What is payment processing? How it works, key elements, and what to look for

Key takeaways

• The best payment processing systems for small businesses have clear fees, take many payment types, and connect with the tools you already use.

• If you understand how payment processing works — from gateways to settlement — you can choose the right provider and protect your cash flow.

• Airwallex makes global payment processing simpler with multi-currency accounts, same-day settlement, and 160+ local payment methods across 180+ countries.

More shoppers now prefer fast options like digital wallets and smooth checkouts. So, small business owners need to adapt to stay competitive. In fact, 33% of customers in the UK prefer to pay with digital wallets like Apple Pay, Google Pay, and PayPal. From traditional credit and debit card providers to newer fintech options like Airwallex, the right payment processing system can improve the customer experience, simplify day-to-day work, and boost profits.

This guide compares nine of the best small business payment processing systems in the UK. It covers key features, costs, and practical tips, so you can make a well-informed choice.

What is payment processing and how does it work?

Payment processing is an online payment system that manages customer transactions. It helps small businesses take payments in a safe and smooth way. It moves money from the customer’s account to the business’s account, whether the customer pays by card or with a digital wallet.

Here’s how it works:

• Initiation: The customer enters their payment details using a card reader, bank transfer, digital wallet, or mobile app.

• Payment gateway: A payment gateway sends the payment details to the payment processor in a secure way.

• Payment processor: The processor checks the transaction details with both the customer’s (issuing) bank and the merchant’s (acquiring) bank.

• Authorisation: The issuing bank checks the payment is genuine. It also confirms there’s enough money or credit available.

• Settlement: Once the payment is approved, the money moves from the customer’s bank to the merchant account.

If you’re ready to look at payment processing services for your small business, explore our top picks below.

Payment gateway vs. payment processor: What’s the difference?

A payment gateway is the tech that collects and encrypts your customer’s payment details. It then sends those details to the payment processor in a secure way. Think of it as the front door. It’s where the payment enters your system. A payment processor, on the other hand, is like the courier. It carries the payment between banks, checks funds, and completes the transfer.

So, why does this matter? Some providers bundle both in one service. Others make you set them up as separate parts. When you know the difference, it’s easier to see what you’re paying for and whether the provider covers everything you need.

Key types of payment processors

When you’re choosing payment processing for your small business, it helps to know the main options:

• In-person payments: Taken in shops using card readers or point-of-sale (POS) terminals. These can handle chip and PIN, contactless, and mobile payments. Many also offer virtual terminals for taking card payments over the phone.

• Online checkout: Takes payments on your website. It can handle one-off sales and recurring subscriptions. These payment gateways connect with eCommerce platforms and let customers enter card details safely.

• Payment links and invoicing: Let you create shareable links or digital invoices that customers can pay online in a few clicks. They’re often used by freelancers and service businesses that need flexible ways to collect payments.

• Digital wallets: Let you take mobile payments like Apple Pay, Google Pay, and PayPal. Customers can pay with a tap or click, instead of typing card details. This can speed up checkout and cut cart abandonment.

• Cross-border payment processors: Manage international payments and multiple currencies. This lets you take payments from customers worldwide in their preferred currency.

Most successful small businesses use a mix of these options. That way, customers can pay in the way that suits them best.

The 9 best small business payment processing systems in the UK

We’ve put together a list of payment processing systems for small businesses in the UK to make your research easier. You’ll find them below.

Read on to compare key features and costs across these platforms.

1. Airwallex

• Key offerings:

  Global payment acceptance, multi-currency Business Accounts, FX & Transfers, Expense Management

• Cost:

  Domestic cards 2.80% + £0.30; international cards 4.30% + £0.30; flexible bundled pricing available depending on your business needs

Airwallex (that’s us!) is built for businesses that work across borders, or plan to. We support payment processing in 180+ countries and offer 160+ local payment methods. So, your customers can pay how they prefer — whether that’s Visa, Mastercard, Amex, or local options like iDEAL, Bancontact, or Alipay.

