Credit card usage has grown exponentially since the launch of Barclaycard in 1966 and card payments overall from the first debit card, also from Barclays, in 1987. The move from paper vouchers to electronic processes led to greater growth in businesses offering card acceptance but entry and fixed monthly costs still meant that, until relatively recently, a card terminal were less common in smaller businesses.
The arrival of the internet led to the development of e-commerce. According to Wikipedia “The first online food order was a pizza from Pizza Hut in 1994”. However although the order for a large pepperoni and mushroom pizza with extra cheese was placed online, revolutionary for its time, it was little more than an online order form, as the order was then verified by a phone call and payment made on delivery. To link together the whole transaction online required a complex payment gateway connection to link the order with the payment.
Systems developed further with the launch of pioneers such as Amazon in 1994 and the beginnings of online orders with payment online by credit card (although you could still phone and give your credit card details over the phone). However, the technology costs still meant that these were large scale solutions for large scale businesses.
The growth of card, online and mobile payment acceptance has increased as digital technology has developed in recent years and further fuelled by the pandemic. The payment solutions initially available to the multi-nationals has now been replaced by capability at everyone’s fingertips, literally, in the smart phones carried by nearly 4 billion people across the globe today.
According to UK Finance in their report of the impact of Covid-19 on cash, in 2010 over half of all payments in the UK were made in cash and only one sixth by debit card. By 2017 contactless payments had fuelled the growth in debit cards accounting for one third of payments and with the impact of the pandemic cash payments accounted for only one sixth of payments in 2020. Within debit card payments contactless payments accounted for 59% of all payments in March 2021.
In recent years, as discussed in the Northey Point blog “Have digital options even replaced the petty cash tin?’, the increase in digital solutions has increased the acceptance of cards across all size of business:
…at all levels, the move to digital has been assisted by the prevalence of payment solutions which have enabled card payments to be accepted without the need to be tied into expensive monthly contracts. This has been a virtuous circle with the rise in contactless payments: there has been a greater demand to use contactless payments and with easy to set up, instantly available payments solutions without a minimum monthly contract, there has been a greater ability and willingness for businesses to accept card payments.
For example, just 10 years ago finding a mobile food outlet that accepted a card payment would be a rare sighting; now most have a mobile or digital device – and certainly again over the last year (when allowed to operate) many have chosen either only to accept contactless payments or certainly have expressed a preference for contactless over cash.
However, although many more businesses now accept card and mobile payments most stop at that point limiting the benefits to the following:
- A simple standalone solution – secure payment is received and, in many cases depending on the industry, funds are received next day by a Faster Payment.
- Online reporting is available giving access to payment information
- Whilst cash is also an “immediate payment” some can be used but most would need to be paid in, incurring additional costs, all avoided when a card or digital payment is taken.
- (cash may still be accepted but if only by exception this reduces the process to by exception rather than a daily necessity to support cashflow)
Yet so much more is available no matter the size of business and deep pockets are no longer required. This is true whether wholly online or wholly face to face, or as is the case for many, a hybrid of both.
Integrated payment systems are now unrecognisable from their costly, clunky and frankly not-very-integrated early days.
What is available and why should a business bother?
By integrating systems businesses can also benefit from streamlining their processes, increasing staffing efficiency and reducing the manual error caused by re-keying data. They can also gain integrated insights into their customer base from the secure data captured within the system.
The above are not insubstantial but integrated solutions link the information together – the information on the cash register is linked directly to the card reader reducing the need for re-keying.
Embedding card payments into e-invoice payments allows customers to issue invoices with the ability to pay by card allowing easy settlement and automatic reconciliation within accounts software offering further streamlining. Win-win across all with fixed price per transaction costings can be built into margins; Faster Payments may still be the choice in business-to-business payments but increasingly embedded card payment options are streamlining the process.
Compare a legacy payment system – customer sends invoice; invoice is keyed into accounts system; their customer sends cheque back; the cheque is paid in; settlement is now next day but, in all likelihood, the whole process can take a number of weeks. Reconciliation of the payment is posted manually.
With an integrated system the invoice is generated with embedded card payment; in many cases this automatically updates within the accounting software; customer pays invoice via link to card payment in the invoice itself; card payment is received and automatically reconciles to confirm payment has been received; Faster Payment settlement means the payment is received in many cases next day. Admittedly the process is still reliant on the time taken for the customer to pay but the potential to reduce the timescale can be seen.
E-commerce solutions have also revolutionised the online merchant and payment gateways integrated into one simple system allowing simple support for online businesses.
Historically, the route would be to add the payment capability to a pre-existing web site.
Many new digital providers now start with a template which includes an integrated payment system and the website can then be customised for the client for online ordering with payment capability as part of the process – and as the sites are built from the ground up and not legacy form the top down the ordering process on both laptop, tablet and mobile is straightforward to implement.
Unless a business is starting from scratch then it is likely that a hybrid of solutions is in place, but thought can be given as equipment needs to be replaced to the best solutions. Talking to the right professionals can help in assessing the best solution.
Most businesses are partly connected and therefore partly benefitting, greater benefits will be enjoyed by those that are fully integrated.
We are pleased to feature a guest blog by Mike Chambers. Mike is a recognised authority on retail payments and, as Chief Executive Officer, led Bacs Payment Schemes Limited (Bacs), the UK’s biggest retail payment system, from 2004 until 2018.
During this time he successfully steered the company through a record number of payment processing, technological, regulatory and innovative customer proposition ‘firsts’ including extending Bacs’ product offering to include the ownership, management and market adoption of the Current Account Switch Service (CASS) and the Cash ISA Transfer Service.
During his time at Bacs, Mike also led the UK’s systemically important RTGS payment system (CHAPS) as its CEO and operated the UK’s Faster Payment Scheme as its first Chief Executive creating the Payment System Operator (Faster Payment Scheme Limited).
Mike was an integral part of the industry initiative which led to the New Payments Architecture (NPA) vision (including concepts such as Request To Pay and Confirmation of Payee), the regulatory endorsed merger of the UK’s retail payment schemes and the formation of Pay.UK.
Having successfully merged Bacs into Pay.UK, Mike has developed a portfolio of roles including chairman, payments advisor, Non-Executive Director, ambassador and awards judge.