I had assumed, when I started on this on 17 September 2026, that "merchant account" still meant a separate thing a bank opens for you, with an application and a look at your books and card takings landing there before being swept across to your ordinary account. I was wrong, mostly. In the regulator's 2021 figures around 90% of UK merchants took under £380,000 a year on cards, and for them that picture is out of date.
What the owner typing the phrase actually wants to know is plainer. Do I have to go to a bank and apply, or can I just buy the reader?
Usually it's the reader, and nobody will ask you for a merchant account. I think the more useful thing to say is that the reader has a contract too, and in the one I read, well over 10,000 words long, the clauses about when your money can be held sit a very long way below the price.
Two ways in, and who is holding your money in between
The Payment Systems Regulator split the market in two in its 2021 review, report MR18/1.8. Its glossary is the clearest version of this I have found. It beats every provider page I read, which surprised me.
An acquirer has the direct relationship with Visa and Mastercard. It takes the payment from your till into the card system and pays you. In that report the five largest, by number and value of card transactions, were Barclaycard, Elavon, Global Payments, Lloyds Bank Cardnet and Worldpay.
A payment facilitator sells you the same service with no direct contract with the card scheme, and uses an acquirer behind it. The three largest it named were PayPal, which owns Zettle, Square and SumUp.
Sign with a facilitator and, as paragraph 3.25 puts it, there is typically no direct contractual relationship between you and the acquirer. It has not gone anywhere, though. Under paragraph 3.27 it still handles authorisation, clearing and settlement, passes your money to the facilitator for onward payment, and stays ultimately liable for chargebacks on your sales. I keep thinking about that part. You are bound up with a firm whose name you may never see on any document.
So that is the whole difference hiding behind "do I need a merchant account". An acquirer gives you an individual agreement, underwritten for your business; a facilitator signs you up under its own arrangement, and the report says a large majority of merchants onboarded by the largest facilitators in 2018 did it themselves on the website.
Here is where I changed my mind about my own summary. I had written Square down as a facilitator, because the 2021 report does. Its current UK payment terms say Square Europe has direct connections and relationships with the networks "so that it is an acquirer itself". I have not seen the other two names' terms on this point, and I would not assume they stayed put.
Who uses which, in the regulator's numbers
The largest facilitators served nearly 80% of merchants that sell only or mainly face to face with annual card turnover below £15,000, and their share dropped sharply above that.
Size bands decide most of what follows. Merchants with card turnover up to £10 million a year are almost all merchants and carry around 17% of the value of card transactions; those up to £380,000 are around 90% of all merchants; and the few above £50 million carry around 76% of the value. A corner shop and a supermarket chain share this market on paper and not much else.
Where the reader route stops
The report, at paragraph 4.25, notes a requirement in Mastercard and Visa rules that a facilitator's merchant with annual card turnover above $1 million must also contract with an acquirer. It is written in dollars because the scheme rules are.
I am not confident enough in any single exchange rate to print a sterling threshold that moves every day, and would rather you check it on the day it matters. Here is what I would say instead. A shop growing towards $1 million on cards should expect the conversation with an acquirer to happen whether it wants one or not, and would do much better to start it than to receive it.
Price pushes the same way, and much earlier. SumUp and Zettle publish flat rates, SumUp's pay-as-you-go being 1.69% on reader payments, while acquirers, the regulator found in its 2022 decision, do not typically publish prices at all. My guess is that this is most of why facilitators' share falls away past £15,000: a business with steady takings has something to negotiate with, and a published flat rate has nothing to negotiate. Nothing in the report says it.
What the reader contract says about your money
Payout on Square is quick: proceeds received on a given day go to your linked bank account the next day, subject to any reserve or holdback. That account has to be in the same name as the Square account holder and has to be a UK sterling account. Square says it is the only account it will use for settlement and direct debits.
Section 12 lists when payout can be deferred or access restricted: an investigation Square decides it needs, a pending dispute, network rules or law, or a judgement that you are an unacceptable credit risk. Section 14 allows a reserve if "some aspect of your business is especially risky", sized as Square reasonably decides, which it can raise, reduce or remove at any time. If that reserve runs short it can be topped up from money owed to you or from your linked bank account.
On chargebacks, Square can hold the disputed amount and delay payouts while any are pending. When it asks for documents to fight one, you have fifteen (15) days, and missing that can make the chargeback irreversible. Fifteen days is short for a shop run by two people in December, and awkward if the receipt is in a box somewhere.
The line I find hard to read past is the plain one. Square says it is not a bank, that your money is not protected in the same way as a bank deposit, and that it safeguards merchant funds in pooled bank accounts. Then, flatly: "You do not earn interest on funds we hold for you." It is not hidden, and it is odd how rarely it gets quoted; it sits in one plain sentence of a very long page.
An aside about dormant balances, which has nothing to do with choosing a provider. A balance counts as dormant after a year with no payments processed or no valid linked account, and if the money is still there 6 years after that last activity Square reserves the right to dispose of it lawfully. The terms give no figure for how often that happens. Anyway, back to the contract.
To end it, Square needs to give at least 90 days' notice, or two months for some sellers moved across from the November 2024 terms or earlier, and it can end things immediately in listed cases such as fraud, a cancelled direct debit or excessive chargebacks. Fees can change on two months' notice, and you can leave free of charge before a change takes effect.