What sets us apart is how payments link to the rest of your finance work. Airwallex Payments connect directly to our Global Accounts. This means you can take payments in many currencies from overseas customers without forced currency conversion. You can then use those same balances to pay overseas suppliers. This can help you avoid extra foreign exchange fees. We call this like-for-like settlement. You get paid in the same currency your customer used, and you choose when (or if) to convert.

Setup is flexible as well. We offer no-code options, ready-made Payment Plugins for Shopify, WooCommerce, Magento, and BigCommerce, and fully customisable API integrations if you need more control. With same-day settlement, you don’t have to wait days to use your funds. Plus, direct links to Xero and QuickBooks mean your accounts can reconcile automatically.

We’re regulated in all markets we operate in, with 60+ licences and permits worldwide. Over 150,000 businesses trust us to process more than US$150 billion in global payments volume each year.

2. Adyen

• Key offerings:

  Online payments, POS payments, Adyen for Platforms

• Cost:

  Fixed processing fee of £0.11; payment method fee defined by type of card used

Adyen is a platform that helps small businesses accept payments 1 across different channels. This includes online, in-store, and mobile apps.

Adyen simplifies payments by combining the payment gateway, processing, and acquiring in one service. That can suit businesses that don’t want to manage several suppliers. Adyen has no set-up fees. However, each transaction has a fee based on the payment method used.

Adyen connects with many eCommerce and enterprise platforms. Still, some businesses may want extra tools to manage other parts of their finances, such as foreign exchange transfers and international payments.

3. Clover

• Key offerings:

  Point of sale (POS) systems, online payments, inventory management

• Cost:

  • £9.99/month (includes device)

  • Per-transaction pricing varies by business

Clover is a POS system with tools to help you take payments. It offers portable and countertop devices, plus eCommerce options for safe online payments 2.

Clover includes payment processing, stock tracking, customer insights, and staff management in one system. That can be helpful. However, Clover doesn’t have the same global reach as Airwallex, and it may not scale as smoothly as your business grows.

4. GoCardless

• Key offerings:

  Invoice payments, recurring payments

• Cost:

  • Pay-per-transaction pricing model

  • Price differs depending on the type of plan you select

  • Starts at 1% + £/€0.20 per transaction

GoCardless is best known for direct debit and recurring payment tools 3. It supports direct debit schemes in many countries, so businesses can collect payments across borders. It can also automate payment collection. This makes the process more efficient and can reduce late or missed payments.

GoCardless also connects with popular accounting tools. Still, it’s worth noting there’s an extra fee at higher transaction volumes, and it doesn’t offer credit card processing.

5. Opayo

• Key offerings:

  Card machines, online payments

• Cost:

  Starts at £0/month, from 1.75% transaction fees

Opayo’s flexibility, security tools, and clear pricing make it a strong option for small businesses 4. It offers several payment options. So, you can take payments online, in person, or over the phone. This makes it useful across different sales channels. It also supports international currency options.

Opayo is also known for strong security. Like many providers, it offers fraud tools such as 3D Secure and tokenisation. That helps protect both merchants and customers.

6. Square

• Key offerings:

  POS system, online payments, invoicing, payroll

• Cost:

  • Packages start at £29+/month

  • Free version available

  • Transaction fees are charged on top of package fees ranging from 1.75% to 2.5% per transaction

Unlike many payment processors, Square has a free version. That can make it a budget-friendly choice for small businesses 5. It supports many payment types, including chip and PIN, contactless payments like Apple Pay, and online payments. This gives businesses flexibility in how they take money from customers.

Square includes a POS system with stock tracking and reporting, alongside payment processing. It also offers a range of hardware, from mobile card readers to full register systems. It’s quick to set up, too. That makes it a solid all-in-one option for small businesses that want something reliable and scalable.

7. Shopify

• Key offerings:

  Online payments, POS options

• Cost:

  • Shopify plans start at US$39/month billed monthly or US$29/month billed yearly on top of pay-per-transaction charges

  • Cost per transaction varies: online standard card rates from 2.9% + 30¢ (Basic) to 2.5% + 30¢ (Advanced) USD

  • Cost per transaction for buy now, pay later (BNPL) Klarna varies by plan; verify current rates on Shopify’s pricing page

If you use Shopify, you’ll automatically get Shopify Payments. It lets businesses take many payment types, such as cards and digital wallets 6. Shopify also supports payments in different currencies, which can help if you plan to sell overseas. You can also choose from different plans, with monthly or yearly billing.

