Category Archives: Payments

Note of Retail Week conference – Innovation in Payments

I chaired Retail Week’s Innovation in Payments Conference on 15 September in London.

Here’s my presentation followed by the notes I took of the rest of the event.

UK market facts (Payment Council)

  • 30bn “spontaneous” payments made by individuals every year
  • 49% of these are cash, ten years ago this was 70%

In one month, the average UK consumer makes:

  • 27 cash payments
  • 16 debit card
  • 6 direct debit
  • 4 credit card
  • 2 contactless
  • 1 Faster Payment
  • 5% of consumers rarely pay with cash at all. This number is growing.
  • 4% of consumers rely exclusively on cash. This number is not falling. These people tend to be older and find that using cash allows them to budget effectively.
  • 94% of adults have a debit card. 60% have a credit card.

Contactless payments are growing strongly and will account for 30% of all consumer payments by 2025. Today, contactless payments are mainly in grocery (37%), restaurant/takeaway (16%) and transport (10%.) Contactless usage is higher among ABC1s and younger people.

There are 11bn cash payments which could be replaced with contactless. These are in grocery (21%), confectionary/tobacco/news (14%) and restaurant/takeaway (13%).

Consumers are keen on remote banking. Only 25% are exclusively branch banked. However, just 33% use their bank’s mobile app. This will restrict the utility of “push” payments from bank apps such as Pay By Bank App (PBBA).


UK retail should benefit from £700m reduction in Interchange payments. This is equivalent to just 0.14% of retail sales so there’re really no way of telling if/when it is passed on to consumers.

Android Pay

Now live in the UK, Android Pay has signed a number of card issuers including most of the large banks. A big marketing push is planned for September.

The user experience for POS not quite as elegant as Apple Pay. For example, for a combined payment and loyalty transaction, shoppers need to make two taps of the phone. In-app seems better designed and Google are quoting some nice KPI’s from early customers in the US. One shopping app is receiving 20% of transactions by Android Pay with a doubled conversion rate.

Apple Pay is notoriously hard to speak to. One very large retailer told me that her organisation was offered one 20 minute slot – take it or leave it – with no refreshments provided. Apple Pay won’t even speak at industry conferences so Google will surely pick up some business for Android Pay just by being human. Google’s business model remains advertising based and it doesn’t charge retailers or issuers for Android Pay transactions.

Hillarys Blinds

Good case study from Hillarys which dominates the UK window covering market. Hillarys has over 1,000 agents out in the field measuring windows and providing instant quotes. Obviously, it makes sense for Hillary’s to try and take the money there and then rather than sending an invoice.

It wrote some bespoke software in 2005 for its agents to use to take customers’ card details on via their Hillary-issued mobile phones but this was not really compatible with updated PCI regulations. Instead, it wanted to use an mPOS device. The challenge was that 20% of UK homes do not have a mobile signal so Hillarys needed a device that could take transactions when offline. Adyen has done this with a solution from the airline industry linked to a Verifone E355. £20m of payments annually is going through these devices and customers very much like the idea of paying with chip & PIN in their own homes. Transactions are tokenised so that Hillarys can take balance and staged payments.

Harris & Hoole

This 42 shop chain of specialised coffee shops was owned by Tesco but has recently been sold to Caffe Nero. Harris & Hoole is now on the fourth version of its successful mobile app and can arguably claim to have the most effective on the market. The key components are loyalty, drink preference, payments and deep ePOS integration.

The payment wallet is pre-pay because pay per transaction card processing fees for very small amounts has been uneconomic. This has changed following the Interchange caps and post-pay would now be a viable option.

The app geolocates the customer within the store and prompts the customer to check-in. At this point, the customer’s name/photo/regular drink are passed to the ePOS so the server can say “the regular, Geoff?” If the customer says yes, a push of a button on the ePOS sends the drinks order to a screen above the barrista. If the app is set up for payments, then the stored value account is debited. If not, the server asks for cash/card payment in the normal way.

There is no way of telling for certain the business benefit of the app as H&H don’t know the behaviour of app users before they began using the app. However, H&H did reveal:

  • Orders from the app are processed 20% faster than others
  • 20%-25% of all orders involve the app. At Tooley Street, 46% of all orders are driven by the app including 15% of payments.
  • In 98% of stores >10% of orders come from the app
  • In 25% of stores >20% of orders come from the app
  • The app grew from 6% of orders to 18% when H&H retired the previous paper-based loyalty stamp card. This was a bold move but a successful one.
  • Where Apple Pay is offered to a shopper, it is used in 85% of cases
  • Support has been a headache, especially for Android as there are so many versions


This is a fast growing chain of Thai-inspired casual dining establishments that does a big lunchtime and post-work trade in central London. Table turnover is fast and many parties want to split the bill.

