Best payment processors UK 2026

Business

TL;DR

Payment processors enable UK businesses to accept debit and credit card payments in person, online or by phone. Fees are made up of interchange (set by card schemes), scheme fees and the processor's own margin. Flat-rate pricing is simpler to budget; interchange-plus pricing is cheaper at higher volumes. All processors handling UK card payments must be authorised by the Financial Conduct Authority or registered as a payment institution. Check the FCA Register before signing up.

Accepting card payments is now a baseline expectation for almost every UK business. The UK Cards Association estimates that card payments represent over 85 percent of all retail transactions by value. Choosing the wrong payment processor can cost a small business hundreds of pounds per year in excess fees or trap it in a long-term contract with punitive exit terms. Understanding how the fee structure works is the most important step before comparing providers.

The UK payment processing market divides broadly into three categories: traditional merchant accounts (long-term contracts, lower per-transaction rates at volume, separate hardware costs); payment facilitators or PayFacs (no merchant account required, flat-rate fees, faster onboarding); and integrated payment platforms that bundle card processing with point-of-sale software, inventory management and reporting. This guide covers how to evaluate each model, the regulatory requirements that apply to all processors, and the key questions to ask before committing.

Key facts (2026)

All businesses providing payment services in the UK must be authorised or registered as a payment institution by the FCA under the Payment Services Regulations 2017 (PSR 2017); check the FCA Register at register.fca.org.uk before using any processor.
Interchange fees for UK consumer debit card transactions were capped at 0.2 percent and credit cards at 0.3 percent under retained EU law; the cap remains in force as of 2026 (PSR 2015, retained in UK law post-Brexit).
Surcharging consumers for paying by personal debit or credit card is prohibited in the UK under the Consumer Rights (Payment Surcharges) Regulations 2012, as amended by the Payment Services Regulations 2017.
Strong Customer Authentication (SCA) is mandatory for most online card payments above £25 in the UK, implemented under the PSR 2017 and the FCA's SCA technical standards (in full force from March 2022).
The Financial Ombudsman Service can adjudicate payment service disputes for eligible small businesses as well as individual consumers (FOS jurisdiction extended to small businesses under the PSR 2017 implementing rules).

How payment processing fees are structured

Every card transaction involves three cost layers. The first is the interchange fee, paid by the acquiring bank (the merchant's bank) to the issuing bank (the customer's bank). Interchange rates are set by the card schemes - Visa and Mastercard - and capped by regulation for consumer cards in the UK at 0.2 percent for debit and 0.3 percent for credit. The second layer is the card scheme fee (sometimes called an assessment fee), charged by Visa, Mastercard or Amex directly and ranging from 0.1 to 0.3 percent. The third layer is the processor's own margin, which is where pricing models diverge significantly. Flat-rate processors roll all three layers into a single percentage (for example, 1.69 percent for all Visa and Mastercard consumer cards). Interchange-plus processors pass through the first two layers at actual cost and add a fixed margin on top - typically 0.1 to 0.4 percent plus a small per-transaction pence charge. Flat-rate pricing is predictable; interchange-plus is generally cheaper for businesses processing above approximately £15,000 per month.

Payment facilitators versus traditional merchant accounts

A payment facilitator (PayFac) such as Square, SumUp or Zettle onboards merchants under its own master merchant account. This allows instant sign-up - usually within minutes - without a formal underwriting process. The trade-off is higher flat-rate fees and the risk of account holds or terminations if the PayFac's risk system flags your business. A traditional merchant account, provided through a bank or independent merchant acquirer, involves a more thorough application and credit check but offers lower rates at volume, a dedicated relationship and contractual protections that PayFac terms typically do not match. Businesses turning over more than approximately £10,000 per month in card payments will usually find a traditional merchant account cheaper over a 12-month horizon, even accounting for monthly account fees and terminal rental costs.

Settlement times and cash flow

Settlement time - the delay between taking a payment and receiving the funds in your business bank account - varies from same-day to three working days depending on the processor and your pricing tier. PayFac providers typically settle the next business day for most merchants, but can hold funds for up to seven days for newer accounts or high-risk transactions. Traditional merchant acquirers often offer same-day or T+1 settlement at standard rates, with T+3 on entry-level accounts. For cash-flow-sensitive businesses, settlement speed is a meaningful differentiator. Some processors charge a premium for faster settlement - factor this cost into your comparison alongside the headline transaction rate.