Our Payment Plugins also work with Shopify. This lets you take payments from Shopify sales. It also links to our Business Account, which can help reduce exchange rate risk and FX fees through like-for-like settlement.

8. Stripe

• Key offerings:

  Online payments, in-person payments, payments for platforms, issuing, revenue automation

• Cost:

  • 1.5% + 20p for standard UK cards

  • 2.5% + 20p for EU cards

  • 3.25% + 20p for international cards (+2% if currency conversion is required)

Stripe is an eCommerce payment system that supports payments in over 135 currencies. It offers strong security and compliance, tools for custom checkout flows, a strong developer platform, and many third-party integrations. It’s also known as a leading PCI-compliant payment gateway worldwide 7. Unlike Airwallex, it doesn’t include FX & Transfers or spend management tools.

9. Zettle by PayPal

• Key offerings:

  Payments, POS systems, inventory management

• Cost:

  • Charge per transaction by payment type

  • 1.75% per transaction for major cards and mobile wallets

Zettle by PayPal offers payment tools and POS systems designed for physical sellers. This includes food trucks, pop-up shops, and market stalls 8. With no start-up costs, it can be a good fit for small businesses. Zettle charges per transaction, and it offers a custom rate plan for businesses with larger transactions.

While Zettle offers many in-person payment options, Airwallex focuses more on online payments. It also offers strong multi-currency support and competitive FX rates for international transactions.

How payment processing affects your cash flow

Unfortunately, two million of Britain’s small businesses fall victim to late payments each year on average. If you’re already low on cash, long settlement times can make things harder. This is especially true when you need to pay suppliers, staff, or other bills.

When customers pay you through a payment processor, the money usually won’t show in your account right away. That’s because the last step, called settlement, takes time.

If you see a settlement time like “T+1”, you should get the money one business day after the sale (a Monday sale settles on Tuesday). “T+2” means two business days (Monday settles on Wednesday). Most UK payments settle within one to two business days, but they can take up to five.

Some processors offer same-day settlement. Others only pay out weekly. Faster settlement can cost a small fee or raise your monthly costs. Even so, it may be worth it if you often need quick access to cash and want to avoid late fees or costly short-term borrowing.

When you compare providers, make sure you factor in your daily cash needs and your supplier payment terms.

How to choose the right payment processing system

Once you know what you need, choose a processor that fits into your current set-up with as little hassle as possible. Here’s what to look for, how to set it up, and what mistakes to avoid.

What to look for in a payment processor

• Services provided: Payment processors don’t all offer the same things. Some only handle payments, while others add invoicing, recurring billing, and fraud tools. Choose the services that match what your business needs.

• Costs and fees: Most platforms charge transaction fees, and these often change based on the payment method. Before you choose a provider, check every fee and make sure it fits your budget. This includes set-up fees, equipment costs, and monthly fees.

• Customer preferences: Think about how your customers like to pay. For example, if most customers prefer Apple Pay, pick a processor that supports it.

• Integrations available: It’s important that your payment processor connects with your current tools. Out-of-the-box integrations can save time and reduce admin stress. For example, Airwallex connects with Xero, QuickBooks, and NetSuite.

• Ease of use: The processor should be easy to set up and simple to use. It should also feel smooth for customers at checkout. Read reviews to see what other users say about it.

• Security and PCI compliance: Your processor should follow PCI DSS rules and include fraud tools like 3D Secure and tokenisation. This helps protect your business and your customers’ data.

Setting up your payment processing in five steps

• Register for a merchant account: Some processors need you to have a merchant account to take card payments. If you need one, your bank or your processor can help you set it up.

• Integrate the processor into your website: Most processors offer plugins or APIs for integration. If you use a popular eCommerce platform, you might already have a ready-made option. If you want a more custom set-up, you may need a developer. Airwallex offers no-code and prebuilt options, plus developer tools for any business.

• Configure your payment settings: Choose which currencies and payment methods you want to offer shoppers, then turn them on.

