Category Archives for "Payments"

Impact of Coronavirus Pandemic on the Payments Sector

In the course of the coronavirus pandemic the world we knew has changed beyond recognition.

This has had a significant impact on the Payments sector, and resulted in new trends and unintended consequences.

Here are a few:

Should Businesses Be Expected To Work For Free During The Pandemic?

The first is the expectation that products and services should be available at no cost, or at the very least with a sizeable discount.

Now, I understand that many of us are in dire straits when it comes to our finances and disposable income, what with the economy being shut down for two months and counting. But what chance is there of a recovery if the few businesses that can operate are unable to pay their teams?

Is it acceptable for more people to depend on the government?

Colonel Tom Moore (Source: bbc.com)

Here’s an example of what I mean. The incredible Colonel and recently knighted Tom Moore – who’s one hundred years old! – raised more than £30 million for the National Health Service doing a fundraising walk in his garden during lockdown. He used Justgiving’s online platform for it, but the company has come under fire for taking a percentage of what he raised in fees. Even the Prime Minister weighed in.

Why should the company face a backlash? The fees cover operating costs such as wages for 150 staff, and includes bank processing fees which it has no control over.

It’s unfortunate that their specialty in processing large volumes in payments is so undervalued. Surely critics don’t want the task performed by elements who lack the necessary accreditation and knowledge to do so?

I don’t subscribe to profiteering – especially not in the middle of a global pandemic. But surely where businesses can work and get paid, they should?

More Refunds In the Travel and Leisure Sectors

Another consequence of the pandemic on Payments will be an increase in refunds requested by customers, and the subsequent increase in related exceptions processing.

(Source: getstencil)

Customers who have booked flights and holidays don’t appear to be getting much in the way of good service. When things go wrong, whether self-inflicted or matters outside your control as a business such as a global pandemic, positive and proactive engagement with customers is the recommended and best course of action.

Unfortunately, customers have reported not being able to contact airlines, travel agents and others in this space, refund requests rejected and being strong-armed into accepting credit vouchers instead.

Since these businesses have prioritised issuing vouchers instead of refunds in a bid to survive, customers are waking up to their rights under Section 75 of the Consumer Credit Act of 1974 which protects credit card purchases.

As long as the transaction amount is over £100 but less than £30,000, any customer with a cancelled holiday can make a claim, since the Act makes the card provider and retailer jointly liable if a product is faulty, not delivered, fails to match the advertised description, or the retailer stops trading.

Growing dissatisfaction with the industry, coupled with customers’ genuine need for funds during this period means we are likely to see more of them go down this route.

Note: While refunds are not the same as chargebacks, there will be an increase in those too.

Rise In Contactless Payments

I’m usually an advocate for cash, but I haven’t touched it since the outbreak.

And I’m not alone: the use of contactless payments has jumped by 40%!

Card providers quickly responded to the demand by increasing the spending limit on contactless card payments from £30 to £45 from 1st April, which has helped customers complete many purchases without having to handle notes and coins, or input a PIN.

Making the Case For a Cashless Society?

And as more people use contactless cards more frequently, cash use has dropped.

(Source: getstencil)

There has already been a significant reduction in the infrastructure around cash as a payment method; could this drop further build the business case to continue down that path?

I hope not. Many use and prefer cash for various reasons, and let’s not forget that for a significant proportion without access to banking, it’s their only option.

Cash is crucial to facilitating and maintaining financial inclusion, and must not be removed from the landscape as a payment method. It has to stay available and affordable.

More E-Commerce Transactions

We’ve all been stuck at home on lockdown with nothing to do other than exercise, homeschool if you have children, bake banana bread, make TikTok videos…

…and shop online. According to The Wall Street Journal, some countries have experienced a soar in e-commerce transactions have increased by as much as 81%.

Retailers with sleek, efficient supply chains and distribution channels have reaped a return on their investments (I see you Amazon), while those who have not kept up with the times in that regard must be kicking themselves.

It means that payment processors, acquirers and gateways are seeing more traffic than ever come through this channel, and it goes without saying that their infrastructure and back office functions must be robust enough to cope with the increase in volumes.

