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America Catching On With Contactless

To many, the global superpower that is the United States can seem like the trendsetter that the rest of the world follows. In terms of how they pay for things, however, it is pretty far behind Europe and Asia. A study available here by A.T. Kearney last year showed that only 3% of US cards are contactless, compared to the UK’s 64% and South Korea’s 96%.

 

Why America is lagging behind

The faster alternative to chip and PIN, that only requires tapping it on a checkout terminal for the transaction, haven’t taken over the US mainly due to the size of the market. It is far easier to make changes to a comparatively small country like the UK compared to one of the world’s largest countries that has a far vaster amount of different retail stores and banks. The method of introduction also played a key part in this difference. Almost five years ago, when the UK first introduced contactless cards to the public, it was done through the popular travel option of public transport. Three years later, the number of contactless cards in the UK had already reached 119 million, accounting for 78% of debit cards and 62% of credit cards in use based on UK Finance statistics.

 

By contrast, the US don’t even use a regular credit card for public transport most of the time. In fact, chip and PIN could even be seen as a work in progress in America with how many retailers are just getting used to it, so contactless is clearly not held in high regards over the pond. Despite this, chip and PIN is growing more accepted over time, with retailers who don’t install chip technology to prevent fraud being held accountable as of 2015.

 

This has a silver lining, however, as it’ll make the transition towards the contactless system far easier for America. Most of the new card readers installed after the 2015 changes already have contactless technology built into them, giving Americans the option if they don’t trust it.

Last year, J.P. Morgan expressed desires to provide millions of contactless cards to customers and by the end of this year, Visa hopes the number of contactless cards in the US to have reached 100 million.

 

Whilst that seems like an overly ambitious goal for some, it’s what many banks and card issuers will be striving toward, as A.T. Kearney has already estimated banks could make a $2.4 billion profit from card earnings across the next five years by introducing contactless cards as a widespread system.

Research has also shown most contactless card payments will be used for mundane things such as grocery shopping, fast-food and clinic payments, as many people will want to pay for these generic tasks quickly and conveniently. That’s the way it is here due to our £30 limit on contactless payments to eliminate fraud- and the US may implement a similar policy.

 

Credit Cards in the US

Two years ago, the payments from all types of cards in the US (other than contactless), amounted to $6.6 trillion according to the Federal Reserve. Whilst this may seem like a giant amount, analysts believe it could be far greater if payment options such as contactless became popular in the country’s market.

 

A big bite for Apple

Beyond the banks and card issuers, there’s another party benefiting from the increase of contactless cards coming to America; the tech giant Apple. The payment service ApplePay acts as a contactless payment option for iPhone, Apple Watch, iPad, and Mac, and they’d reap the rewards of a contactless-loving USA.

 

Why Americans are scared of contactless

No option is ever perfect, as many worry about the security of contactless options. Despite evidence from financial experts presenting it as every bit as secure as chip and PIN, the public’s natural scepticism of new ideas have caused many to worry about the safety of this option.

Contrary to this belief, however, contactless cards have far less chance of counterfeit problems due to the chips placed into them, making them an even safer option. On top of this, creating a maximum spend on contactless would stop people from stealing a card and emptying a bank account quickly.

Despite the fear some have of contactless cards in America, they are on the rise now and will only continue to grow. The US has started moving towards the cashless society the rest of the world is nearing, and contactless will be the figurehead of that.

 

Need a card machine for contactless payments?

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Why the new £1 coin could be the last ever made as Britain moves towards a cashless society

The two-tone pound coin boasts innovative security features which supposedly make it the most secure on the planet. It is also the first UK coin in circulation since the threepenny bit to feature a design of octagonal proportions.

But despite its impressive design, there’s every chance that this will be the last £1 coin in the history of our currency.

Why?

The decline of coins and notes is not just being driven by the convenience of alternative, more high-tech payment methods – it’s also because of the simple fact that cash costs money to make!

The UK is a world leader when it comes to alternative payments. In 2015 alone, Brits spent over £21bn via contactless payments – more than any other country on the continent.

This explains why every business, from popular chains to pop-ups, know that their customers expect to be able to pay by their card, mobile, or wearable device – and over 17.m UK businesses now accept payment cards.

As if we needed any more proof that it’s time to convert to contactless and mobile payments, we now officially have it!

