Payment processing fees are one of the largest variable costs for any business that accepts cards. At low volumes, a flat rate of 2.9% + 20p doesn't feel like much. At GBP 1M in annual card revenue, you're paying GBP 29,000+ in processing fees alone. At GBP 10M, it's GBP 290,000. At GBP 50M, you're spending more on payment processing than most businesses spend on their entire engineering team.
The good news: most businesses are overpaying, and there are concrete steps to reduce costs without the disruption of a full provider switch.
Why Fees Escalate at Scale
The Flat-Rate Trap
Most businesses start with a flat-rate provider like Stripe (1.5% + 20p for standard UK cards) or Square (1.4% + 25p for UK cards online). Flat-rate pricing is simple and predictable. It's also designed to be profitable for the provider across a wide range of transaction types, which means you're overpaying on low-risk, low-cost transactions to subsidise the provider's risk on high-cost ones.
A UK debit card transaction has an interchange cost of around 0.2%. On a GBP 100 transaction, that's 20p. But Stripe charges you 1.5% + 20p for a standard UK card, which is GBP 1.70. The provider's markup is GBP 1.30 on a transaction that costs them roughly 40p to process (interchange + scheme fees + acquiring costs).
That markup is acceptable when you're processing GBP 10,000 a month and the simplicity of flat-rate pricing saves you time. It's not acceptable when you're processing GBP 1M a month and the overpayment is tens of thousands of pounds annually.
Cross-Border Markups
Processing a card issued in another country typically costs 0.5% to 1.5% more than a domestic transaction. For businesses with international customers, cross-border fees can represent a significant chunk of total processing costs, often without the business realising how much they're paying.
Stripe's UK pricing, for example, is 3.15% + 20p for international cards, against 1.5% + 20p for standard UK cards, plus 2% if currency conversion is required. On a GBP 100 transaction from a US-issued card, that is GBP 3.35.
Hidden Charges
Beyond the headline rate, watch for:
Chargeback fees: GBP 15-25 per dispute, regardless of outcome
Refund fee retention: most providers keep the processing fee when you issue a refund
PCI non-compliance fees: monthly charges if you don't complete PCI self-assessment questionnaires
Monthly minimums: fees if your processing volume falls below a threshold
Statement fees, batch fees, and gateway fees: smaller charges that add up at scale
Currency conversion margins: the spread between the real exchange rate and the rate your provider applies
7 Strategies to Reduce Your Payment Processing Fees
1. Negotiate on Volume
If you're processing more than GBP 50,000 per month, you have negotiating leverage. Payment providers have significant margin in their pricing, and they'd rather reduce your rate than lose your volume to a competitor.
How to negotiate effectively:
Get competing quotes: approach 2-3 other providers for formal pricing proposals before negotiating with your current provider
Know your numbers: present your average transaction value, monthly volume, chargeback rate, and transaction mix (debit vs credit, domestic vs international)
Ask for interchange-plus: providers are more likely to offer competitive rates on an interchange-plus model than to deeply discount flat-rate pricing
Negotiate annually: don't set and forget. Review pricing every 12 months as your volume grows
Even Stripe offers custom pricing for businesses processing significant volume. You won't get it by asking through the standard support channel. You need to reach their sales team.
2. Switch to Interchange-Plus Pricing
Interchange-plus (also called cost-plus) pricing separates the non-negotiable costs (interchange and scheme fees) from the provider's markup. Instead of paying a blended rate of 2.9%, you pay the actual interchange rate (which varies by card type) plus a fixed markup.
Volume (Monthly) | Flat Rate (2.9% + 20p) | Interchange-Plus (IC + 0.4% + 8p) |
|---|---|---|
GBP 50,000 | GBP 1,550 | GBP 1,040 |
GBP 200,000 | GBP 6,000 | GBP 3,800 |
GBP 500,000 | GBP 14,700 | GBP 9,000 |
GBP 1,000,000 | GBP 29,200 | GBP 17,500 |
Estimates based on a typical UK transaction mix (60% debit, 40% credit, 90% domestic). Actual savings vary.
The savings increase with volume because flat-rate pricing over-charges on low-cost transactions (debit cards, domestic transactions), and those make up the majority of most businesses' transaction mix.
Not all providers offer interchange-plus to smaller merchants. But if you're processing more than GBP 100,000 monthly, it should be available.
3. Use Local Acquiring to Reduce Cross-Border Fees
When a UK customer pays with a UK-issued card and the transaction is processed through a UK acquirer, it's a domestic transaction with domestic interchange rates. When the same customer's transaction is processed through a US-based acquirer, it becomes cross-border, with significantly higher fees.
If you have customers in multiple countries, using local acquirers in each major market eliminates cross-border surcharges:
EU transactions processed through an EU acquirer avoid cross-border fees
US transactions processed through a US acquirer avoid international surcharges
APAC transactions processed through regional acquirers reduce costs and improve authorisation rates
This means holding a relationship with an acquirer in each market. For a group with a business entity in each market, the practical version is running each entity on an acquirer in its own market, through one integration.