Online payments: gateway fees and SCA compliance

For e-commerce businesses, a payment gateway sits between the website checkout and the payment processor, routing transactions securely. Some processors bundle the gateway with the merchant account; others charge a separate monthly gateway fee of £10 to £30. Strong Customer Authentication (SCA) is mandatory in the UK for online card transactions above £25, requiring two-factor authentication at checkout in most cases. Processors must support 3D Secure 2.0 (3DS2) to comply with SCA requirements. Non-compliant transactions may be declined by the issuing bank. When evaluating online processors, confirm that their gateway is 3DS2-compliant and that the authentication flow is tested on mobile devices, where friction at checkout disproportionately increases cart abandonment.

Contract terms: rolling monthly versus long-term commitments

PayFac services are almost universally rolling monthly contracts with no minimum term. Traditional merchant accounts typically run for 12 to 36 months with an early termination charge (ETC) that can be several months' minimum monthly fees or a percentage of projected processing volume. Before signing any contract, calculate the maximum ETC if you need to exit early, and check whether the contract permits the provider to change rates mid-term (a common clause in multi-year agreements). The FCA's rules on payment services require clear pre-contract disclosure of all fees, but contract length and ETC terms are not specifically regulated - so read the small print carefully or ask your accountant to review before signing.

Verifying FCA authorisation before signing up

Every payment processor accepting or transmitting money in the UK must be authorised or registered as a payment institution under the Payment Services Regulations 2017, or hold an e-money institution licence. Check the FCA Register at register.fca.org.uk before onboarding with any processor. The register shows the firm's authorisation status, permitted activities and any regulatory actions. Using an unauthorised firm for payment processing not only puts your customer data at risk but also means you have no recourse to the Financial Ombudsman Service if a dispute arises. Some overseas processors operate in the UK under temporary permissions or passporting arrangements; confirm the specific regulatory status before proceeding.

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Frequently asked questions

Can I charge customers extra for paying by card?

No. Surcharging consumers for paying by personal debit or credit card has been illegal in the UK since January 2018 under the Payment Services Regulations 2017. You can pass on processing costs through your general pricing but cannot apply a separate card payment surcharge. The prohibition does not apply to business credit cards, where surcharging remains permitted provided it does not exceed your actual processing cost for that transaction type.

What is PCI DSS and do I need to comply?

PCI DSS (Payment Card Industry Data Security Standard) is a set of security requirements for businesses that store, process or transmit cardholder data. All businesses accepting card payments must comply with PCI DSS at the level appropriate to their transaction volume. PayFac providers typically handle PCI DSS compliance on behalf of their merchants for card-present transactions. For online payments, you must complete a Self-Assessment Questionnaire (SAQ) annually and may need quarterly network scans depending on your integration method. Your processor should guide you through the compliance process and may charge a monthly PCI compliance fee.

What happens if my payment processor holds my funds?

Payment processors and PayFacs can place a hold on funds if they identify unusual transaction patterns, a chargeback rate above their threshold, or activity that does not match the stated business type at onboarding. The duration of a hold varies from a few days to 90 days or more. If your funds are held, contact the processor immediately, provide any requested supporting documentation (invoices, delivery confirmations), and escalate to the Financial Ombudsman Service if the hold is unreasonable and the processor fails to resolve it within eight weeks.

What is a chargeback and how does it affect my business?

A chargeback occurs when a cardholder disputes a transaction with their bank and the bank reverses the payment. The merchant loses the sale amount plus a chargeback fee, typically £10 to £25 per incident. Excessive chargeback rates (generally above 1 percent of monthly transactions) can result in account termination and being placed on the card scheme's MATCH list, which makes obtaining a new merchant account difficult for up to five years. Maintaining clear refund policies, accurate product descriptions and prompt customer service dispute resolution is the most effective chargeback prevention strategy.

Is American Express accepted by all processors?

No. American Express operates its own acquiring network separately from Visa and Mastercard. Some PayFac providers include Amex acceptance within their standard flat rate; others require a separate Amex merchant account or do not support Amex at all. Amex interchange rates are not subject to the same regulatory cap as Visa and Mastercard consumer cards, so Amex transaction fees are typically higher - often 1.5 to 2.5 percent versus 0.2 to 0.3 percent interchange for regulated consumer cards.

How we verified this guide

FCA authorisation requirements were verified against the Payment Services Regulations 2017 and the FCA Register. Interchange caps were confirmed against the UK Payment Systems Regulator's guidance on retained EU law. SCA requirements were cross-referenced with the FCA's final SCA policy statement. Surcharging prohibition was confirmed against the Consumer Rights (Payment Surcharges) Regulations 2012 as amended. This guide was compiled in May 2026.

Disclaimer: This guide is information only, not financial, legal or tax advice. Rates, allowances and rules change. Always check the primary sources cited and consult a regulated adviser for decisions about your own circumstances.

Primary sources

Last reviewed: May 2026.