard, and Stripe are integral to digital payments globally, the UK market also features specialised payment processors that cater to specific business needs. Some UK payment companies cater to high-risk merchants, while others provide customised solutions for small and medium-sized enterprises (SMEs), subscription-based businesses, and mobile payment systems.

Your payment processor explained

A payment processor is a company or technology that securely manages card and digital payments between the various financial parties involved in a transaction. Essentially, it is the secure link that orchestrates the communication between your customer’s bank, the card networks, and your business’s bank. In simple terms, it is the service that securely verifies and moves the money from the buyer’s chosen payment method into your business account.

How a payment processor helps your UK business

Whether you run a shop, café, eCommerce store, or take bookings over the phone, you rely on a payment processor to:

• Authorise transactions: Check if the customer has enough funds.
  
• Encrypt payment details: Protect sensitive customer data.
  
• Handle approvals and declines: Confirm whether the bank accepts or rejects the payment.
  
• Settle funds: Transfer the money into your business bank account.

Without a reliable processor, UK businesses would not be able to accept credit cards, debit cards, or mobile wallets like Apple Pay and Google Pay. The right payment processor is therefore vital for running a smooth operation and meeting customer expectations.

The different types of payment processing solutions for UK businesses

To securely accept and manage transactions, UK businesses can choose from a range of payment processing solutions. These provide the necessary technology and infrastructure to facilitate payments across multiple channels, including online, in-store, and mobile devices. By tailoring the solution to a business's specific needs, companies can ensure a seamless transaction experience. Here is an overview of the various payment processing solutions available, along with the different tools and technologies that enable them.

Online payment solutions
eCommerce companies rely on secure payment solutions to handle digital transactions effectively. These typically include online payment gateways, which serve as a link between a merchant’s website and the payment processor. Notable UK payment companies offering gateways include PayPal, Stripe, and GoCardless, which enable businesses to receive payments through credit cards, digital wallets, and direct bank transfers.

In-store payment solutions
Retail point of sale (POS) systems are crucial for managing card and mobile payments for brick-and-mortar stores. POS systems, such as those provided by Square and Clover, enable businesses to accept debit and credit cards, mobile wallets, and contactless payments. Many modern POS systems also incorporate valuable features like inventory management, customer loyalty programs, and real-time sales tracking.

Mobile payment solutions
As mobile commerce grows, many UK businesses are adopting mobile POS solutions that facilitate transactions through smartphones and tablets. These solutions accept contactless payments, QR code transactions, and mobile wallets including Apple Pay and Google Pay. Mobile payment options offer enhanced flexibility for businesses and a seamless checkout experience for consumers.

Integrated payment solutions
Integrated payments offer a single, cohesive solution that unifies payments across online, in-store, and mobile channels. This enables businesses to manage payment processing more effectively, ensuring a seamless and consistent payment experience for customers, no matter how or where they pay.

The essential payment processing services for UK businesses

To facilitate the secure and efficient transfer of payments, UK businesses rely on a range of payment processing services. These services are provided by FCA-authorised payment processors and handle essential tasks such as authorising and managing transactions, preventing fraud, ensuring compliance with regulations, and settling funds, all of which result in smooth and secure transactions for your business.

The key benefits of payment processing services for UK businesses

UK businesses increasingly choose payment processors that offer comprehensive payment processing services with additional features such as fraud prevention, transaction analysis, and dedicated customer support. These offerings are particularly advantageous for small and medium-sized enterprises (SMEs) as they simplify payment management, reduce administrative workload, and eliminate the need to deal with multiple providers.

Simplified operations and enhanced efficiency
Payment processing services manage the entire transaction process for you, from the moment a customer starts a payment until the funds are settled. By handling the complex technical and logistical details, these services enable you to focus on business growth, customer satisfaction, and operational efficiency. The integration of modern technology and compliance into one platform also simplifies payment management.

Strong security and compliance
Modern payment processors use advanced technologies, including encryption methods and payment gateways, to ensure payments are secure. They also help your business comply with UK financial regulations, including the PCI DSS, protecting both you and your customers from fraud and security risks.

Improved cash flow and financial health
Faster fund settlements mean quicker access to your money, improving your cash flow. Transaction analysis helps you better understand your business performance, while the overall operational efficiency contributes to your long-term financial stability.

