Independent figures show PayPoint is choosing to squeeze retailer profits

Retailers will suffer a 30% drop in PayPoint profits next year – but it can’t be blamed on utility providers squeezing margins, a Retail Express investigation shows.

Last month, PayPoint retail director Andrew Goddard told Retail Express that retailers’ commission caps had been reduced as a result of tough negotiations with utility suppliers. “The changes are a direct result of reductions that we have been forced to accept,” he said.

But stockbroker Numis Securities said this is not the same story the company has told investors.

PayPoint’s utility commission has actually increased, according to Numis analyst David McCann, who delved into the payment provider’s profits.

In the year to March 2014, PayPoint received 19.15p commission from utility providers per transaction. This increased in the year to March 2015 to 19.44p per transaction. And Numis forecasts the commission will rise again to 19.45p in the year to March 2016.

McCann, an expert in financial companies and banks, said that during a meeting with PayPoint on May 28, it denied having an issue with utility companies. This was 10 days after cuts to retailer commission caps were introduced.

“I asked a number of questions and one of them was, have you been squeezed by providers? And the
answer was no,” he said.

According to McCann, if PayPoint had been squeezed by suppliers it would have been revealed in the numbers.

“I suspect what has happened is that one of their providers might have squeezed them but that doesn’t mean that of course most, or all, have,” McCann added.

In response, Steve O’Neill, PayPoint marketing director, told Retail Express: “No, we are not being squeezed but there are competitors market pressures that we are responding to.”