How the Latest Payment Services Directive Affects You

I did a straw poll of some small businesses recently, and it
was interesting to find that the majority did not use a Business Plan for
planning and forecasting.

It might be the same for you. Maybe you don’t have anything
formal; perhaps you jot down your goals and thoughts from month to month (or,
week to week)?

If you run your own business, or department within a
business, you may wonder if writing a Business Plan is worth the hassle. You understand
that it’s important to plan, but you’re not sure you want to spend the time
doing it.

If you’ve ever wondered what the point of a Business Plan is,
here are 4 reasons you need one today:

It sets out your business intentions

More businesses than you’d think waste time and money
pursuing white elephants that have no bearing on their goals and objectives.

With a Business Plan, you’ll get to clarify and specify what
you aim to achieve in the coming weeks and months. You can always refer to it
when the next shiny object comes along; it will serve as a good way tp keeo you
on track!

It prompts you to think carefully about your what your customers need

Entrepreneurs are by nature creative, and left to their own
devices, could easily dream up a warehouse full of cutting-edge products and
services. But…

…is anyone out there asking for them?

A well-written Business Plan poses the questions of customer
demand, and how your products and services meet that demand.

It helps you zero in on your target market

A good Business Plan poses will contain a section on your
target market.

So apart from the obvious bit on just who your product or
service is designed for, it will prompt you to analyse and detail things like the
current state of the market, how it’s changing, trends and any gaps.

Researching and knowing these things will help you position your
proposition, and make the most of any gaps that your competitors are not
serving.

It forces you to plan for the money

This is the section of Business Plans that people struggle
with most!

It’s also THE most important part.

How else will you know how much you should aim to make as a
minimum to cover your costs, and how much cash you must have in the bank each
month to keep the business running?

Ignore the finances, and you could end up in dire straits
very soon.

 

And, don’t forget, a Business Plan is a living
document! You will get clearer on some of the elements, and you can adjust
these to be more specific or realistic as time goes on.

Most business owners and bosses I speak to agree on one
thing: having a Business Plan is crucial for goal-setting and the success that
comes with it.

When it comes to writing that plan however, I find that
actions don’t match the rhetoric!

Writing a Business Plan can appear intimidating, but it isn’t
as difficult as you might think. The fear of it can make the task into a
monster it’s not!

So, have you ever made these excuses to NOT write a Business Plan?

“I don’t have time”

A common reason used to get out of doing just about
anything!

But as the saying goes, if something is important you’ll
make time for it.

Right?

Besides, this nut doesn’t have to be cracked all in one day.
You can purpose to work on one section every 2 – 3 days and at the end of the month,
you’ll have your Business Plan!

“I’m not good with numbers”

And my response to that is, who is?

Not many of us can be described as mathematical geniuses,
but that doesn’t preclude us from running – and planning for – our successful
businesses.

While section headings in the document like “Sales Forecast”
and “Projected Cash Flow” may discourage the numerically challenged, taking the
time to stop and think about what those words actually mean will remove the dread
you feel deep in the pit of your stomach!

For example, “Projected Cash Flow” is simply a summary of
how much cash you need to run your business day-to-day, and for your Sales
Forecast, put in estimates for what you anticipate your best and worst case
scenarios will be in terms of sales (be realistic!). Also, work out the minimum
number of units you need to sell to cover your costs.

See? It’s not so scary when you break it down.

“It’s don’t want to pay someone to do it for me”

Yes, paying for a Business Planning service like ours
requires a financial commitment.

You can certainly
do it yourself, and my Business Plan template here breaks it down into manageable
chunks designed to help and guide you.

But if you can’t dedicate the time or effort needed to do it
yourself, is the cost really worth the risk of going from one day to the next
without a plan?

“It will change as time goes on, so why bother?”

A Business Plan is a living document, so yes, you will need
to keep updating it.

When you plan for months, a year or more in advance, there
are conditions and elements that you will become more aware of, things that
will happen and need to be finetuned in the plan.

That doesn’t mean it’s not a worthwhile exercise. I’ve written
about why it’s something you need here.