Get in touch with a member of our team today to identify the payment solutions that are perfect for YOUR business.

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Reasons why your Business NEEDS to make the switch to contactless payment solutions

More than just a saying or statistic, it has become reality that ‘Businesses that decline card payments are losing out’.

Sorry, we don’t take card payments’ should be a thing of the past as Britain quickly converts to a cashless society, not taking card payments should be something rarely heard of by now. Unfortunately, this is not the case just yet. 75% of all UK retail purchases are made by card; and yet still, more than two thirds of British small to medium sized businesses (SMEs) still don’t accept card payments.

With Cheaper PAY’ment solutions you can:

  • Accept Payments over the phone
  • Accept online Payments
  • Accept smart phone payments
  • Accept Chip ‘n’ Pin payments

How will these benefit your business?

  • Never miss a sale – Customers are able to buy your products anywhere at any time with secure online payments which means more sales for your business.
  • Beat your competitors – Customers are more likely to shop at a store that offers card payments.
  • Happier customers – Card payments are processed in a matter of seconds so customers can quickly continue with their day and you can get on with serving the next customer.
  • Lower bank fees – Handling less cash means fewer trips to the bank and more money back into your business.
  • More security – Extra features protect your business from fraudulent transactions and tell you immediately if a customer’s funds have not yet cleared.

Our low transaction costs are what make Cheaper Pay one of the most affordable merchant service suppliers available. Many card machine companies will charge you for a service that is designed to benefit growing businesses rather than hinder them.

At Cheaper Pay, we believe in supporting and innovating businesses with evolving technology. That is why we offer FREE quotes and a 3 months’ free trial to ensure that the payment solution you have chosen is compatible for your business.

To begin your journey to contactless payment get your free quote HERE.

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Pepare for the next generation of card payments

Paying for your shopping using your smartphone just got even easier as Mastercard expands the reach of its mobile payment app.

The humble credit and debit card may be a step closer to extinction thanks to a new announcement from Mastercard.

The company has revealed a major expansion to its Masterpass digital wallet service that will allow customers for the first time.

Going forward, Masterpass should now work seamlessly on your smartphone, wearable device or tablet, letting you pay online, in-store, or using the NFC-enabled app with just one touch.

Masterpass makes paying for goods even easier

Masterpass makes paying for goods using your smartphone even easier

Mastercard says that the new service, which links to your current account, is perfect for a wide ranges of use cases, from paying for the tube in the morning to splitting the bill at lunch and ordering your weekly shop online.

Banks will also be able to build Masterpass into their own apps, bringing together all your various digital payment methods and apps in one place.

The company says that around 80 million people around the world will be able to benefit automatically from the new service, which launches in the US today before expanding to Europe later next year.

The news comes as competition in the mobile payment market continues to increase, as big players such as Apple and Samsung throw their weight behind the technology.

Since its launch in 2014, Apple Pay has helped popularize the idea of paying for good using a mobile phone in the UK, with thousands of businesses across the country supporting the technology.

 


Moore, M. (2016) Home. Available at: http://www.express.co.uk/life-style/science-technology/689626/mastercard-masterpass-contactless-shopping-payment-app-nfc (Accessed: 15 July 2016).

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Selfies And Contactless Rings: New Ways To Pay

The way we pay for goods is changing. Get ready for Selfie Pay, contactless payment rings and iris scanners.

What if you could use a selfie to pay for things? How about the rhythm of your heart?

New technologies that could change the way we buy things have been shown off at the Gherkin as part of London Tech Week.

Selfie Pay takes everyone’s favourite vanity exercise and makes it useful: allowing you to authorise a transaction with your face.

The app requires you to blink so it knows you’re really there and someone isn’t using a photo of you to fraudulently authorise a transaction.

The idea is to get rid of the need for passwords, instead using biometrics: unique data based on individual characteristics like your face, eyes or fingerprint.

“If you think about passwords, they’re a standalone measure,” said Jane Khodos from MasterCard. “They’re easily lost, stolen or forgotten.

“Here you’re authenticating with what you have: your phone and also who you are.”

You could use this kind of tech to buy goods, pay for bus or train fares, or to log into your computer.

