Payment options | SHOPFLOOR ANALYSIS Payment, please
It doesn’t get more important than getting the money off the customer and into your bank account, but with the industry apparently seen as ‘high-risk’ by credit card providers and retailers being charged comparatively high fees, is there a better way? Toby Griffin investigates
I
t’s not what you do, it’s the way that you do it’ – so sang Fun Boy Three and Ban ana- rama in their 1982 hit, and rarely has such a simple piece of advice been so insightful. I’ve seen often how the mishandling of a situation hasn’t been down to the decision made or intended outcome, but the manner in which it is done. When it comes to payment methods in the KBB industry, the song’s advice is equally applicable, with the way that a payment is performed making a surprising amount of difference. Here’s the normal scenario. You’ve closed a deal with a customer. This could be after months of designing and consultations for a large project, or a walk-in customer that just wanted a tap to take away. In either case, when both parties are happy with the arrangement, a price is agreed, and so it’s just a case of taking payment. It should be simple, yes? Well yes it can be,
Martina Landhed, director of Instil Design in Oxfordshire confirms this, adding “the last time we took cash was about two years ago, and it cost me £100 to deposit in our bank”. Another traditional favourite, particularly when larger amounts of money are involved, has been the good old cheque. Far more secure than cash, industries like our own have long preferred taking cheques for this reason, with the only drawback being the time it took for them to clear. Bankers’ drafts and their building society equivalent, sought to solve this matter, and – although took a little work to arrange – cleared instantly, which definitely suited retailers.
but it’s surprising how many issues, compli- cations, consternation and even the collapse of the deal can be a result of the method that the customer chooses to pay. To get a better understanding of this topic, let’s firstly consider the payment methods available today and discuss their strengths and weaknesses. Cash has been used for millennia. Simple, clear, instant, and unreliant on power and technology, the exchange of cash for goods and services has stood the test of time. But it has its drawbacks, as it can be easily stolen, is difficult to track, and – particularly since the advent of other, more secure and transparent payment systems – has long been associated with tax avoidance and even criminality. So it has begun to fall out of favour. Richard Hibbert managing director of KBB retailer KSL Sudbury in Suffolk, and KBSA national chair, reveals why they tend to avoid taking cash payments. “We haven’t taken cash lately,” he explains. “I used to feel that it was offered as a tax dodge. We’d always say that we’d take cash, but let them know we’d be banking it.”
April 2023 •
The last time we took cash was about two years ago and it cost us
Martina Landhed, director, Instil Design
£100 to deposit this become the most money in our bank
Cheques though have been in massive decline during recent years and now account for less than 1% of retail bank payments. Next, we have your ‘flexible friend’ the debit and credit card. Although the concept of these was first cited in a science fiction novel from the 1800s, they weren’t used and popularised until the 1950s, and have since grown to
popular method for transactions in the UK – particularly since
the replacement of signatures with PINs. Debit card use finally outstripped cash for the first time in 2017. Although the funding methods vary between debit and credit cards, the general principle of cleared, instant, secure payment suits both customers and retailers alike.
Transfers
Of the major payment methods, from almost out of nowhere in the past decade or so, we’ve seen bank transfers becoming a huge player in the market. Initially using either BACS (which takes three working days to clear) or the chargeable CHAPS (normally clears the same day), the Faster Payments system was launched in 2008, and allows for free, same-day payment transfers between all major banks and many other financial institutions. Combined with the advent of internet banking (now used by 93% of the UK population), and greater security for online payments, bank payments have rocketed
– particularly for larger
amounts. By avoiding credit and debit card charges, and many of the delays that can be associated with them, bank transfers could be seen as something of a dream for KBB retailers. To see how industry retailers at the coalface are handling this changing landscape of payments, I set a poll on LinkedIn asking: “Which payment method is used most by customers of your KBB retail business?”. It got a big response with a whopping three-fifths stating that bank transfer was the most common, with a fifth stating credit card, and the last fifth stating debit card (noticeably neither cash nor cheques were cited once). Even if you combine the two card options, bank transfer is still hugely more popular. The results of the survey are backed-up when speaking to industry figures,
with Instil Design’s director
Martina Landhed saying: “Our preferred payment terms ask for BACS, and 95% of customers pay that way”. Simon Hughes, co-owner of Zara Kitchen Design in Wokingham, explains that they prefer to take bank payments because “we are not charged, and the money is in our account in a few hours”.
Managing director of Lima Kitchens in Milton Keynes, Elizabeth Pantling- Jones, agrees, saying: “We’ve almost eradicated all credit card payments. it’s bank transfer all the way. Not only is it the most cost-effective, keeping our quotes as competitive as possible, but it is also easier to reconcile and search for if any questions ever arise.” It seems that customers are happy
to pay this way too as Roxanne Baker, director of Olympus Bathrooms in
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