PayPoint has received heavy criticism in recent months from Convenience Store readers, with low commissions, high bank charges and perceived lack of communication top of the list. Convenience Store travelled to PayPoint HQ to put these issues to the company’s senior management
C-Store: Many retailers are frustrated by the low rate of commission offered by PayPoint, particularly as this is usually swallowed up by bank charges. Are you charging a fair rate, and do you have plans to review it?
PayPoint: “We feel that the commissions offered to retailers are competitive given the market. We are in the middle of the client and the retailer and we have to ensure that we achieve a fair balance between all parties.
“Since 1997 our commission on utilities has been 0.5%, capped at 13p. In the early days there was a lot of pressure for bill payment to be completely free, and we had to come up with a rate that worked.
“We’d like to offer more, but there are competitive restraints from other organisations such as the Post Office, and modern procurement tactics are brutal every client is making it harder for us. I assure you that in 15 years our fees to clients have only ever gone downwards, yet we have protected that 0.5%. If we took the cap away, we wouldn’t even be in the market.
“Through PayPoint, the retailer gets footfall that they wouldn’t get from any other supplier. Would you rather have the commission, the customer, and the opportunity to sell them something else, or no customer at all?”
C-Store: The cash handling charges at banks are crippling for retailers. Is there any support that you can offer?
The facts: PayPoint UK
Number of terminals: 22,500
Annual transactions: 550 million
Services offered: More than 1,200 including gas, electricity, television licence and regional transport schemes
Pre-tax profits as of March 2010: £32.6m
PayPoint: “We can see that banks are exploiting retailers, but there’s not a lot we can do about it. We offer a great deal on reduced charges to Barclays customers but we obviously can’t force retailers to switch banks.
“The biggest win we can achieve is by recycling cash through self-replenishment cash machines and ‘cash out’ schemes. Our message to retailers would be please do more of this. We’re also hoping to get involved in the benefits system by bidding for new contracts there, which would help with the cash situation.”
C-Store: Why don’t you let retailers make a surcharge on transactions?
PayPoint: “We feel that this isn’t right for us for two reasons. First, our service is built on brand values, and that means a free service to customers, many of whom are at the lower end of the social scale and may be more vulnerable. We are proud of this value and believe a surcharge would go against it.
Second, it just wouldn’t work. Footfall in stores would drop and customers would simply pay their bills elsewhere. You can already see this demonstrated in the huge swing towards free-to-use ATMs.”
C-Store: PayPoint demands exclusivity and has recently asked all of its agents to sign a five-year contract. Why is this necessary?
PayPoint: “Although we’re not legally a franchise, we operate similar to one. There is a standard attached to our brand and the strength of this allows us to sign clients. Retailers sign up to what we offer and customers believe that they are getting a service from PayPoint, not other payment service providers. You wouldn’t expect to get an old banger from Hertz rental.
“These high standards have to be maintained in order for us to attract new clients, and if there was no exclusivity agreement with retailers, both standards and footfall would be diluted.
“Despite complaints from retailers asked to sign up for the five-year contract, some of them forget that they’ve been with us already for even longer than that. PayPoint does reserve the right to suspend terminals, but this is quite rare. We have a very small churn-out of retailers, just 5.5%.
“Our service levels are a real cost to us. If a terminal breaks down, we are committed to replacing it within four hours, whether you are down the road or in the Shetland Isles. We don’t charge retailers for the service, the terminal or the till rolls, and of course the contracts are for both parties. It’s a five-year commitment from us, too.”
C-Store: Retailers have also been concerned about the lack of communication they have received from PayPoint. Will you be reaching out to retailers more now?
PayPoint: “Customer engagement is top priority. We’re aware retailers are concerned that they hadn’t seen anyone from PayPoint in a while. We’re trying to find ways to communicate better including an improved effort in the field and retailer surveys through the terminals.
PayPoint represented by:
Dominic Taylor - Chief executive
Tim Watkin-Rees - Business development director
Mike Igoe - Retail strategy director
Peter Brooker - Head of corporate affairs
Gerry Hooper - Head of field sales
Dipak Naran - Territory sales executive
“We have a new customer engagement strategy now in place that will enable us to visit all of our agents more regularly. We want to be able to spend more time with retailers and to use the information learned from them to look into the business and see how it can be developed.
“We used to have a retail forum for independents but, to be honest, it was very poorly attended. Our retail focus has become more multiple-based because they turn up to meetings. But we do have a strategic perspective about the independent sector. We have invested in it for the long term and we need to make it work.”
C-Store: What future plans do you have for the service and how will you making PayPoint more attractive for your agents?
PayPoint: “We’re developing a whole suite of retail services and we know we need to communicate these effectively.
“We see the recycling of cash as essential to businesses. We’re also trying to get involved in benefit payments we’ve put in a strong bid to the DWP to replace Giro cheques.
“We’ll be continuing to expand means of getting more customers into stores. The Collect+ parcel scheme is a classic example of helping retailers find a totally new customer group. We’re also providing the opportunity to have customer offers specific to a certain product or store on the bottom or back of the PayPoint receipt. These could be money-off offers or a bogof, but they would help drive transactions in store from customers who originally only wanted to use the bill payment service.”