We also saw more of Nymi: a wearable wristband that can identify you by the unique rhythm of your heart, found in your electrocardiogram (ECG).

Your heart rhythm is not to be confused with your heartbeat, so the band would still work if you had just run for a bus, for example.

“We’re also very concerned about the security issues, it’s something that’s top of the mind for us,” said Amy Neal from MasterCard Labs, the company’s research and development division.

It is not just biometrics that could change payments.

Kerv is said to be the world’s first contactless payment ring: a simple piece of technology that essentially means you are wearing a contactless payment card.

Payment tech inventors emphasise that there is no need to choose just one of these products.

“You can start to bundle biometric authentication together,” says Ms Neal. “So you might have Selfie Pay, but also the electrocardiagram for additional security.

“We hear stories like people are concerned that they may have an identical twin, so what does that mean if you’re doing selfie pay?

“For us this is ensuring that we have a full suite of biometrics available.”

The Kerv ring is due out in July, Selfie Pay comes out in the UK this year and the Nymi band and iris scanner are both still in development.

 


Team, T.S. (2016) Selfies and Contactless rings: New ways to pay. Available at: http://news.sky.com/story/selfies-and-contactless-rings-new-ways-to-pay-10323052 (Accessed: 15 July 2016).

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London’s contactless Tube payment system is going global

Other cities will soon be able to use TfL technology to develop their own contactless payment systems.

The contactless payment system used on London’s transport network will soon be modified for use in other cities.
A deal between Transport for London (TfL) and transportation firm Cubic will see the latter adapt the contactless ticking system and license it around the world. The deal, worth up to £15 million, will help TfL ensure fares don’t rise for the next four years, the mayor’s office said.

Cubic will be given access to London’s contactless system to allow it to tailor it to other transportation networks. The company first worked with TfL in 2003 to develop the technology behind Oyster and has since helped upgrade the system to support contactless payments from debit cards, Apple Pay and Android Pay.

Outside London, CTS provides similar ticketing technology to Brisbane, Chicago, Sydney and Vancouver. The non-exclusive deal with TfL will allow the company to integrate technology developed for London’s network into other transport systems.
According to TfL, more than 500 million journeys have been made by more than 12 million unique credit and debit cards since the contactless system launched on London’s busses in December 2012. The technology was expanded to cover Tube and rail in September 2014 and has been used by customers from 90 different countries with one in ten contactless transactions in the UK made on TfL’s network.

Cubic continues to run TfL’s ticketing and fare collection services on 8,500 busses, 1,900 Underground and Overground ticket gates and 1,600 ticket machines across the network.

 


Temperton, J. (2016) London’s contactless tube payment system is going global. Available at: http://www.wired.co.uk/article/london-underground-contactless-payments-licensing-deal (Accessed: 15 July 2016).

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Contactless payment coming to Birmingham buses and trams

The way we pay for public transport will become a lot more straight forward.

Catching the bus in the West Midlands is about to get a lot easier.

National Express West Midlands has announced plans to fit their buses with technology to allow contactless payment.

Their 1,500 buses in the area with take payments from bank cards, smartphones, smart watches, cash and Swift cards.

Peter Coates, managing director of National Express West Midlands, said: “We know our customers want the choice of using contactless when they travel.

“Only a month ago, we introduced it on the Midland Metro and already 7% of passengers buying a ticket on board are using contactless.

“So, as part of our pledge to the West Midlands Bus Alliance to get more people travelling by bus, we are investing in contactless because it makes journeys quicker and easier for passengers.”

The new technology will appear first on buses in Coventry by the end of the year before coming to Birmingham and the rest of the West Midlands over the following two years.

It is predicted to speed up bus journeys because passengers will spend less time buying a ticket at bus stops.

A report into the effects of congestion on bus passengers recently said: “If London-style cashless buses with contactless payment and smart ticketing could be extended to the rest of the UK, bus journey times could be improved by up to 10% by halving dwell time at bus stops.

Soon you will be able to pay your bus fare with your debit card.

“In urban conditions, dwell time makes up between 25% and 33% of total journey time. The big five bus operators in the UK have set a target to introduce contactless bus transactions by 2022.

“They should do everything possible to accelerate this, and it is realistic for them to achieve this goal in the large conurbations within three years.”

