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Online and credit cards grow share of spending with UK SME merchants

According to retailers, consumers across the UK spent in record numbers on November’s “Black Friday”. It is estimated that online spend for the day was around £1.23 billion, a 12% increase year-on-year, while the total spend for the week rose to £6.5 billion.

Small to medium enterprises (SMEs) and Micro businesses expect this trend to grow, adding that credit cards payments were increasing in popularity, according to a new report from East & Partners Europe (E&P Europe).

In the latest round of E&P Europe Merchant Payments Market Analysis, Debit and POS terminals’ share of spend with SME and micro merchants continues to dominate but online and credit are clearly growing their share of spend.

Areas for Key Future Payment Product Investment

In contrast, those same merchants predict the continued decline of the old favourite cash, along with cheques, with both means of payment now in single figures in each case for the first time of the report.

A key victor in these trends is the payments business itself, which in merchant payments acquiring is going through significant change and faces a future of even further change with the growing importance of “FinTech” in this sector.


In-line with a shift in consumer shopping and spending habits, which has seen a rapid uptake of e-commerce and emergence of mobile commerce as a result of the saturation of smartphones and tablets, both SME and micro merchants were forecasting increases in online transactions as a share of the spend made with them.

At the same time, merchants are predicting that the share of POS terminal spend with them actually reversing. This trend potentially indicates that future growth in spending online for SME and micro merchants will represent an increasingly important channel for them.

Overall, across all three merchant segments interviewed by E&P Europe – micro, SME and lower corporates – two-thirds of merchants now accept online payments, with this number set to grow strongly in the next six months. And not surprisingly, the vast majority of merchants (79.3 per cent) reported internet payment platforms as their key area of development in the next two years.

Clearly many of the issues to accepting online payments have been resolved but security of payment remains as the biggest concern with close to half of all UK merchants experiencing some form of fraud in the past year.

Credit Cards

The increase in credit card purchases, driven by “lower value” mobile and contactless payments is expected to reach £183 billion by 2025, a 25 per cent increase from 2015 according to Payments UK.

In the shorter term, the growing appetite of SME and micro merchants for card payments is illustrated by their forecasts for growth in the share of credit cards, once the reviled and often rejected form of payment by these merchants. The growth rates merchants forecast for it exceed the rate of growth of debit, and particularly with micro merchants.

Fuelling this growth in share of spend, E&P Europe expects to see growth in average transactional value for credit cards of around 15 per cent in the next year.

The Dynamics of UK Merchant Payments Acquiring

As would be expected, traditional merchant payment providers; WorldPay, Barclays Merchant Services and Evalon collectively dominate market share (70.7 per cent) across all three merchant segments. However, credible challengers exist with Lloyds Cardnet, Allied Irish, First Data and more disruptive entrants.

The challenge of these other players is best illustrated in their performance service ratings, in which it’s clear they excel in many ways in their merchant customer relationships.

This feature, coupled with the disruptive opportunities in merchant payment services, as shown by PayPal’s success and many other new entrants, such as European based POS providers like iZettle, along with re-energised processors like ACI, set the scene for an ever-increasingly dynamic landscape.

The future of merchant payments choices looks promising. As the competition within the industry heats up, niche, reliable and cheaper alternatives are fast becoming the small business owners’ friend.

It’s no longer just about service charges.

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