Do have a read, and let me know if you have any queries.

(If you’re still wondering what the point of having a
Business Plan is, have a quick look at this).

(I’ve put together a post explaining what the jargon in a
Business Plan means; here it
is. Start by reading that; it will help you with this part).

I know this sounds patronising. After all, who knows your
business better than you?

I can assure you it isn’t meant to be. The point I’m making
is that, as well as giving an overview of your business, you have to be able to
articulate things like the main idea behind it, your mission and objectives,
and who your main competitors are.

Think about what the market is like, and where it is going

So, what’s the current condition of the market?

Is it growing, fairly stable, or declining?

Are there any notable underlying trends?

What is the demand in the market, and how do your products
or services meet that demand?

What’s your Unique Selling Proposition, and are there any
gaps in the market which you intend to fill?

Know the audience you are selling to

Which segment of the market have you designed your products
and services for?

Women, or men, or both?

Working women, or stay-at-home mothers?

People within a certain age range?

Are they based in cities, suburban or rural areas?

Are they early adopters or technophobes?

What are their problems, and which of these will you solve
with your products and services?

These are some of the questions which will frame your
offering. And they are crucial, because sometimes it’s easy to forget that our products
and services are NOT for us.

They must meet the needs of your target market. Give the people
what they want, as they say!

Brainstorm some ideas about how you will price, market and sell your
products and services

Take some time to think about your pricing strategy.

Most of the time, people think this involves plucking a
price out of the air, but there’s more to it than that!

How much does each unit cost to produce, and what margin
will the market tolerate on top of that?

How does that then match your expectations for income and
profit?

Then, you need to think about how you want to market and
sell products and services. Social media makes advertising and marketing more
accessible, but bear in mind that what works for a similar business may not
work for yours.

So, do a bit of research, and have some intentions for how
you will conduct your sales and marketing campaigns.

How will you measure your success?

“Measure your success” sounds boring, I know!

But if you don’t work out in advance how you’ll do this, how
will you know what you’re working towards?

And more importantly, how will you know when it happens?

Take some time to think through the finances

This part is easy to skip, but is probably the most important
of all.

You need a certain amount of cash to run your business every
month. Sum up your expenses (and don’t forget to include your salary).

What does the total come to?

That’s what the amount you need to have available. Not invoiced
and waiting to be paid; actual cash in the bank. Anything less, and you
immediately have a cash flow problem.

Many a business has been successful on paper and in terms of
invoiced amounts, but ended up filing for bankruptcy because it simply couldn’t
meet its obligations when they were due.

Another key point to address is the length of time you think
it will take to make a profit.

It’s not unusual for some businesses not to make a profit
for some months, or even years. As long as you know that upfront and are
prepared for it, that’s fine!

But if that’s the case, do you have an idea of what the losses
will come to each month? How will this be funded, and how long can you sustain
that?

In my experience, people either don’t plan for these
scenarios, or are far too optimistic with their figures.

P.S. Where I’ve recommended doing research, please don’t think
it has to be onerous.

Ask your family and friends. Use the internet. Create a poll
using Surveymonkey or Google Polls. Some professional bodies – such as the Institute
of Directors – offer research sessions which you can access as part of their
membership. Check with your professional body and see if they can help you do
some, maybe they’ve even done something similar already and have some
statistics they can share with you!

An effective headshot can give theviewer a sense of who you are more than words can say.

Here, you need to commit to some timelines.

So, remember those objectives you listed above? Break them down
even further into tasks, and for each one put down a realistic completion date.

That will make sure your plans are firmly rooted and realistic,
as opposed to being pie-in-the-sky aspirations that you have no chance of achieving.

The second Payment Services Directive – also known as PSD2 – becomes UK law on 13 January 2018.

From the name, it’s easy to think it only affects banks.

But hold on! It has implications for YOU.

Here’s a summary of what it’s about, and the main ways it will affect you.

So, what’s PSD2?

The first Payment Services Directive (PSD) from 2009 put in place a legal framework for payments and related services across Europe.

