While bill payments may bring in customers, their baskets are not profitable.

September 24, 2019
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Will Bill Payment Bring Added Footfall?

One particular question has been asked by retailers lately, and it involves bill payments. Basically, ‘do bill payments bring in customers and drive extra spend?’

The answer is no. From our focused analysis of data collected over some 2,900 stores, although a significant portion of gross sale comes from bill payments for the majority of shop owners, the profit margin remains minuscule.

What’s Going On With Bill Payments?

Boiled down, while bill payments may bring in customers, their baskets are not profitable. Profit from stock purchased by those paying for gas or electricity tariffs as a percentage of total cash profit is a lowly 2.45%. Considering that bill payments account for roughly 16% of all sales, this raises concern over the gap between share and profit.

Customers using ‘top-up services’ do not typically buy many other products. A large percentage of ‘bill payment’ baskets contain no other items.  Nor are shops making much money from bill payment transactions. On average, total profit from bill payment baskets is just 2.39%. That figure is so low that it doesn’t cover losses caused through errors that occur through some ‘bill’ transactions.

Marketplace Turbulence

This compounds the notion that turbulence is expected in relation to bill payments through the convenience channel. By 2020, all meters are expected to be smart meters. Different utility companies are already making different arrangements to serve their energy customers. Some are selecting different High Street payment partners, and others are encouraging payment through direct bank transfers or online.

Whilst it’s likely that some bill payment services will continue to be offered on the High Street, volumes are expected to decline.  The big question is: ‘Does this decline in bill payment services on the High Street matter to a convenience retailer?’  The answer comes down to local circumstances.  However, we’ve already seen some of our customers terminating their bill payment contracts without adverse effect on their profits.

It is advised that you carefully consider your payment partner. Avoid entering into any long-term contracts that might bind you into a relationship and cut off your ability to service utility providers. If you are a customer of The Retail Data Partnership, you could also ask us for an analysis of the profitability of your bill payment traffic.  With that information at your fingertips you’ll be better able to make the right decision for your business.

For more retail news, updates, and insights check out the TRDP news page.

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