 


Beardsworth, L. (2016) When will contactless payment be available on Birmingham buses?Available at: http://www.birminghammail.co.uk/news/midlands-news/contactless-payment-coming-birmingham-buses-11609505 (Accessed: 14 July 2016).

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Barclaycard bPay turns watches contactless

Barclaycard is expanding its bPay contactless payments range through the introduction of a small case that can be attached to watches and fitness bands.

The bPay Loop is a silicon case containing an NFC chip that can be slid onto the strap of watches and fitness bands with open buckles.

Launched in 2014 bPay is available to anyone with a UK-registered Visa or MasterCard, debit or credit card, not just Barclaycard and Barclays customers. Users add funds to their digital wallet on-the-go using a mobile app, online through the bPay web portal, or set up an automatic top-up which adds funds when their balance falls below a pre-set level.

Bpay was initially launched as a wristband and is also available as a sticker and fob, with over 100,000 products sold. Barclaycard says that the latest Loop version comes in response to customer demand for a way to add payment functionality to wearables people already own.

Available to buy online for £19.99, Barclaycard has also teamed up with Swiss watch maker Mondaine and fitness tech outfit Garmin to offer Loop to those purchasing selected items from both brands.

Tami Hargreaves, commercial director, digital consumer payments, Barclaycard, says: “Thanks to the huge growth we are seeing in contactless payments, we are increasingly becoming accustomed to being able to make low-value payments throughout the day, in a quick, easy, convenient way. Loop makes that easier than ever.”


Finextra (2016) Barclaycard bPay turns watches contactless. Available at: https://www.finextra.com/newsarticle/29140/barclaycard-bpay-turns-watches-contactless (Accessed: 7 July 2016).

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50 years on: How credit cards changed our relationship with money

Fifty years ago this week Barclaycard issued the first credit cards in the UK.

Half a century on, consumers are used to a range of convenient ways to pay, but back in 1966 there was a feeling of change when people tried to brandish their exciting new plastic cards.

“When it arrived I didn’t really know what it was,” admits Liz Hodgkinson, who was a fresh-faced 22-year-old just out of university.

The company sent out some 1.25 million plastic cards to Barclays customers from 29 June 1966 and while some sent them back or never used them, many, like Liz, a writer, embraced the new way of paying.

“There was an explanatory letter from Barclays which said it was issuing the cards to its best customers. It was a terrific revolution as far as women were concerned as previously you had to have a male guarantor to get credit.”

Liz Hodgkinson in 1966 and today

Liz Hodgkinson in 1966 and today

At the time, the bank said: “[Barclaycard’s] purpose is to reduce the use of cash in shopping and other transactions and the scheme is designed to appeal not only to those who must travel and spend a good deal of money in restaurants, but also to the everyday shopper throughout the country.”

It also stressed the benefits to retailers and businesses by pointing out that the card would help in “reducing or eliminating the book-keeping now needed to maintain customers’ credit accounts.”

‘Made me feel special’

Once she’d worked out its advantages, Liz used her card as soon as possible.

“I realised that I could buy something without having to pay for it there and then and could have three weeks’ grace. It meant I didn’t have to wait until payday.

“It made me feel very special. My husband banked at Lloyds at the time so didn’t get one.”

In fact it took Barclays’ High Street rivals six years to respond.

Then and now

By the time a group comprising Lloyds, NatWest and Midland (now HSBC) launched the now-scrapped Access card in 1972, there were 1.7 million Barclaycard holders.

Today the company says it has 10.5 million consumer customers as well as many more business customers.

Graphic showing key stats of 50 year anniversary

In the intervening period, the world of plastic cards has changed completely.

In 1966 Barclaycard charged an annual interest rate of 1.5% but expected payment by the end of the month.

The idea of revolving credit, where a card can be used to maintain a longer borrowing, only started in 1967 when Barclaycard offered up to three months’ credit. Now, of course, it’s possible to be in debt to a credit card for a lifetime and the average interest charged on outstanding balances is 18.9%.

The borrowing limits in 1966 were much more modest, too. Cardholders were offered up to £100 worth of credit. Now the average is around £4,000, the company says.

Looking ahead, plastic cards will take over from cash to become the UK’s most frequently used payment method by 2021, reckons Payment UK.

