Pay as you go

As an increasing number of shoppers choose to pay via mobile apps, SMEs can reap the benefits of this growing, lucrative market, says Nicola Smith

The UK has the biggest mobile payment market in Europe. SMEs that don’t adapt to this changing behaviour risk being left behind. Research by Sage Pay (The Payments Landscape 2014) finds that 36% of consumers are more likely to shop at places that offer “a range of payment methods or innovative payment types”, with the report stressing the importance of SMEs “moving away from cash and embracing new payment technologies”.  

Get mobile

New technologies refer to mobile payments. It’s a growing market for both consumers and businesses as they become more used to paying for goods and services via their mobile phones, instead of by cash, cheque or credit card. 

Mobile payments are processed via an individual’s mobile phone, either by Near Field Communication (NFC), which allows the mobile to be scanned by a card reader to process the ‘contactless’ transaction, or by technologies, such as mobile wallets, which support payment cards. For individuals, it can mean a faster, easier way to make payments. For businesses, the benefits go beyond simply meeting customer demand for a more convenient way of paying.

Benefits for SMEs

So what are the benefits? First, it can be cheaper for SMEs to accept mobile payments than to accept cash or credit card payments, and it also reduces administration and accounting work. In November 2013, a report published by the Centre for Economic and Business Research (Cebr), commissioned by Zapp, concluded that cash is the most expensive mainstream form of payment (once costs such as store count, preparation and transaction errors are included) at 2.8% of cash takings. The transaction cost of debit and credit cards amounted to 1.1% of total plastic card takings. 

“Research shows that 36% of consumers are more likely to shop at places that offer ‘a range of payment methods or innovative payment types’”

Second, mobile payments give businesses access to data and analytics, to help them  identify buying trends, track sales more easily and give a better, more relevant service, potentially boosting customer retention and sales. 

Third, when someone buys something from a business using mobile payment, the payment details will be stored on their phone. This opens up opportunities for businesses to offer schemes that tie seamlessly into a customer’s payments. 

Loyalty schemes

Analysts have predicted that 2014 will see mobile payment providers start to differentiate their offerings, with mobile POS (Point Of Sale) systems moving beyond facilitating payment and instead embracing sales analytics and loyalty reward schemes.

Large retailers are already tapping into this already. Starbucks has a payment app that incorporates loyalty points, while UK bakery chain, Greggs recently launched a mobile payment app that allows customers to top up their account online and pay using their mobile when in-store, as well as receiving rewards via the app.

Payment apps

There are a growing number of mobile payment technologies on offer. For example, iZettle allows businesses to accept credit card payments via an app on a mobile phone or tablet. Businesses download the app, link their bank account to iZettle and invest in a mobile Chip & PIN reader. The technology also enables businesses to load their products on to the app and organise them into categories to help speed up payments and manage sales. 

Barclays’ mobile money transfer app, Pingit, has also proved popular, with more than 30,000 businesses using the tool.  Money can be transferred from customer to business in seconds, simply by entering the company’s registered mobile number.

Mobile wallets

Other initiatives operate as mobile wallets, a space led by PayPal, whose wallet app allows for online payment, both at the point of sale and via mobile. 

SMEs will benefit from mobile wallet app, Zwallet, designed specifically for smaller businesses, enabling them to accept mobile payments, as well as acting as a marketing tool by giving them the capability to create branded loyalty schemes. Zwallet also enables businesses to issue mobile vouchers and deals straight to users’ mobile wallet accounts. 

There is also much noise around the growth in mobile phones equipped with NFC technology, enabling contactless payments. More than 300,000 UK shops have contactless readers for small payments, while Vodafone, 02 and EE (collectively Weve) recently formed a partnership with MasterCard, which is building a payments system that links bank cards to NFC-enabled SIM cards within smartphones.

The future

Of course, there are challenges too. The public and SMEs need to know that mobile technologies and solutions are secure, while the flood of players entering the market right now is confusing. Ultimately, though, the mobile payment sector promises to help SMEs compete with larger organisations.

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John Carroll - Helping businesses achieve International success. Head of Product Management & International Business, Santander UK