Welcome to issue 91 of Payments:Unpacked, get to grips with the UK’s retail payments landscape with Mike Chambers - exclusive payment insights, hot topic briefings and fundamentals unpacked.

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Trilo powers POS payment with Open Banking

On Friday Trilo powered their first POS/in-person payment with Open Banking. Until then customers could only pay in shops via card or cash, now this has changed.

Trilo gives merchants and customers the ability to make and receive payments with no hardware or software required. Merchants can use their tablet or phone to create a payment.

The customer then scans the QR code. Customers will also receive a reward in the form of the Boost whenever they pay. Giving them a clear reason to switch from card every time they shop.

Trilo has also removed transaction fees entirely for merchants, enabling them to unlock vast swathes of revenue that are currently tied up in transaction fees.

More: Trilo: The simplest way to pay.

Global Perspective: Card Over Cash?

Statista report that most South Koreans wouldn’t trade their cashless payments for anything, in Japan, Spain and France between 60 and 67 percent of people prefer cashless payments and the least people were in favour of cashless payments were in the Philippines at 33 percent.

Source: Statista

More: Statista: Global Perspective: Card Over Cash?

FCA performance scorecard - comparison metrics for personal current accounts 2021

The FCA have published the latest performance scorecard which highlights some of the information available on personal current accounts (PCAs) - helping customers choose their provider by highlighting:

• good and poor performers

• how easily they can carry out day-to-day banking activities

• the reliability of the service they receive.

Service quality:

In August 2020, the survey showed Monzo (86% score) as the top ranked bank for overall service quality, and Tesco Bank as lowest ranked (44%). Chart 1 above shows the results from all 19 banks.

Online and Mobile Banking Services

For online and mobile banking services, the survey showed Monzo (89% score) as the top ranked bank and Tesco Bank as lowest ranked (59%). Chart 2 above shows the results from all 19 banks.

More: FCA performance scorecard.

CHAPS Payments in the property sector

The Bank of England is currently migrating the CHAPS payment system to the ISO 20022 message standard.  

The new standard provides an improved message structure, including additional data beyond the core payment message. These changes will allow for simpler integration of payments into wider business processes, providing a range of benefits. 

The benefits include:

• reduced process costs through minimising disputes and supporting straight through processing

• improving cash management and certainty of payment by coordinating transaction chains

• minimising fraud by improving validation of parties.

To ensure that benefits are realised across the community a survey has been launched. The survey will inform the benefit case to publish Market Guidance documents showing specific benefits and how they might be realised in different market sectors.

The first activity is specifically looking at the property sector.

This survey will help the Bank understand how CHAPS users in the property sector could benefit from the new message standard. The findings from this survey will help inform the Market Guidance to be published by the Bank of England.

More: CHAPS ISO 20022 - Market Guidance Survey.

Cashless payments on the North Isles

Probably the last time I used physical cash was on an inter island ferry at the very Northern tip of the UK. Shetland News are reporting that late last year Shetland Islands Council began trialling card and contactless payments on the Bressay and Whalsay ferries. Shetland’s online newspaper report that card payments would have been introduced on North Isles ferries by now if it wasn’t for coronavirus restrictions, councillor says.

More: Cashless on the North Isles.

When the winds of change blow some people build walls while others build windmills

As the old Chinese proverb goes, ‘when the winds of change blow some people build walls while others build windmills’. Firmly in the windmill camp is Gavin McLean, head of product – payments, at Lloyds Bank Commercial Banking, part of Lloyds Banking Group, which is involved in one in every three payments in the UK. Gavin has helped the bank put its considerable weight behind improving or accelerating the use of technologies to help the payments process for both its business customers and individual consumers.

Fintech Finance article: Winds of change’ – Gavin McLean, Lloyds Bank.

Prepaid cards tackling food poverty

A joint initiative that transformed the tackling of food poverty in Scotland takes top national award. The Scottish Government has replaced the old UK Government voucher scheme in Scotland with prepaid cards in tackling food poverty and has been saluted as Social Inclusion Project of the Year at the 2020 Payments Awards. It’s a win that recognises the work of top FinTech allpay and the Scottish Government on a payment solution to transform its healthy food scheme.

More: Tackling food poverty in Scotland.