The growth will be driven by “the next generation of account holders”, says the UK Cards Association as “younger people are more likely to embrace new technologies such as contactless cards and mobile payments.”

Barclaycard being sold in 1966

Paying on plastic has come a long way since 1966, with the introduction of debit cards and contactless payment

But the older generation is getting in on the act, too. Liz Hodgkinson, now 72, reveals: “I have an app on my phone to make contactless payments,” although she admits: “It was set up by my grandson!”

Debt warnings

While the introduction of plastic in 1966 may have given cardholders like Liz a feeling of confidence, the evolution of the credit card also meant the danger of getting into debt very much became a reality.

“I was elated to get an Access card when I was aged 18,” says Karen Wake, 55, a pension expert. But her happiness didn’t last. “By the age of 25 I had built up £30,000 worth of debt.

“I worked hard to pay it off in five to six years and have had no debt since then,” she says. “Despite the fact I now work in the financial services industry, that didn’t equip me to manage my finances at a young age.”

Today, many people happily use credit cards for convenience – often earning rewards or cashback – while paying the balance off every month to ensure there are no charges.

But overspending and building up long-term debt remain big problems.

Mike O’Connor, chief executive of the debt charity Step Change, says: “The average credit card debt we see is £8,403 and last year we dealt with more than 200,000 people with £1.7bn of credit card debts.”

He says the Financial Conduct Authority should reform the market to ensure that credit cards work better for consumers, especially those in financial difficulty.

“Small changes to existing rules, such as increasing minimum payments from 1% to 2% of the balance or fixing minimum repayments so that they don’t fall as the balance declines, could save people thousands of pound and cut years off repayment periods,” says Mr O’Connor.

 


Read, S. (2016) 50 years on: How credit cards changed our relationship with money. Available at: http://www.bbc.co.uk/news/business-36518248 (Accessed: 5 July 2016).

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UK Debit Cards Surpass 100M Mark

The circulation of debit cards in the U.K. has hit a major milestone.

The U.K. Cards Association announced on Thursday (June 30) that there are more than 100 million debit cards in the U.K.

Growth in debit card circulation has increased 2.7 percent over the past year, surging from 97.6 million to 100.3 million in April of this year.

In a statement from The U.K. Cards Association, the organization’s head of policy, Richard Koch, said:

“Since they were first launched in the U.K. in June 1987, debit cards have become a prime feature in the nation’s wallets. Now, almost 30 years later, more than half of all retail sales in the U.K. are made using a debit card. More recently, it has been the growth of contactless, as well as the increasing use of debit cards for online shopping, that has been driving the changes.”

According to the association, debit card spending in the U.K. reached £37.8 billion earlier this year, showing a 6.8 percent jump from £36.5 billion in 2015.

There are many factors contributing to the rise in debit cards in the U.K. market, including consumers opening new bank accounts and the changing ways in which consumers make payments and access funds.

The U.K. Cards Association’s data found that the number of ATM-only cards has drastically decreased in recent years and the check guarantee-only card scheme ended in 2011.

With the popularity of contactless payments in the U.K., it’s no surprise that 61.8 million debit cards in the region now include contactless technology.

The monthly spending on contactless cards reached a record £1.5 billion in March 2016, according to The U.K. Cards Association. In March, approximately 179.6 million contactless purchases took place, amounting to 67 transactions being made every second.

Earlier this year, Visa Europe released data showing that one in five in-person card transactions are now being made with a contactless card in the region. This translates to nearly 3 billion tap-and-pay transactions in Europe over the course of the last 12 months, tripling levels from a year ago.

 


PYMNTS (2016) UK debit card circulation exceeds 100M. Available at: http://www.pymnts.com/news/international/2016/uk-debit-cards-circulation-milestone/ (Accessed: 4 July 2016).

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Forget your phone, Visa just put a ring on mobile payments

Anyone who has watched TV or an Apple or Google keynote event within the past year knows that paying for things with anything but your credit card is all the rage. Visa, not to be left out being a leader in all things money, is experimenting with a new device.

Meet the Visa payment ring. Set to launch at the 2016 Olympic Games in Rio, Brazil for the firm’s 45 athletes repping Team Visa, a prototype of the device was shown off at an event in New York City.

You’ve seen something – seemingly thinner and lighter, at that – like this before in the Kerv ring earlier this year. However, Visa does have a first to tout with its own payment ring: tokenization.