Busaba launched a pay at table app which allows easy bill splitting but also includes its “39 steps to enlightenment” loyalty programme. The app is based on MyCheck. In 2016, 83,000 transactions were made with the app to a value of £2.9m at an ATV of £38. So far this year 70,000 transactions have yielded £2.3 revenue with an ATV of £44.

The app has been downloaded 170K times (75% iOS) with 147K registered users and 100K regular users across 17 restaurants. Apple Pay usage is growing fast and doubled in the last quarter. As well as turning tables quicker, the app gives RFM and other useful CRM data.

The next phase is to add extra features to the app including e-gifting and order at table. The latter is expected to result in additional sales of drinks.


The big trend in grocery is more customers buying more often but buying less. 40% of people don’t know at 4pm what they will be having for dinner. Waitrose customers are increasingly polarised between “fast lane” and “slow lane” behaviour. Its payment strategy focuses on security, choice and ease and is based on a fully tokenised managed PED service from Verifone.

In the “fast lane,” Waitrose introduced QuickCheck, hand-held devices which can be used to scan merchandise before it’s put in the trolley. At the end of the shop, customers go to one of the self-checkout machines, scan a barcode and pay with their card. This has been around for twelve years and have some devoted followers. QuickCheck is being upgraded with new handsets and an alternative in which the shopper can download a QuickCheck app and use their own phone to scan the products.

Click on the image for an explanatory video
Click on the image for an explanatory video

The service is only available to MyWaitrose loyalty members. This ensure that Waitrose knows where you are in-store and can send you relevant communications for the department in which you are shopping. Scanning is the spine around which everything else is built. People still have to use the self-checkout machine at the end because there may be age-restricted items in the basket.

Self-scanning has been quite slow to take off. The move to shoppers bringing their own bags should help – the old bagging process is a major disincentive to self-scan – but Waitrose is also trying to overcome customers’ concerns about not wanting to look like a shoplifter.

Waitrose installed “skinny” self-checkout machines in one London store – no scales, no cash drawer – and improved customer satisfaction from 56% to 72% in a week. Queues fell and the store is doing 2000 extra transactions/week at £12 ATV.

Across its estate, 35% of all transactions are now contactless. This is six seconds faster than chip & PIN. Waitrose has one cash-free store. This is on the Sky TV campus but is a special design due to space limitations. There are no plans for any other cash-free outlets.

Waitrose is piloting the VF355 for queue busting and fulfilling non-standard orders eg picking up a turkey at Christmas. Waitrose is very happy with Verifone as a strategic partner.


London based healthy eating salad bar with 27 stores and ambitious plans.  Its USP is that you order a bespoke salad that is made in front of you. This is a great strength but also a major weakness because choice and customisation slow down operations. These have gone through four iterations.

  1. Order at the salad bar, pay at till – this was very slow and distracted the “tossers” from tossing.
  2. Order at the till and take a ticket to the salad bar – an improvement but was still too slow and resulted in a “mosh pit” of customers milling around the store
  3. Mobile app on which customers could pre-order for collection – nice idea but didn’t fit into how customers really have decide what to eat for lunch.
  4. Replace some tills with kiosks – nobody used the kiosks
  5. Replace all the tills with kiosks and forced the shift to self-service

In a typical store, six manned till points have been replaced with 17 tablet/kiosks, each with a Verifone payment terminal attached. Tossed spent a lot of time on getting the UI right having piloted in their head office canteen. Point One (the ePOS vendor) worked on the project.

The move to kiosk has taken cash out of the organisation completely. Nobody has complained. It has also increased the amount of customisation that consumers ask for which has put some pressure on production. Staff have been reassigned from the tills to production so net labour cost is the same.

This was a theme from the previous day’s Finance Director conference. A combination of Brexit and increases in the minimum wage means that retailers will need to ensure that scarce human resource is directed at things customers care about. In the Tossed example, staff are better employed making the product than with ordering/paymentt.


This is a well-funded mobile wallet that spun out of Imperial College Labs. It began with close loop applications and is present in 35 universities and 66 office restaurant locations. It reckons that 13% of the available spend is made through YoYo today.

Longer term, it wants to enter the High Street – it has signed Planet Organic – and use its consumer insight to combine loyalty, offers and e-receipts.

