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David Prosser: Card payments remain unavailable for small businesses

Billions are lost by smaller firms that can’t offer a feasible mobile-phone payments service
  • @davidprosserind

Why don’t more small businesses accept debit and credit cards? As many as three in five firms decline plastic payments, despite claims that this costs them a fortune in lost trade – a Barclays Bank survey earlier this year reckoned one in six consumers walks away from a purchase if they can’t pay by card, costing those businesses £7bn a year.

It might be wise to take Barclays’ numbers with a healthy pinch of salt – it has something of a vested interest given its status as Britain’s biggest credit card provider – but there is no doubt many small businesses recognise they would reap a benefit from offering customers a card payment option.

One factor holding them back is a fear of fraud. In particular, research published last week by payment procession firm WorldPay suggested small businesses are particularly vulnerable to the growing problem of computer hackers stealing customers’ card data. This problem is now costing British businesses millions of pounds and WorldPay estimates small businesses account for almost two-thirds of the costs incurred.

However, the bigger issue for many small businesses may be the practical considerations involved in setting up a process for accepting card payments. There is no single standard for doing so: a number of competitors now provide card payment solutions that rely on small businesses’ mobile phones, but each one works slightly differently and costs vary. Meanwhile, the banking industry’s payments experts aren’t doing much to help.

The launch this month of a card payment solution by US retail giant Amazon rather rubs salt into the wounds of British smaller companies as the new service, Amazon Local Register, is not being made available in the UK. That’s a pity since the card reader it uses is effectively being handed out for free via refunds of transaction charges and those latter fees undercut what other providers in the US market offer.

In the US, Amazon’s launch into is seen as a major challenge to Square, the mobile phone card payments business launched by Twitter founder Jack Dorsey that currently leads the market. But Square isn’t available to British small businesses either.

Ironically, the fact that Britain’s card payments system is more secure than its US equivalent has been a disadvantage in the context of mobile phone transactions. The US has yet to switch to chip and pin technology, relying instead on the old swipe system. As a result, Amazon and Square’s card readers aren’t suitable for the UK market – especially as Visa won’t allow European cards to pay in the old-fashioned way.

To be fair, there are still several options for small businesses here. Paypal offers one solution, while other options include iZettle, Intuit and Worldpay. Nevertheless, competition from the US market leaders would certainly be a shot in the arm for mobile phone card payments in the UK.

Square is now finally talking about a launch on this side of the Atlantic, though it isn’t clear when that might happen. Amazon, meanwhile, is tight-lipped on its intentions for the UK.

Meanwhile, the banking industry’s mobile phone payments service, Paym, remains disappointingly out of reach for small businesses. In many ways, this would be an ideal solution for small firms, since it doesn’t require the merchant to have a card reader.

Instead, customers with the Paym app on their phones use it to make money transfers to the bank account registered to the mobile phone number of whoever they’re paying.

Unfortunately, most banks will only let customers set Paym up on their personal current accounts and it can only be used to pay individuals, rather than organisations. That rules Paym out as a payments service for the vast majority of small businesses.

These issues are set to become more pressing if, as most analysts expect, cash becomes an even less popular way for people to settle even quite small transactions. And if commercial card payments providers are finding it difficult to offer the right solutions, the extension of Paym would be of huge benefit to many small businesses.

Attraqt set to fly after finding retailers’ sweet spot

Look out for Attraqt Group, which makes its debut on the Alternative Investment Market tomorrow allowing a fund-raising that has picked up £1.25m from investors.

Attraqt, which is now valued at just over £10m, sells software to retailers looking to improve their online trading performance, and already counts the likes of Tesco, Superdry, Laura Ashley and Paperchase as customers.

With retailers’ dependence on internet sales growing all the time – UK shoppers are amongst the world’s most enthusiastic online purchasers – Attraqt operates in something of a sweet spot, assuming that it can produce tangible results for its customers. The company says its software enables retailers to improve conversion rates online by giving them greater control over tools such as product searches and recommendations.

Dan Wagner, one of the founders of Attraqt argues that while online sales will continue to increase, not all retailers can expect to benefit. “Many retailers are still struggling to truly capitalise on the change in the market by deploying sophisticated merchandising to bring their products to shoppers and stand out from the competition,” he warns.

No further forward on outstanding bills

There is still no evidence of any improvement in Britain’s late payments culture. Almost two-thirds of small businesses have had clients fail to pay their bills on time over the last year, new research suggests, while one in five have had payments that are still outstanding three months after they were supposed to be settled.

Satago, an online business that enables firms to post anonymous reviews of how good clients are at paying on time, said small firms were struggling to put pressure on their clients to do better. Two-fifths simply write off bad debts, while only one in four have formal processes in place for securing late payments.

Steven Renwick, the founder of Satago said small businesses had no choice but to step up their efforts. “SMEs that offer customers trade credit must ensure they are effective and professional when collecting debt,” he said. “Businesses must invoice correctly and on time and proactively chase for payment.”

Powerful web tool restricts number of  unhappy customers

Wilmott: We’ve grown 100 per cent this year alone

Small business woman of the week: Lindsay Willott, Chief Executive, Customer Thermometer

“I came up with the idea for Customer Thermometer when I was running my old marketing agency firm. We had some really impressive clients but they were all on retainers and, with 80 staff, it was scary waiting to see if the phone would ring each month. I knew we couldn’t afford to have unhappy customers so we developed a tool to enable our clients to tell us quickly each week if they were satisfied with what we were doing for them.

“I knew this was a powerful tool so, when I sold the agency four years ago, I set up Customer Thermometer to exploit its potential with external clients. We now have more than 2,500 companies in 40 countries.

“It’s a software-as-a-service business – our customers sign up online and pay monthly for the tool, but there’s no contract. The idea is to embed our feedback tools in the communications and transactions firms have with clients. We even have a red alert facility so a really unhappy customer can make their feelings known. The business can then get in touch instantly to try and put things right, which is amazing for customer retention.

“Some of our clients use it to monitor staff morale and we’re also now looking at geo-location services. A restaurant manager might be able to speak to an unhappy diner before they’ve even left the restaurant.

“It’s a very different type of business to my agency. I only have four staff but it’s been very exciting. We’ve grown 100 per cent this year alone.”