What a bank's merchant contract says instead
I had assumed the bank contract would be the gentler one, and it is not, particularly. While I had the Barclaycard terms open next to Square's (32 pages, last updated May 2025), the assumption did not survive condition 2.4.
On settlement, condition 2.2 says it will usually reach your bank account one banking day after Barclaycard receives the transaction data, so on speed the two are level.
Then condition 2.4, which lets Barclaycard make you a "non-standard settled merchant" the day it accepts you, and condition 2.5, which lets it do the same later on written notice of normally at least two months. What that can mean in practice, in its own examples, is a settlement paid only after a fixed period, a sum or a percentage of turnover kept back in reserve, or a cap on what reaches you in one banking day. Condition 13 goes further still, and its plain-English summary reads: "We may also delay, hold back or keep payments in reserve if you owe us money." It adds that the same applies if Barclaycard thinks you are likely to owe it money in future. I didn't expect that from a bank.
I would single out condition 2.7. You get 13 months from a statement's date to challenge an irregularity. Then the door shuts: "You cannot challenge the statement after that time." I think 13 months is generous. It only helps if somebody opens the statements.
On leaving, you can end the agreement on at least one month's notice under condition 18.3, in writing or by phone, while Barclaycard under 18.1 normally gives 90 days in writing, or less in listed circumstances.
Laid side by side, both contracts carry a reserve, a holdback and a 90-day exit on the provider's side. My view is that the difference owners imagine between "a proper bank account" and "an app" is mostly not in the paper. It is in how you got in and who picks up when money is held.
What a bank asks for when you apply
Lloyds publishes its process, which saved me guessing. Existing Lloyds or Bank of Scotland business customers with card turnover under £100,000 a year can apply for Lloyds Accept through online banking; the page says approval can come in minutes.
Bigger than that, whether or not you bank there, and the online form usually takes around 20 minutes. It wants key people such as directors, partners or trustees, with home addresses. Your business bank account details. A registration number, if you are a limited company or a charity. The agreements then come by email to sign. The page is blunt about timing: "Please allow 7-10 working days for your account to be set up." If you want terminals at more than one site, or payments on your website, it asks you to phone instead.
That is the application people dread: a form, three kinds of information, about two weeks.
A worked example, invented for the arithmetic
Picture a bakery on one site taking £9,000 a month on cards, £108,000 a year, all in person. That is above the £15,000 line where facilitators dominate and far below the $1 million scheme ceiling, so both routes are open to it.
At SumUp's 1.69% pay-as-you-go it would pay £152.10 a month in card fees before any reader cost, or £1,825.20 a year. An acquirer quote has to beat that after every line on the statement, scheme and terminal charges included, and the only fair test is total cost as a percentage of turnover, which is what our fee calculator does.
Suppose the same bakery took a £2,400 wedding order by card and the payment was disputed. Both contracts allow the amount to be held. I cannot tell you whether a bank relationship team or an app's support queue would release it faster for that bakery, and I suspect anyone claiming to know in general is selling one of the two.
What I would do with a shop of my own
Starting from nothing, I'd buy the reader. I wouldn't go looking for a merchant account in the old sense, because nobody asks for one. But I'd read the payout, holdback and reserve sections before the first tap. The rate can wait.
Past £100,000 on cards, I'd get one acquirer quote a year. I'd do it even with no plan to move. The Lloyds form takes around 20 minutes, and I'd compare totals rather than headline rates.
On either route I'd write down the provider's notice period. I'd keep the payout account's name identical to the contract's. And I'd answer dispute document requests the same week, because fifteen days goes quickly.
Why most shops never look again
The regulator's merchant survey found that 42% of small and medium merchants had not considered switching provider in the previous two years, and 61% of those had never searched for another. Its report says many such merchants "don't regularly (if ever) search for providers". It blamed partly the indefinite length of both kinds of contract. Nothing ever prompts a look.
The October 2022 remedies in PS22/2 were a personal summary box of key price and non-price information, online quotation tools and trigger messages prompting a review, for merchants with card turnover up to £50 million, plus an 18-month maximum initial term on terminal lease and rental contracts with monthly notice after, for merchants up to £10 million. They bind a named list of providers that includes Barclays, Lloyds, PayPal, Square, SumUp and Worldpay. If yours is on it, that summary box is the one-page answer to what you are paying. I am slightly annoyed that I had to go through a 2022 policy statement to learn it exists, and I still do not know how many owners have ever opened theirs.
Questions people ask
Do I need a merchant account to take card payments in the UK?
Not in the traditional sense. A payment facilitator such as SumUp or Zettle signs you up under its own arrangement. An individual agreement with an acquirer becomes necessary once card turnover passes $1 million a year, under the scheme rules the regulator described in 2021, or sooner if you want a negotiated price.
What is the difference between a merchant account and a payment facilitator?
An acquirer gives you a direct, individually underwritten contract with the firm connected to Visa and Mastercard. A facilitator contracts with you alone and uses an acquirer behind the scenes, and according to the regulator that acquirer stays ultimately liable for chargebacks.
Can a card provider hold my money?
Yes, under both routes: Square's terms allow holdbacks and reserves for investigations, disputes and credit risk, while Barclaycard's allow delayed settlement, a reserve held back from turnover and a daily cap, normally on two months' notice.
How long does it take to open a merchant account?
At Lloyds the online application for businesses above £100,000 card turnover takes around 20 minutes, with 7 to 10 working days of set-up after that.