Ringing in payments for Rio

Using its Visa Token service, which replaces the attached card’s sensitive payment information with a unique digital identifier, the ring can be used to process payments without exposing any account details in the transaction. And, the process is stupid easy.

When an NFC-ready payment terminal is prepared to accept a card, just make a fist and gently “fist bump” the terminal. Your payment is accepted automatically from there, as if you had just swiped your card.

However, save for a secure microchip made by Gemalto and a tiny, NFC-enabled antenna, there’s nothing else inside this waterproof ring (to a depth of 50 meters) designed by McLear & Co. That means there’s no need to charge this device, as any payment terminal picks up the hard work once it reads Visa’s unique token from the ring’s otherwise dormant microchip.

All said, there are two catches when it comes to Visa’s payment ring. First, it’s a tied to a prepaid, contactless debit card (seen above) supplied by Visa. Athletes will have to load up their card – err, ring – with cash via an online portal before gently punching the nearest point of sale.

Second is that I was told several times by several Visa representatives that this is very much a test for Visa. (I was also told that the ring will be shaved down a bit before the big event.) Should things go well down in Rio, the firm will consider a wider release of the device.

Once the ring gets the Olympian seal of approval, perhaps we’ll see an official Visa Payment Ring tied straight to our debit cards. Honestly, I just want an excuse to coin the term “Punch Payments.”

 


Osborne, J. (2016) Forget your phone, visa just put a ring on mobile payments. Available at: http://www.techradar.com/news/wearables/forget-your-phone-visa-just-put-a-ring-on-mobile-payments-1322670 (Accessed: 1 July 2016).
In-text citations:

  • (Osborne, 2016)
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Pay your car licence – with your card!

Cape Town – The City is testing the use of card payment facilities at its motor vehicle registration office at the Civic Centre.

The use of card payment facilities will be for one week before the City expands this service to other motor vehicle registration facilities across Cape Town, such as the Promenade Mall, Milnerton, Khayelitsha and Plumstead.

On the first day of the pilot, more than 100 credit and debit card transactions were processed.

The city-wide roll out to motor vehicle registration offices is expected to take approximately two months. According to deputy mayor Ian Neilson, the expansion of card payment facilities for the payment of rates and tariff accounts and traffic fines will take a bit longer as system upgrades are required.

The City will accept payments of up to R5000 per transaction by credit or debit card, or any other means of payment which does not hold any cost implications.

“This amount covers most transactions by our clients,” Neilson said, “be it for motor vehicle licences, rates, services bills or other sundry payments. The City will, however, reclaim the relevant banking fee for any payment over R5000.”

As electronic payments carry the lowest bank charges, more than 60 percent of payments to the City are via this method.

“Our first day of testing went well and 103 card transactions to the value of approximately R45 000 were processed,” he added.

“The success of our online offerings, such as receiving municipal accounts by e-mail and the option of registering for the City’s e-services portal, allows for online payments of rates, tariffs and motor vehicle licence payments for clients,” said Neilson.

 


Kent claims 90% of waste handled in UK (2016) Available at: http://www.letsrecycle.com/news/latest-news/kent-claims-90-of-waste-handled-in-uk/ (Accessed: 1 July 2016).
In-text citations:

  • (Kent claims 90% of waste handled in UK, 2016)
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Never mind the contactless card, I will be paying by ear

Spending with contactless cards more than trebled last year to almost £8 billion. Experts predict that wearable payments will be the next big thing, with the technology incorporated into watches, earrings and clothes.

Henry Holland used the wearable technology in his London Fashion Week show last September. VIPs in the crowd were able to buy garments from the catwalk by touching a specially designed ring to a blue brooch that the models were wearing.

Contactless technology, which allows shoppers to buy without entering a PIN, has been in circulation since 2007 but adoption rates soared when the spending limit increased to £30.

Half of all credit and debit cards in circulation allow contactless payments, according to the UK Cards Association.

Analysts say that within five years millions of Britons will be paying via smartwatches, wristbands or key fobs with embedded microchips.

 


2016, T.N.L. (2016) Never mind the contactless card, I will be paying by ear. Available at: http://www.thetimes.co.uk/article/never-mind-the-contactless-card-i-will-paying-by-ear-kgs7dcfvv (Accessed: 28 June 2016).