• Test your payment system: Before you go live, run test transactions. Check that payment methods, security tools, and the checkout flow all work as expected.

• Launch your payment systems: After you’ve tested everything fully, you can start taking payments.

Common mistakes to avoid

• Choosing the wrong fee structure: Different pricing models suit different businesses. A subscription plan (like £20/month + 0.99%) may suit high-volume sellers. Pay-as-you-go (like 1.75% per transaction) may suit businesses with fewer sales.

• Choosing the wrong settlement timeline: Cash flow issues often happen when businesses don’t know when money will land. Standard settlement is about two to five business days, but some providers offer next-day or same-day payouts. Compare options with your working capital needs in mind.

• Ignoring international payment capabilities: Even if you only sell in the UK today, overseas demand can show up at any time. Switching processors can be disruptive, and cross-border fees from some providers can be over 3% for international cards. It can help to choose a provider that supports global payments well from day one.

• Overlooking customer support quality: Payment problems don’t always happen in office hours. Check what support you’ll get. For example, do you get a dedicated account manager, tech support, or only help with account questions? There can be a big difference.

• Not integrating with existing systems: Manual reconciliation takes time and can lead to mistakes. Without an automatic sync to Xero or QuickBooks, you’ll spend hours tracking and approving payments. You may also miss disputed transactions.

Accept payments anywhere with Airwallex

A payment processor that matches your small business goals can help you reach more customers worldwide. It can also make it easier for customers to pay you.

With Airwallex, small businesses can accept payments in 180+ countries. You can take payments through major card schemes, like Visa, Mastercard, and Amex, plus 160+ payment methods. On top of that, you can get competitive FX rates (0.5–1% above interbank), flexible ways to integrate, and spend management tools.

We’re regulated in all markets we operate in, with 60+ licences and permits worldwide. Join the 150,000+ businesses that trust us to process over US$150 billion in global payments volume each year.

Frequently asked questions (FAQ)

What is a payment processing system?

A payment processing system is the tech that manages electronic payments between a customer and a business. It moves money safely from the buyer’s account to the seller’s. It usually includes a payment gateway (which captures and encrypts payment details), a payment processor (which works with banks to check and move funds), and links to the acquiring and issuing banks. Together, these parts help make sure payments are authorised, secure, and settled the right way.

What’s the difference between a payment processor and a payment service provider (PSP)?

A payment processor handles a specific part of the payment flow. It checks and moves funds between banks. A payment service provider (PSP) combines processing with extra tools, such as payment gateways, fraud prevention, reporting, and analytics. Many modern providers like Airwallex, Stripe, and Adyen work as PSPs. That means they offer an end-to-end service, not just processing.

What fees do payment processors charge?

Most processors charge a fee per transaction. This is usually a percentage plus a fixed amount (for example, 1.5% + 20p). Some also charge monthly subscription fees, set-up costs, or fees for specific features, such as chargebacks or international payments. The main pricing models are flat-rate (one rate for all payments), interchange-plus (interchange fee plus a markup), and subscription (a monthly fee plus lower transaction rates). Always look for hidden costs, such as currency conversion fees or PCI compliance fees.

What are the benefits of payment processing for UK small businesses?

Payment processing lets UK small businesses take card, digital wallet, and international payments. This can help you reach more customers and improve cash flow speed. Many providers offer plug-and-play tools that are easy to set up, even if you don’t have IT staff. Some also connect with tools like Xero and QuickBooks, which can save time on accounts and admin.

Sources and references

1. https://www.adyen.com/pricing

2. https://uk.clover.com/start-taking-payments/

3. https://gocardless.com/pricing/

4. https://www.elavon.co.uk/

5. https://squareup.com/gb/en/pricing

6. https://www.shopify.com/uk/pricing

7. https://stripe.com/gb/pricing

8. https://www.zettle.com/gb/pricing

Disclaimer: We updated this article in Q1 2026. We based the information on our own online research and weren’t able to manually test each tool or provider. The information is for educational purposes only, and you should consider your business’s specific needs when you compare providers. We review this research every six months. If you’d like to request an update, feel free to contact us at [email protected].