It covered the rights and responsibilities of consumers, users and providers of payment services, and ensured that European countries implemented, and were held to, a uniform set of standards.

PSD2 builds on the success of PSD, and at its core wants to increase competition in the industry while reducing the dominance of banks.

Big banks have traditionally held all the aces when it comes to the business of payments, and when you consider the amount of information they hold on their customers – data is big business, just ask Facebook! – there’s been little incentive for them to innovate what they have on offer. Save for a few companies such as PayPal, Apple and Stripe, few have been able to make even the tiniest dent in the banks’ market share.

Why is this a problem, you ask? It means that you as a consumer don’t have much of a choice. When you look at the UK, there are 4 big banks, with VISA and MasterCard being the two dominant payment card schemes. So where do you go for a truly different sort of service?

Why was PSD2 introduced?

PSD2 is set to become law in the European Economic Area (comprising the 28 EU member states, as well as Norway, Iceland and Liechtenstein) on 13 January 2018, and here are some of the reasons the wheels were set in motion:

  1. To encourage new players, especially those that are NOT banks, to get into the business of payments.
  2. To encourage the introduction of new, cutting-edge technology which will revolutionise the way payments happen in Europe.
  3. As a result of increased competition and technology, the expectation is that the cost of payments will fall. A bonus for consumers!
  4. To improve security around payment processes, and the way consumer data is handled.

Who is responsible for PSD2?

PSD2 is a directive issued by the European Commission, which becomes national law on 13 January.

How does PSD2 affect you?

Strong Customer Authentication:

You already have many rights when it comes to protection against misuse of your data, and any potential fraud.

PSD2 takes these even further, by mandating that banks and businesses that process payments use what is referred to as strong customer authentication (SCA) for payments.

This means they have to take significant steps to make sure any payment you make is actually coming from – and authorised by – you.

So if you find you’re asked to verify your identity or payment in a different way, don’t be alarmed. It’s all PSD2-related.

PISPs & AISPs

Talking about your data though, in a bid to promote competition and open it up to new organisations, banks could potentially share what they know about you with these new players to the market, who will fall into 2 categories: Payment Initiation Service Providers, and Account Information Service Providers.

Agreeing to use these services could make your online payments simpler and more seamless, and you’ll be better placed to compare what’s available in the marketplace. It also means you could make a payment directly from your bank account without using a debit or credit card, which could save you any card charges and fees.

Open Banking

Don’t worry, your data won’t be shared without your permission! Banks – who as well as being dominant forces in the landscape, are also the largest repositories of consumer data – are required by PSD2 to share this data when you give your permission, as a way of levelling the playing field.

In preparation for PSD2, your bank will have sent the last few years developing technical integrations to make the data sharing process easier. There’s a whole initiative around this within UK banking called Open Banking, and your bank will have already sent you something that looks like this:

Card Surcharges

PSD2 is also meant to end a practice that’s been a pain for consumers for a long time.

You know when you go into a shop, or book theatre tickets online, and you’re charged an additional percentage for using your credit card?

That practice – known as surcharging – ends with PSD2.

That’s not to say that shops and retailers will take this lying down; it’s hard to know how they will respond. They might swallow the costs, put their prices up across the board (which would affect ALL buyers, not just those using cards), or offer shoppers an incentive to use different ways to pay.

The jury is still out on this one, so keep your eyes peeled to see what happen when you shop after 13 January!

How does PSD2 affect your business?

PSD2 only affects payment institutions, credit institutions, and electronic money institutions.

If this is not your core business, there is no impact.

The only thing to note is that, if you add a surcharge for credit cards when collecting payments, this practice will no longer be allowed.

Will Brexit affect PSD2?

The UK government has confirmed that PSD2 implementation will not be affected by the decision to, or process of, leaving the European Union.

Since that only takes effect in 2019, PSD2 will be fully implemented and transposed into UK law.

The second Payment Services Directive – also known as PSD2 –
becomes UK law on 13 january 2018.

From the name, it’s easy to think it only affects banks.

But hold on! It has implications for you too.

Here’s a summary of what it’s about, and the main ways it
will affect you.