When a customer want to pay by YoYo, the sales associate hits the YoYo tender type button on the ePOS. The customer opens his phone, opens the app which produces a bar code. This is scanned by a scanner attached to a special YoYo box attached to the ePOS. Merchants are settled by YoYo directly and independently of their merchant acquiring relationship.


DigiSEq is a platform allowing the credentials of any contactless bank card to be provisioned to any piece of wearable technology. It’s a great concept although there are plenty of challenges. I blogged about DigiSeq here.


WoraPay has similar functionality to YoYo but doesn’t want to build its own brand. Instead, WoraPay offers white label payment/loyalty apps to retailers. It is has been picked up by the Lloyds Bank ventures team and is live at the Lloyds Bank staff canteens in which 10.200 man years are lost each year in queues.

At Lloyds, 1 in 3 lunch orders are now paid for by WoraPay. The app works very differently to YoYo. Customers order and pay for their food in advance via the app which gives them a virtual ticket to use when collecting their lunch.

Lloyds Cardnet are now selling WoraPay.

Universal Basket

This is an app that allows you to put any product from any retailer into a single shopping basket and to buy the basket with one payment. Universal Basket stores your details and automatically creates account and fills out the forms on multiple checkout pages behind the scenes.


The app works via screen scraping which means that there are some obvious PCI challenges. UB says it’s managed to meet overcome these and is now in Beta. There are some customer experience ones too – notably that you’ll get asked for your CVV code because UB isn’t allowed to store this. So, you could get multiple 3DS challenges which won’t be a great customer experience. But it’s a neat concept nonetheless and I’ll be keen to see how far Universal Basket gets.


Sage H1 Results – good cross-selling but slower growth

Sage Pay’s half year results demonstrate that it continues to prosper although there may be signs that momentum is slowing.

Revenue grew 11% to £17m, continuing the positive long term trend that has seen the business grow strongly alongside the e-commerce explosion over the past five years. Management pointed out that the £17m figure was flattered by c.£1m in one-off hardware sales and that organic growth was closer to 5%. This compares to annualised increases of up to 25% reported in previous years. Clearly, growth rates diminish as businesses get larger but Sage Pay remains focused on SME clients at a time when the major market expansion is in enterprise and in-app payments.

Sage Pay revenue (£m)
Sage Pay revenue (£m) – Barraclough & Co derived from Sage Pay accounts

Sage’s new management is reportedly keen to bring the sometimes disparate family of Sage businesses together so it’s interesting to watch the only Sage Pay KPI that makes it into the group results pack. This is the number of customers that take integrated payments – defined as having a core accounting package from Sage integrated with the Sage Pay gateway.

There is real value for customers in taking the integration – the gateway automatically loads e-commerce transactions into Sage and creates and updates customer records. The number of customers taking integrated payments grew by 9% to 16,600 – a very respectable performance – and a rare example of a genuinely useful integration of payments-derived data into a business process.

Number of Sage accounting customers with integration to Sage Pay
Number of Sage accounting customers with integration to Sage Pay. Barraclough & Co derived from Sage Pay accounts.

Rugby deal shows acquirers how to maul the competition

While I was at WorldPay, we bought a small payment services provider and used this capability to commercialise a new proposition that included a range of terminals, EPOS integration, online payments and a single management dashboard with a merchant account.

WP Total

This is WorldPay Total and it was hugely gratifying to see this article in Computing outlining its successful implementation at the English Rugby Football Union’s (RFU) operations at Twickenham, the home of English Rugby. You have to look hard, mind. WorldPay’s PR team did a cracking job to get such a great selection of testamonials from RFU but there’s no reference to this deal on WorldPay’s website.

RFU had previously run a mixed estate of stand alone and integrated fixed and portable payment terminals through multiple acquirer contracts. Its online and telephone payments were handled through yet more third payment providers. This complexity made it hard to introduce customer service innovations, such as queue busting, as well as generating reconciliation headaches in the accounts office.

Total gave WorldPay the toolbox it needed to be able to offer a complete solution to RFU and, given the right commercial terms, the ability to win the entirety of the business available. And because the payment service is fully integrated into the EPOS and includes maintenance contracts for the payment terminals, the relationship between WorldPay and the RFU should be deeper (and hopefully more long lasting) than a typical acquirer/merchant contract.

“Since we rolled out the new service in October 2013, the value of payments has grown threefold (314 per cent)” – RFU

Total provides WorldPay with a platform to introduce new services within the overall contract and service framework. For example, the upgrade to contactless is simply a question of upgrading existing terminals.

