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Third-party payment processors vs merchant accounts

When it comes to e-commerce and accepting credit card payments, there are two different types of services on offer: dedicated merchant accounts and third-party processors.

What is a third-party payment processor?

A third-party processor allows e-commerce businesses to accept online payments without the need for a merchant account of their own. Instead, they let businesses make use of their own merchant account But, it has to be under their terms of service.

With this type of service, payment processing is outsourced to a third party by the merchant. When a customer is ready to make a purchase, they’ll be redirected to a check-out page hosted by a third-party provider.

This way, there’s no need for the merchant to purchase and install payment gateways or SSL certificates. Any sensitive personal data is entered on the third-party server, which means they’re responsible for handling it securely. PayPal, Amazon Payments and Google Checkouts are a few examples of the better-known third-party service providers. 

The problems with third-party credit card processors

  • Security: Third-party payment processors do offer security measures - but they don’t  offer as much safety assurance as merchant accounts.
  • Lack of customer service: While the simple set-up of third-party processors may be appealing, the downside is you may not be able to get help with any problems right away. Sage UK’s customer service team is available 24 hours a day, 7 days a week.
  • High transaction fees: You might think a third-party processor should be cheaper but their transaction fees tend to be significantly more expensive. These fees can be as high as 3% - much higher than the average merchant account rate.
  • Appears less professional: Regular merchant accounts are usually deemed to be more trustworthy than less secure third-party payment processors.

The benefits of having a merchant account

If your business is your primary occupation - or you intend it to be - consider a merchant services account. This will allow you to set up a dedicated online payment processing solution. You can do this when setting up your online store - or when sales volumes increase enough to justify it.
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Save time and money

With faster payments and automated processing, you’ll save yourself time and hassle as well as improve your cash flow. You also don’t have to enter payment details manually on your system like most third-party processors.
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Give your customers the flexibility of paying online directly from invoices. You’ll never have to wait for cheques to arrive by mail.
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Highest level of security

Our merchant accounts feature PCI-compliant security and encrypted credit card processing, including Card Verification Value (CVV and CVV2).

Simple, smart payment solutions for your business

Sage payment solutions go further than third party processors. We help you get paid, make payments, and manage your money.

Get advice for growing your business with a merchant account