PayPoint’s strategy

At the time of flotation, PayPoint’s capabilities centred on its UK and Irish based retail networks. Since then, there has been significant evolution of our strategy, particularly through the acquisition of PayByPhone, as we broaden our position as a leading specialist payments company.

PayPoint has now also become a leading player in web and mobile phone payments through PayPoint.net and PayByPhone, as well as operating a retail cash network in Romania. We have expanded the sectors which we serve and moved into new geographies. The profit yield of outlets in PayPoint’s retail networks is also being enhanced by additional services including ATMs, debit and credit card payments, international money transfer and the ground-breaking new Collect+ service, allowing consumers to send and collect parcels from their local store.

The payments industry is changing. Technology advances are creating new channels for secure and convenient payments, providing greater accessibility for consumers to the internet through sophisticated computers and smartphones. Client and retailer requirements are for multi-channel solutions. Consumers value new technology’s convenience and speed, and better access to information. Developments such as Wave & Pay and growth in prepaid cards, e-money and other payment media require underlying processing and financial settlement between consumers and businesses.

At the same time, regulatory changes such as the Payment Services Directive and plans to phase out cheques, are opening up parts of the payments industry which were previously the exclusive domain of banks. Banks are having to focus on their core businesses and enhanced payment security standards are leading other businesses to focus on efficiencies and their core activities.

These developments lead us to believe that there will be new opportunities for the outsourcing of payment and related transaction processing. Cash payments markets also continue to deliver a high proportion of regular payments, demonstrating entrenched preference for cash among many consumers.

PayPoint’s strategy places the group in a strong position to benefit its existing business streams and from changes in technology, regulation and competitor focus which external influences are providing. Our strategy, which aims to reinforce our position as a specialist payments provider, is built around four key elements:

PayPoint has succeeded in establishing broad payment capability in a number of key vertical markets. We provide a vital payments hub to our clients in many sectors (energy, telecoms, household bills, transport, e-commerce and parking), with the ability to process consumer payments and related transactions across the consumer’s choice of payment media or channel. The delivery of the payment from the consumer to our client touches various elements such as the payment medium used (cheque, cash or debit/credit card) the channel through which the payment is made (by post, in a shop, via the internet or mobile); the processing company (for example PayPoint, banks and internet payment service providers); and the financial intermediary (acquiring banks, card schemes and card issuers). PayPoint either runs operations within each channel directly (such as our retail proposition for cash collection, internet payment service provision and mobile payment for parking) or works closely with partners (retailers, internet merchants and acquiring banks) to drive a secure and efficient consumer payment to the client, from whichever consumer source.

PayPoint also provides value added content and services within each channel, which differentiates the PayPoint proposition from competitors. In the case of our retail channel, this differentiation is achieved through providing retailers with a broad range of retail services, including ATMs, parcels, SIM cards and international money transfer. With respect to our internet channel, differentiation to merchants will be driven through having a wider base of acquiring bank relationships, combined with value adding products such as Fraudguard and superior reporting to merchants. Our mobile channel, delivered through PayByPhone, will similarly drive differentiation through its ability to leverage our cash retail payment capability and internet payment services, combined with improving the consumer experience with appropriate smartphone applications.

The execution of the fourth element of our strategy to extend geographic reach has commenced. We entered into the Romanian market to replicate our UK retail success in cash payments, and we have recently acquired PayByPhone which has contracts in the UK, Canada, USA and France.

Our objective is to increase shareholder value through accessing the range of opportunities which build around the four key elements of our strategy. We aim to:

1. grow our established UK market position through incrementally adding new payments to our existing portfolio; by focusing on optimising the retail network to enhance our yield; by adding further payment schemes and online merchants to our internet business; and by continually adding content and services to attract consumers and clients.

2. accelerate growth in our developing businesses as we expand our PayByPhone business in parking and into new markets and applications. We have opportunities to add services from the UK to our Romanian business such as international money transfer, to leverage our retail presence in Romania. Collect+ should benefit from the continued roll-out to stores across the UK, greater take-up by online merchants and through increased consumer adoption.

3. add content and services to our payment channels, which is fundamental to maintaining our competitive differentiation. We have a number of developments aimed at offering new content-rich services to our retailers and online merchants and by extending our role in financial settlement where it is to our clients’ advantage. We also aim to enhance functionality around PayByPhone, the terminal networks and PayPoint.net, notably where these functions build bridges between the different payment channels by offering choice to consumers.

4. take the opportunity for improved and more rapid returns from new geographies, which is substantially greater with the combination of PayByPhone, the internet and a retail-based network, than through entering a new market with a single proposition. PayByPhone already has a presence in the UK, Canada, USA and France, with opportunities in other countries under investigation.