Card payments industry set to face dynamic change
retailers, consumers across the UK spent in record numbers on
November’s “Black Friday”. It is estimated that online spend for the
day was around £1.23 billion, a 12 per cent increase year-on-year,
while the total spend for the week rose to £6.5 billion.
Small to medium enterprises (SMEs) and Micro businesses expect this
trend to grow, adding that credit cards payments were increasing in
popularity, according to a new report from East & Partners Europe (E&P
In the latest round of E&P Europe Merchant Payments Market Analysis,
Debit and POS terminals’ share of spend with SME and micro merchants
continues to dominate but online and credit are clearly growing their
share of spend.
In contrast, those same merchants predict the continued decline of the
old favourite cash, along with cheques, with both means of payment now
in single figures in each case for the first time of the report.
A key victor in these trends is the payments business itself, which in
merchant payments acquiring is going through significant change and
faces a future of even further change with the growing importance of
“fintech” in this sector.
In-line with a shift in consumer shopping and spending habits, which
has seen a rapid uptake of ecommerce and emergence of mobile commerce
as a result of the saturation of smartphones and tablets, both SME and
micro merchants were forecasting increases in online transactions as a
share of the spend made with them.
At the same time, merchants are predicting that the share of POS
terminal spend with them actually reversing. This trend potentially
indicates that future growth in spending online for SME and micro
merchants will represent an increasingly important channel for them.
Overall, across all three merchant segments interviewed by E&P Europe
– micro, SME and lower corporates – two-thirds of merchants now accept
online payments, with this number set to grow strongly in the next six
months. And not surprisingly, the vast majority of merchants (79.3 per
cent) reported internet payment platforms as their key area of
development in the next two years.
Clearly many of the issues to accepting online payments have been
resolved but security of payment remains as the biggest concern with
close to half of all UK merchants experiencing some form of fraud in
the past year.
The increase in credit card purchases, driven by “lower value” mobile
and contactless payments is expected to reach £183 billion by 2025, a
25 per cent increase from 2015 according to Payments UK.
In the shorter term, the growing appetite of SME and micro merchants
for card payments is illustrated by their forecasts for growth in the
share of credit cards, once the reviled and often rejected form of
payment by these merchants. The growth rates merchants forecast for it
exceed the rate of growth of debit, and particularly with micro
Fuelling this growth in share of spend, E&P Europe expects to see
growth in average transactional value for credit cards of around 15
per cent in the next year.
Dynamics of UK Merchant Payments Acquiring
As would be expected, traditional merchant payment providers; WorldPay,
Barclays Merchant Services and Evalon collectively dominate market
share (70.7 per cent) across all three merchant segments. However,
credible challengers exist with Lloyds Cardnet, Allied Irish, First
Data and more disruptive entrants.
The challenge of these other players is best illustrated in their
performance service ratings, in which it’s clear they excel in many
ways in their merchant customer relationships.
This feature, coupled with the disruptive opportunities in merchant
payment services, as shown by PayPal’s success and many other new
entrants, such as European based POS providers like iZettle, along
with re-energised processors like ACI, set the scene for an
ever-increasingly dynamic landscape.
The future of merchant payments choices looks promising. As the
competition within the industry heats up, niche, reliable and cheaper
alternatives are fast becoming the small business owners’ friend.
It’s no longer just about service charges.
To find out more about E&P Europe’s Merchant Payments Market Analysis,