Tesco Pay+ surpasses £1 billion in payments since launch

Tesco have revealed that Pay+, the mobile payment app operated by Tesco Bank, surpassed a total of £1 billion in payments shortly before Christmas 2020. The contactless payment app makes shopping in Tesco stores more convenient and rewarding for customers when paying with their smartphone.

Since it launched nationwide in 2017, the Pay+ app has been enhanced to allow Tesco shoppers to make payments, collect Clubcard points and track spending in any UK Tesco store or petrol station with a single scan of their phone, improving customer checkout experience when shopping at Tesco.

Tesco Pay+ now has 1.2 million registered users and a transaction using the app takes place, on average, every 1.4 seconds.

More: Tesco Pay+.

Nine-in-ten of all UK in-store card payments made with contactless

The Coronavirus pandemic has cemented the role of contactless as the preferred way to pay in the UK, accounting for nine-in-ten of all elgible card transactions in 2020.

The biggest milestone for the technology was in April, when the UK limit was raised from £30 to £45, making even more transactions eligible for contactless payments.

Since the introduction of the new limit, the average value of contactless transactions has jumped to £12.38, up almost a third compared to the 2019 average of £9.60, according to figures from Barclaycard.

With many stores unable to open for much of the year due to lockdown restrictions, the total volume of contactless payments fell by 11.8% compared to 2019. However, with the higher average transaction value, the total transaction value actually rose by seven per cent.

Individually, the average user made 141 contactless payments in 2020, worth a total of £1,640. Looking at the spending habits of different age groups, the over-65s were most likely to embrace the technology for the first time, with the age-group seeing a 12% annual growth in the number of active users.

More: Contactless: Nine in ten.

Retail payment tracker

Northey Point’s payments tracker acts as "fast indicator" for monitoring the volume and value performance of the UK’s retail payment schemes. This fast indicator provides the ability to track in aggregate how the UK’s payment habits are changing in response to the societal shift to digital payments which is being accelerated as we respond to the COVID pandemic.

Key highlights of the final 2020 payments tracker (using latest available data):

• In aggregate the Bacs, CHAPS, Faster Payments and cheque / credit clearing schemes operated by Pay.UK increased by 3% in 2020 to a massive 9.5 billion transactions.

• The lions share of Pay.UK volumes are generated by Bacs (6.5 billion) with the nearest ‘rival’ by volume Faster Payments at 2.8 billion.

• Just two of Pay.UK’s payment scheme grew in volume during 2020: Faster Payments (+17%) and Direct Debit (+1%).

• Looking at the wider payment eco system a number of factors (including the COVID pandemic and the societal switch to digital payments) led to payment schemes experiencing a volume reduction: Bacs Direct Credit (-4%), CHAPS (-8%), Cheque / credit clearing (-28%), ATM withdrawals (-47%), Debit Cards (-4.6%) and Credit Cards (-2.8%).

• It is also important to note that (over the 12 month to October 2020) the outstanding balances on Credit Cards contracted by 14.7%.

More: Retail payments tracker.

Longer read

Two longer reads for this week exploring aspects of Request to Pay:

• Learning from M-Pesa: Peter Cornforth (Commercial Director at Answer Pay) takes a look at how the success of M-Pesa might act as a reference point for the UK’s Request to Pay eco-system.

• A European perspective: With the European (SEPA) scheme for the Request-to-Pay now published - Mark Munne and Paul van der Valk encourage us to invest 10 minutes of reading to understand why it could be important to us.

In brief

• Variable Recurring Payments are back... Sign up to hear Open Banking views on where VRP and Sweeping goes next.

• EC and ECB join forces to investigate digital euro.

• Ireland's competition watchdog has rejected a plan by four of the country's biggest banks to create a joint payments app, but says it is willing to "further engage" on the issue.

• Payments Landscape: Unpacked - all you need to know about payments in the UK in a series of informative briefings - subscribe for the whole series or pick and mix topics on a PAYG basis .

• Bank branch closures league table.

Read, subscribe and share

The Payments:Unpacked newsletter from Mike Chambers at Northey Point explores a wide range of the UK’s payment news including: Open Banking, Request to Pay, Direct Debit, Confirmation of Payee, Bacs, CHAPS, Faster Payments, LINK, cash, cards and cheques and unpacks the eco-system that supports the operation of these systemically important payment systems.

The newsletter is an independent and informed insight into the UK’s payments landscape – exclusive payment insights, hot topic briefings and fundamentals unpacked.

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Mike