Support for growth
Contemporary payment processing services offer key features such as seamless integration with eCommerce platforms, solutions for recurring billing, and support for multi-currency payments. As more customers embrace digital payments, selecting the right payment processor is essential for improving customer experience and supporting business growth.

UK payment processing FAQs for your business

What are the best payment processing companies in the UK?

In the UK, top payment processing companies include Wonderful, PayPal, Stripe, Square, and Helcim. The best choice depends on your specific needs, such as cost, speed, eCommerce tools, or in-person payment options.

What is the best real-time payment processor for businesses?

For real-time or same-day payments, consider processors that support instant bank payments, such as Wonderful, Stripe, and Square. Settlement speed can depend on the payment method used.

What is the average cost of a payment processor in the UK?

The average cost is 1.4% to 2.5% per transaction, plus a small fixed fee. Costs vary by business. Open banking options like Wonderful offer a cost-effective alternative with no percentage fees.

Which UK payment processors offer the lowest rates for SMEs?

Wonderful is a strong low-cost option for UK SMEs with fees from 1p per bank payment. Other low-cost processors include SumUp and Square, which offer free hardware and competitive flat transaction rates.

Who are the best UK payment processors for subscription businesses?

Stripe and GoCardless are strong choices for recurring payments. For a low-fee, bank-based option, Wonderful supports instant bank payments ideal for direct customer billing.

Which UK payment processors integrate with accounting software like Xero or QuickBooks?

Square, Stripe, Revolut Business, and Wonderful all support integration with accounting software like Xero and QuickBooks. These integrations often include instant settlement and low-cost bank payments.

What is the best UK payment processor for in-person and online sales?

Square and Zettle offer unified POS systems for both in-person and online sales. For an open banking solution, Wonderful provides a softPOS app and WooCommerce plugin for seamless physical and digital transactions.

Which UK payment processors offer same-day or instant settlement?

Tyl by NatWest, Revolut Business, and Wonderful all offer near-instant settlement. This is a key feature for businesses needing better cash flow control. Settlement speed may vary by payment method.

Are there any UK payment processors that work without a contract?

Yes. Wonderful, SumUp, and Square offer pay-as-you-go, contract-free services with transparent pricing. Wonderful's open banking solution also removes hidden card or gateway charges.

Which UK processors support Apple Pay and Google Pay for contactless payments?

Square, Zettle, and Takepayments support Apple Pay and Google Pay. While Wonderful focuses on bank-based payments, its softPOS app provides contactless functionality on compatible devices.

Which UK payment processors are FCA regulated?

Many top payment processors, including Stripe, SumUp, and Wonderful, are regulated by the Financial Conduct Authority (FCA). This ensures compliance with UK payment rules and protects both businesses and consumers.

How should new businesses approach payment processing?

New businesses should assess their transaction volume and payment method needs. Compare fees, security, integrations, and support from various processors to find the best fit.

How do payment processing companies work?

Payment processing companies manage the technical aspects of transactions, such as authorisation, authentication, and settlement. They facilitate the secure transfer of funds between merchants and consumers.

What is the FCA in England?

The Financial Conduct Authority (FCA) is the UK's financial services regulator. It ensures that businesses, including many payment processors, operate fairly, transparently, and are accountable to consumers.

Making your final choice

Payment processing services are essential for running a modern business successfully. As we have seen, they impact everything from your operational efficiency and customer satisfaction to transaction security and overall financial health. When selecting a payment processing company, the right choice should balance cost-effectiveness, reliability, and security with your specific business needs.

By thoroughly evaluating reputation, range of services, security protocols, and pricing models, UK businesses can choose a trusted and affordable payment processor that guarantees smooth transactions and sustained growth in an increasingly digital economy.

Key takeaways for UK businesses:

• Prioritise a payment processing solution that aligns with your specific needs, whether that is online, in person, or both.
  
• Go beyond just the headline transaction rates. Look at the total cost, including any monthly or hidden fees.
  
• Ensure the payment company offers robust security, regulatory compliance, and excellent customer support.
  
• Choose a payment processor that can scale with you and integrate seamlessly with your other business software. 

Ultimately, the right payment partner empowers your business to succeed. By following the guidance in this guide, you are well-equipped to make an informed decision and find the ideal payment processing solution to support your growth journey.

Photo by Christiann Koepke on Unsplash