“Now that we’ve rolled out contactless, our outlets are making more in sales; and fans are getting back to the game much more quickly, because they don’t have to stand in a lengthy queue” – RFU

Queueing for drinks at Twickenham
Queueing for drinks at Twickenham

The architecture of Total has also allowed WorldPay to be first in the UK with integrated enterprise m-POS devices too. RFU introduced them in its hospitality boxes to take payments on orders created on tablets and iPhones.

“The RFU saw a 44 per cent increase in the value of payments using its eight Worldpay Total Mobile devices in the corporate boxes” – RFU

Twickenham hospitality box
Twickenham hospitality box

Running all payments through a common reporting infrastructure is another strong customer benefit.

“Now we have all the latest payment statistics for each of our corporate boxes at our fingertips, so we can better target these customers with other loyalty schemes and offers” – RFU

This is one deal in one relatively small account but has important implication of the future direction of European acquirers. Here’s why.

The European card payments industry is in a state of agitation and foreboding in anticipation of the new EU interchange regulations. Card issuers will be under severe pressure; inevitably acquirers will be too. If acquirers (the ying to the issuers’ yang) want to grow, they have two options. Either to get bigger to drive up margins through economies of scale or to widen their product offering.

I covered the consolidation option in my report from MPE. But acquirers are generally paying less attention to the possibilities for diversification and this is why the WorldPay Total example is so interesting. Many acquirers are endowed with the brands, customers and distribution necessary to sell more than simply card processing services.

For the monolines, like WorldPay of course, diversification is an imperative not an option. In a head to head with a full service bank for an customers’ payment business, the pure acquirer will normally lose the deal. The bank can offer processing at cost as a sweetener to retain or win the wider banking relationship. The monoline acquirer can’t match that offer so needs to move the goalposts.

One good tactic for monolines is to reposition themselves as technology suppliers, not financial services businesses. This will help them lever acquiring contracts away from the business bankers. To do this, their key relationship focus needs to move from their clients’ finance team to their CIO with propositions like Total available to substantiate this shift in emphasis.

The banks will fight back, of course. Barclaycard, the UK’s remaining bank-owned acquirer responded to WorldPay Total by purchasing The Logic Group. This gives it a very broad capability but it may struggle to maintain high quality relationship management across such a wide range of both financial services and technology products.

“If you can’t bill it, kill it.” Day One of MPE 2015.

It’s my first time at MPE and you have to hand it to Empiria, the organisers. The hall is packed, the exhbition full and the seniority level impressive. Pretty much anyone who matters in European payments is here. Unless they work for Visa.

The principle of the event is to bring together the acceptance end of the payments world – acquirers, processors, payment service providers and ancilliary functions such as fraud screening, with the merchants who use their products to take money from their customers.

It’s a three day event so here’s just a flavour of the key points from day one.

Payments is still hot. If you own a payments business, now is the time to sell. The buyer will probably be a private equity house looking for stable, non-cyclical profits. If you want to buy a payments business for strategic reasons, you’ll probably be out-bid by the private equity guys. So sell instead.

Merchants. There was only one merchant speaking today. Auchan, the French supermarket chain, has built its own pan-European payment infrastructure which allows transactions to be dynamically routed to the lowest cost acquirer. And it recognises the card’s nationality to print out a receipt in the shopper’s home language. All quite cool. Auchan complained that there was no single vendor it could use for its requirements across the continent. “That’s because the businesses that want a single European provider won’t pay for it,” fumed one vendor during the coffee break.

Crypto-currencies. Nothing new today except one start-up (confusingly called Pay Cash) pitched the ability to accept Bitcoins on a standard payment terminal using QR codes. A bit niche, I’d say. Of course, Bitcoin is a volatile asset class, not a currency, and has no place in retail.

Apple Pay. This changes everything. But you probably knew that. There wasn’t anything new revealed today except that (1) Carte Bancaire is in negotiation with Apple and (2) Carte Bancaire won’t be paying anything like the 0.15% that the US issuers have inexplicably agreed to donate to Apple. Meanwhile, the CEO of one acquirer confided to me that mobile payments would finally make his investement in contactless point of sale terminals worthwhile.

Paypal. A spirited presentation from Luke Olbrich outlined the most credible strategy from any of the established players. I’m a sucker for a list of new products accompanied with screenshots. To his credit he also admitted that PayPal Here is a “me too” product.

Zapp. No new information and still no confirmed launch date. Should we be worried? I do like Zapp and wish them well but their roadmap and go live dates are hostage to the UK retail banks’ IT development plans. The same goes for Visa Checkout.