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Brexit: Possible Impacts on the UK Payments Market

Following Britain’s momentous decision to leave the European Union our thoughts must inevitably turn to the potential impact on UK consumer payments.

In this blog we provide some early thoughts on how the UK market may be affected, beginning with recent European regulation which will have to be untangled.

First, let us look at how the two Payment Services Directives may be approached by the UK government. Will the PSD1 remain on the statute book, and the PSD2 implemented as planned? The answer at this stage is probably. Many aspects of European legislation related to consumer protection are likely to remain because they did not fundamentally change existing UK rights. The UK government’s approach to account access is generally more progressive than that embodied in the PSD2, so this will probably be superseded by UK Open Data Initiative.

The biggest change will be in the area of licensing and passporting. The FCA has established a good reputation with innovative European payments businesses for its regulatory regime. These eMoney and Payment Institutions will probably to move their headquarters to other European markets, and we will be poorer for it both commercially and from an innovations perspective. Changing the approach to passporting will affect the UK’s cross border acquirers the most. Many UK acquirers rely on passporting FCA regulatory licenses to support their local acquiring offers across the EU. Unless they already have licenses in other EU markets, acquirers will need to seek new EU regulatory approval to operate across the continent, and to sign new merchant contracts.

Second, interchange regulation. The UK CMA has always taken a close interest in the payments market, and many issuers expected interchange to decline in the medium term. It therefore seems unlikely that credit interchange will suddenly return to its previous levels. It may be that debit migrates back to the historical fixed price approach. This is particularly important within the context of the announced move to a basic 0.2% (removing the 50p cap and 1p fee) expected for Visa Debit in September. We can therefore expect modest change in the interchange arena.

The European Banking Authority will almost certainly move, possibly to Paris to balance the ECB in Frankfurt. However, may have little impact on the UK consumer payments market as they have played a relatively modest role to date.

How may the international card schemes react? Both have substantial presence in the UK, particularly Visa. It seems likely that Visa Inc. will increase its presence in Continental Europe as part of a wider restructure as other roles are migrated to the US. MasterCard may also to shift its emphasis to Waterloo away from Canary Wharf. Both schemes will need to adapt their licensing approaches, but these are already flexible enough to accommodate the inclusion of non-EU markets. Such moves by the card schemes may be to the detriment of London and the UK, but the impact will probably be modest.

The impact on data processing and data security remains unclear. Will the UK be treated as an off-shore location for card and payment processing? This will be a matter for the lawyers to resolve, but could affect Visa’s UK processing hub, or MasterCard’s rumoured purchase of VocaLink. New payments processors arriving in Europe from the US or Asia are also much less likely to locate their business in the UK.

Will there be a substantial change in the structure of issuers and acquirers of consumer payments (either cards, credit transfers or direct debits)? We have already highlighted the impact on cross border acquiring, and both regulators and schemes will need to adapt accordingly. On the issuing side markets are unlikely to change their activities as they are either domestically focussed, or already manage operations both inside and outside the EU.

Now let’s look at users of payments. Will consumer spend day to day be affected? Again, probably not. Consumers in the UK do not use SEPA Direct Debits or SEPA Credit Transfers domestically. They will continue their preference for cards in store, and online. The growth in online payments will continue, alongside the growth in contactless in-store. Similarly it seems unlikely that there will be a substantial change in the merchant landscape. The UK will remain a vibrant market where retailers online and offline will fight for consumer spend. It seems less likely that our exit from the EU will impact this to any great degree.

We have suggested that there may be some potential downsides particularly in the area of acquiring and processing. Will there be any upsides? At this stage we struggle to see any, which is a great disappointment. Perhaps benefits will emerge from the current maelstrom by 2017.

So, in conclusion, impacts on the UK consumer retail payments market will most probably be concentrated in areas such as licensing, cross border acquiring and processing. However, in the long term we are optimistic that the UK consumer payments market is likely to remain innovative and forward looking and get past these issues.

 


Finextra (2016) Brexit: Possible impacts on the UK payments market. Available at: https://www.finextra.com/blogposting/12770/brexit-possible-impacts-on-the-uk-payments-market (Accessed: 27 June 2016).