So, what’s PSD2?

The first Payment
Services Directive (PSD) from 2009 put in place a legal framework for payments
and related services across Europe.

It covered the rights and responsibilities of consumers,
users and providers of payment services, and ensured that European countries
implemented, and were held to, a uniform set of standards.

PSD2 builds on the success of PSD, and at its core wants to increase
competition in the industry while reducing the dominance of banks.

Big banks have traditionally held all the aces when it comes
to the business of payments, and when you consider the amount of information
they hold on their customers – data is big business, just ask Facebook! – there’s
been little incentive for them to innovate what they have on offer. Save for a
few companies such as PayPal, Apple and Stripe, few have been able to make even
the tiniest dent in the banks’ market share.

Why is this a problem, you ask? It means that you as a
consumer don’t have much of a choice. When you look at the UK, there are 4 big
banks, with VISA and MasterCard being the two dominant payment card schemes. So
where do you go for a truly different sort of service?

Why was PSD2 introduced?

PSD2 is set to become law in the European Economic Area
(comprising the 28 EU member states, as well as Norway, Iceland and
Liechtenstein) on 13 January 2018, and here are some of the reasons the wheels were
set in motion:

1.      
To encourage new players, especially those that
are NOT banks, to get into the business of payments.

2.      
To encourage the introduction of new,
cutting-edge technology which will revolutionise the way payments happen in
Europe.

3.      
As a result of increased competition and
technology, the expectation is that the cost of payments will fall. A bonus for
consumers!

4.      
To improve security around payment processes,
and the way consumer data is handled.

Who is responsible for
PSD2?

PSD2 is a directive issued by the European Commission, which
becomes national law on 13 January.

 

How does PSD2 affect you?

You already have many rights when it comes to protection
against misuse of your data, and any potential fraud.

PSD2 takes these even further, by mandating that banks and
businesses that process payments use what is referred to as strong customer
authentication (SCA) for payments.

This means they have to take significant steps to make sure
any payment you make is actually coming from – and authorised by – you.

So if you find you’re asked to verify your identity or
payment in a different way, don’t be alarmed. It’s all PSD2-related.

Talking about your data though, in a bid to promote
competition and open it up to new organisations, banks could potentially share
what they know about you with these new players to the market, who will fall
into 2 categories:

Payment Initiation Service Providers, and Account
Information Service Providers.

Agreeing to use these services could make your online
payments simpler and more seamless, and you’ll be better placed to compare
what’s available in the marketplace. It also means you could make a payment
directly from your bank account without using a debit or credit card, which
could save you any card charges and fees.

Don’t worry, your data won’t be shared without your
permission! Banks – who as well as being dominant forces in the landscape, are
also the largest repositories of consumer data – are required by PSD2 to share
this data when you give your permission, as a way of levelling the playing
field.

In preparation for PSD2, your bank will have sent the last
few years developing technical integrations to make the data sharing process
easier. There’s a whole initiative around this within UK banking called Open
Banking, and your bank will have already sent you something that looks like
this:

 

PSD2 is also meant to end a practice that’s been a pain for
consumers for a long time.

You know when you go into a shop, or book theatre tickets
online, and you’re charged an additional percentage for using your credit card?

That practice – known as surcharging – ends with PSD2.

That’s not to say that shops and retailers will take this
lying down; it’s hard to know how they will respond. They might swallow the
costs, put their prices up across the board (which would affect ALL buyers, not
just those using cards), or offer shoppers an incentive to use different ways
to pay.

The jury is still out on this one, so keep your eyes peeled
to see what happen when you shop after 13 January!

 

How does PSD2 affect your business?

PSD2 only affects payment institutions, credit institutions,
and electronic money institutions.

If this is not your core business, there is no impact.

The only thing to note is that, if you add a surcharge for credit
cards when collecting payments, this practice will no longer be allowed.

 

Will Brexit affect PSD2?

The UK government has confirmed that PSD2 implementation
will not be affected by the process of leaving the European Union.

Since that only takes effect in 2019, PSD2 will be fully
implemented and transposed into UK law.