Consolidation. Much agreement that there are too many acquirers and that consolidation is inevitable as banks assess whether they really to keep up the necessary invesment. On the otherhand, payments is capital-lite and an easy upsell to corporate banking relationships so I’m not sure it’s that clear cut. Anyway, if you have decided to sell, both Six Pay‘s Nickaus Santschi and WorldPay’s Ron Kalifa both claimed to be in the market to buy. The rationale for consolidation is primarily that in an undifferentiated industry, scale brings cost leadership.

Interchange regulation. A few speakers addressed the implications of the proposed reductions in credit and debit interchange. One unexpected consequence is that some German retailers have been opting to process dual branded Maestro/Giro cards as cross-border Maestro transactions. The German banks are responding by removing the dual branding and doing a deal with Total so that Germans can buy petrol in France with their domestic Giro cards.

More interesting to my mind is the impact on innovation. It’s going to be hard to produce a new payment instrument that’s cheaper than cards so new successful ideas will need to be pitched at enhancing the customer experience. This sets Europe and the USA in opposition. Across the pond, with credit interchange still hovering at 1.5%, there is a ready reception for anything that gives retailers some relief.

Biometrics. There’s some very welcome thinking on ways to eliminate the PINs and passwords that plague the payment industry. Carte Bancaire are close to launching fingerprint recognition which they claim 58% of French people would prefer to a PIN code. Biometrics are also useful online tools in France as they inhabitants implacably refuse to use 3D Secure.

Biometrics would also has the advantage of differentiating Carte Bancaire from Visa/Mastercard at a time when, accoridng to Gilbert Arira, the EU would like to see domestic schemes closed down. Or maybe merged. How about Giro/Carte Bancaire/Mister Cash as a third pan-European payment scheme?

A signature based biometric authentication tool won the innovation competition by a country mile. Sign2pay allows you to sign your name on a smartphone (landscape not portrait, natch) to validate online local debit transactions. I can’t see millenials going for this but the German delegates were quite excited and there must be an application in the US now that our American friends seem set on chip and signature.

In-store commerce platform. The payment industry can sometimes be guilty of confusing a card machine with an EPOS system but there was some evidence that the vendors are finally reviewing their thinking. Ron Kalifa said that WorldPay was planning to sell a bundle of in-store technologies to SME’s but gave no detail. Verifone’s Julie Felix seemed to be heading in the same direction but First Data (not presenting) are miles ahead with their Clover product.

Tangibly on view today, and impressive too, was Tiller – a restaurant EPOS designed and built by a team with a strong hospitality background. It includes an app store with links to Just Eat, Guest Online and other useful services.

M-POS. iZettle announced that its card reader would now be free. This underlines how similar the SME payments business is getting to mobile phones. It would be nice if free devices and transparent pricing plans were the norm not the exception.

Europe’s Widely Divergent Payments Markets

In preparing for my presentation to MPE later this month, I’ve been analysing the European Central Bank data on card payments. It’s a remarkably useful source. Here’s one striking graph I’ve pulled together.

mpe payment cards

The graph shows the average number of transactions per card in each EU members state along the X axis and the average number of transactions per point of sale payment terminal along the Y axis. The size of the bubbles indicates the relative value of total of all payment card transactions in each country.Even though payment cards have been available for decades, consumer take-up varies significantly across the EU. The Nordics (top right) are keenest on electronic money, the balkans (bottom left) the least excited. Notable outliers are the Netherlands and Germany.

Acquirers need to focus on innovation; not tricksy pricing, to win in the digital world.

Here’s some fascinating research from Strawhecker. Tracking leading US acquirers, they show that new customers are paying 20% less than existing ones for the same service.

Source: Strawhacker, 2015
Source: Strawhacker, 2015

This result is consistent with the mystery shopping research I carried out in the UK late last year in which retention teams readily knocked 20% off the bill to keep a customer.

This isn’t new. It’s a normal financial services practice to entice new customers with low prices and then to take advantage of the customer’s lack of knowledge to put them up later. Here’s a particularly creative example from WorldPay highlighted by Cardswitcher. Another tactic common in the UK is to hit the client with PCI charges. I found one small dry cleaner paying £50 a month to Global Payments for non compliance.

This sort of practice can’t persist in the digital world. Not only are sites like Cardswitcher throwing a welcome light on the industry but new entrants such as Credorax and EVO will help to drive down prices overall.

Instead of eking out their margins by bamboozling their clients, acquirers should be investing in new products and services that genuinely add value to their customer relationships. Here’s three good examples:

No doubt Barclaycard will come up with something equally interesting following their purchase of The Logic Group.

Price transparency is coming to the payment industry. When it does, the winners will be the providers with the widest product portfolio, the strongest brands and the best customer service; not the ones with the tricksiest pricing teams.