4. Put Each Payment Method on the Right Provider
Different payment methods carry different costs. The provider with the best card rates is not always the best choice for bank payments such as ACH or direct debit.
Shuttle lets you send each payment method to its own provider, for example cards through Stripe, ACH through Authorize.net and direct debit through GoCardless, so each method runs on a provider you chose for it. This is set per payment method: Shuttle does not pick a provider for each transaction.
For this to work, you need a multi-PSP architecture that connects to several providers simultaneously. Most businesses can't do this with a direct single-provider integration, but a payment layer lets you connect several providers through one integration.
5. Reduce Chargebacks
Every chargeback costs you the transaction amount, the processing fee, and a chargeback fee (typically GBP 15-25). But the indirect cost is higher: elevated chargeback rates push you into monitoring programmes, trigger higher processing rates, and can ultimately lead to account termination.
Practical steps to reduce chargebacks:
Use clear billing descriptors: the name on the customer's bank statement should be recognisable. "SHUTTLEYOURCOMPANY" is better than "SP38291X"
Send transaction receipts immediately: customers who recognise a charge don't file disputes
Implement 3D Secure selectively: strong authentication on higher-risk transactions shifts liability and reduces fraud
Offer easy refunds: a customer who can self-serve a refund won't file a chargeback instead
Use Mastercard Ethoca alerts: these services notify you of disputes before they become formal chargebacks, giving you the opportunity to refund proactively
Keeping your chargeback rate below 0.5% not only avoids monitoring programme fees but also gives you leverage in rate negotiations.
6. Optimise for Scheme Fees
Card schemes (Visa, Mastercard) charge fees on top of interchange, and these fees vary based on how you process transactions. Optimisations include:
Send Level 2/Level 3 data for B2B transactions. Including purchase order numbers, item details, and tax amounts qualifies transactions for lower interchange categories
Use network tokens instead of PAN storage: Visa and Mastercard offer lower interchange rates for transactions using their network tokens
Optimise authorisation-to-capture timing: capturing transactions promptly (within 24 hours for e-commerce) avoids downgrade fees
Batch settle daily: delayed settlement can trigger higher fees with some acquirers
These are smaller individual savings, but they compound.
7. Add Alternative Payment Methods
Cards are the most expensive payment method for merchants. Alternative methods are often significantly cheaper:
Open Banking (Pay by Bank): flat fee of 20p-50p per transaction, regardless of amount. On a GBP 500 transaction, that's 0.04-0.10% vs 2.9% for cards
Direct Debit (GoCardless, BACS): 1-2% or flat fees, ideal for recurring payments
Digital wallets: Apple Pay and Google Pay can route via debit rails, reducing costs compared to credit card transactions
Bank transfers: zero processing fee for higher-value B2B transactions
The key is offering these methods at checkout without forcing customers away from cards. A "Pay by Bank" option alongside card payment captures cost-conscious customers and price-insensitive ones alike.
How Multi-PSP Coverage Helps Reduce Fees
Strategies 3 and 4 need more than one payment provider connected at the same time. For most businesses with a single direct integration, that means rebuilding their payment infrastructure.
A PSP-neutral payment layer solves this by connecting to multiple providers through a single integration. You choose which connected provider handles each payment method and, for a group or platform, which provider each merchant or entity uses. The factors worth weighing:
Payment method: cards, ACH and direct debit carry different costs, so the cheapest card provider is not always the cheapest for bank payments
Market: an entity that trades in one country can use an acquirer there, so its domestic cards are processed domestically
Transaction value: amount rules decide whether a payment method is offered, for example ACH only above a set amount, where a flat bank fee beats a card percentage
Provider-specific rates: leverage your negotiated rates across multiple providers
Shuttle connects to 40+ PSPs through one integration. Adding a new provider is a configuration change, not an engineering project. You set which provider handles each payment type, and each merchant keeps its own agreement and rates with its providers.
Because each merchant runs on its own gateway, you keep negotiating leverage: if a provider raises its rates, you can move merchants elsewhere. Saved cards stay with the provider that stored them, so those customers re-enter their card or stay on the original provider.
Building a Fee Reduction Plan
Not every strategy applies to every business. Here's how to prioritise:
Processing under GBP 50,000/month: Focus on strategies 5 (reduce chargebacks) and 7 (alternative payment methods). The volume-dependent strategies won't deliver meaningful savings yet.
Processing GBP 50,000-500,000/month: Negotiate with your current provider (strategy 1) and push for interchange-plus pricing (strategy 2).
Processing over GBP 500,000/month: All seven strategies are relevant, including 3 and 4, which need more than one provider connected.
Key Takeaways
Payment processing fees are not fixed costs. They're negotiable, optimisable, and reducible, often significantly, without switching your primary provider. The businesses that pay the least per transaction aren't the ones who found the cheapest provider. They're the ones who built the infrastructure to keep every provider competing for their volume.
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