May 2016

Payments Landscape Changing for UK SMEs
Current research from industry analysts East & Partners Europe (E&P Europe) has found rapidly changing payments behaviour amongst UK SME card-accepting merchants, with a strong shift in online and contactless transacting.


1293 SME merchants nationally were interviewed in the latest round of E&P Europe’s Merchant Acquiring markets program. The dominance of debit acceptance continues, although credit card engagement is growing as both merchants help direct acceptance traffic at the point of sale and consumers become savvier in their use of their card based credit. Virtually all credit transactional growth is occurring online with a 2.3 times increase in the proportion of online credit card transacting over the past four years being reported by merchants.


Beyond these dynamics is growing use of contactless card acceptance by merchants. In terms of high street, terminal present merchants, the average proportion of all card volumes being accepted that is now contactless has reached 8.2 per cent, with the vast majority of these cards being debit.

This connects with February data from the UK Card Association, showing there are 84.2 million contactless cards in the UK as of February this year. In 2015, consumers spent £7.75 billion on contactless cards, compared with £2.32 billion in 2014.

Further illustrating the rise of the new payment technology, Visa Europe has recently reported that one in five in-person card transactions are now being made with a contactless card.
  According to the payment service provider, it facilitated around 3 billion contactless transactions in Europe over the course of the last 12 months (with the majority of transactions in the UK), tripling levels from a year ago.

This has happened from a near standing start over the last two years only when card issuers ramped-up issuance of contactless cards in the UK, particularly debit, and the distribution of contactless-accepting POS terminals has become more widespread. It is on a trajectory to reach 15 percent of all such transacting by the end of 2017.

Old World Changing

Cash is clearly slowing as a payments mechanism for high street merchants but is doing so slowly, reducing its proportionate slice of the payments cake over the past four years by a modest 2.8 percent. Clearly, a rump of both merchants and consumers continue to prefer the use of cash for its convenience and non-traceable values.

Cheques as a payment tool, however, are declining rapidly – dropping their relative share by 21.8 percent since 2012. Increasingly being used for special / out of the ordinary payments, cheques are considerably more prominent in B2B transactions than consumer payments. They remain favoured where complex authorisation and signature processes are required by the merchant.

Some of these changing payment patterns are being driven by Fintech disruptors with new acceptance technology but in our evidence based view, the vast majority reflects the natural evolution of payment options and solutions matching changing demand-side behaviour occurring in the markets; a complex matrix changing almost by the day.

Receivables Transaction Behaviour – SME Merchants

  Average % of Total Annual Receivables
  Feb 2012
(N: 1198)
May 2016
Debit Cards 61.2 57.9

Terminal Payments

58.0 54.6

Website Based

1.1 1.4

Other (phone, mail etc…)

2.1 1.9
Credit Cards 14.6 20.3

Terminal Payments

10.4 10.2

Website Based

2.7 8.9

IVR / Phone

0.4 0.3


0.4 0.4


0.7 0.5
Cash / OTC 14.4 14.0
Cheque 8.7 6.8
Direct Credits and Standing Orders 1.1 1.0
TOTAL 100.0 100.0

Source: UK Merchant Acquiring Markets program, East & Partners Europe
Note: SMEs defined as enterprises with annual turnover of less than £50 million
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