Matt Oldham, Non-Executive Director at Suresite Group
You won’t be surprised to learn that the Covid-19 pandemic has changed retail sales in the UK. Dramatically? That could be the understatement of the year as some sectors, the fashion industry, for example, have been hammered.
Convenience retail on the up
One sector experiencing an upturn on the back of the pandemic is convenience retail. According to market intelligence agency Mintel’s latest research, convenience retail sales will grow almost eight per cent this year, over twice the 2019 figure of three per cent. It’s not difficult to figure out why – people are avoiding big supermarkets, with Mintel’s research also showing that 25 per cent of consumers are shopping more with local businesses.
Cash is dead – long live contactless
The upturn in small retailers fortunes has had a major knock-on effect on the fintech payment space as well because smaller retailers – for example, convenience stores – have had to make customer-preferred payment types available. This includes debit and credit cards – together with their contactless functionality, which has seen a significant uplift.
Banking and finance industry cheerleader UK Finance recently revealed contactless payments by debit card reaching record levels in August – 62 per cent of all debit card transactions. For credit cards, 45 per cent of the transactions were contactless.
Whilst many convenience retailers have always taken cards, they haven’t necessarily promoted it. As a result of the pandemic, customers now don’t want to use cash so retailers of all sizes have to embrace the challenge.
The problem smaller retailers face is that merchant service fees can be perceived to be more than the cost of handling cash (whilst the cost of loss and fraud is often not considered), which is where the opportunity for fintechs lies.
This year has seen a growing appetite for digital payments coupled with the increase in contactless threshold to £45. In future, we can expect fintechs to use Open Banking systems to further enhance their SME offerings.
The big add-on payment fintechs can offer – and monetise – is advising smaller retailers on how to use the data generated through the use of such systems.
It’s all about data
A fintech being sounded out by a small retailer on payment provision should be able to offer that retailer payment data in a form which can provide useful insight into their customer spending habits. Small retailers often aren’t data miners, so payment fintechs providing easily understandable customer data boiled down from financial transactions could help retailers significantly. That could mean a live data feed giving the retailer the ability to move quickly on any trends identified by the information.
Currently, most payment fintechs can’t provide ‘stock keeping unit’ (SKU)-level data, but it will only be a matter of time since that level of granularity will allow retailers to react to trends much faster, which means better stock management and higher profits – something they’ll thank payment fintechs for.
Trends like live data feeds and SKU-level data are set to become the holy grail for retailers, and we can expect to see increased demand and pressure on fintechs to offer these services.
Accommodate customer paying trends
Payment provision is constantly changing, so fintechs should look to provide small retailers with the latest methods, which in turn allows their customers more flexibility in how to pay for goods and services. For example, table ordering where small independent restaurants can let customers scan a QR (quick response) code into their phone and order from a specific table. Other methods of payment popular with the younger generation who are more at ease with technology include Card-on-File (CoF) payments like Apple Pay, Google Pay, and Samsung Pay.
The quicker payment fintechs can integrate new payment methods into their services, the higher the chance of being chosen as the preffered payment provider.
The ‘home delivery’ challenge
Home delivery is nothing new, in fact, Sainsbury’s started home deliveries from its Croydon branch nearly 140 years ago in 1882. It was cash-only then, but home delivery today has created a payment headache for retailers who have only embraced the trend this year – which translates into opportunity for fintechs. Payment processing, returns management, and cleaning up order errors are just some examples of where fintechs can provide small retailers with the necessary systems to underpin a home delivery service.
Keep on growing
Payment fintechs have been gifted a ‘to-die-for’ market opportunity with some of the smaller retail players as the pandemic has forced a payment provision transformation on them. Being flexible enough to be able to offer new payment methods quickly and securely will differentiate payment fintechs positively.
As the vaccine roll-out starts in the UK, will people revert to how they used to shop? Not if fintech payment providers have anything to do with it – because they can play a significant part in helping small independent retailers hang on to the market share fortuitously provided by the Covid-19 nightmare. Helping small retailers avoid high payment service fees, providing insightful data about customer spending habits, and providing the latest payment methods means it’s a ‘win-win’ scenario for both fintech and small retail.
