Electronic payment companies proceed with investments in spite of crisis

In May last year PayPoint plc acquired Pay Store SRL, one of the leaders on the market of the distribution of prepaid services for mobile telephony. Operations in Romania are conducted through the company Pay Store, and on August 11 the firm launched in Romania a bill payment service. At the moment, Paypoint, has over 4,000 terminals installed in Romania but by next spring the company will instal another 1,500.
All the transactions, both the payment of bills and the electronic recharging of prepay cards for mobile phones, take place using the PayPoint platform in the United Kingdom.
Since 2004 PayPoint is listed on the London Stock Exchange with a market capitalization of GBP 380 million (EUR 475 million). It makes annual payments for approximately 5,000 clients and entrepreneurs through the national networks of electronic terminals in 19,800 retail points.
In more concrete terms, Paypoint, operated by Pay Store in Romania, is a system that allows the payment of bills for services provided by Romtelecom, Distrigaz Sud, UPC and Zapp at the moment.
In addition to the bill payment service, Pay Store offers complete electronic recharging services for the prepaid SIM cards of mobile telephony operators that supply this type of products, such as Cosmote, Orange and Vodafone. Also, Pay Store services include electronic recharging for landline telephony with international access and internet such as EasyComm, UPC, Nobel and Worldtelecom (Number 1).
“PayPoint brings to Romania an operational solution of over 12 years in the United Kingdom to the benefit of the 95 percent of Romanians who pay their bills in cash. The PayPoint network currently has national coverage and the terminals are located in proximity stores where consumers can pay their utility bills at the same time as acquiring other goods. The advantages of the PayPoint system consist of a substantial reduction in the time taken to pay the bills and also lack of supplementary costs for users,” Mugur Dogariu, Pay Store general manager, tells Business Review.
In the fiscal year 2007-2008, PayPoint collected bills that totaled GBP 7.5 billion, having on average 7.5 million weekly customers and over 500 million transactions annually in the three countries where it has operations – Great Britain, Ireland and Romania. Across all three, PayPoint had net income of over GBP 70 million in 2007-2008, a 21 percent growth compared to the previous fiscal year. Pre-tax profit amounted to GBP 30 million, which represents a 14 percent increase on to the fiscal year 2006- 2007.
Due to making investments, company representatives said they would expect PayPoint operations in Romania to post losses in the first semester of the current financial year. The company also registered some losses during the last financial year as it invested in consolidating its management team, transferred the processing operations from a local supplier to the center in Welwyn Garden City (UK) and formed a new sales team. “Nearly all Romanians pay their bills in cash, and payment channels are poorly developed. For this reason, PayPoint anticipates it will make new investments and will expand the network in Romania over the level foreseen initially. “Even given the hypothesis of a drop in household consumption due to the global financial crisis, utility bills will remain a constant presence on our everyday life and the behavior of the consumer is strongly influenced by the facility with which the service is accessed and the lack of supplementary costs,” say company reps.
“We can not really talk about a market yet, since only now is it beginning to take shape,” explains Dogariu.
Data from the National Institute of Statistics show that in Romania there are approximately 8 million households and the average expense for each one for household consumption is EUR 72. “Hence we can estimate an annual market of bill payment of almost EUR 7 million in Romania and a potential number of transactions of bill payment and electronic recharging of more than EUR 600 million,” adds Dogariu.
Other players have also done the math. “We estimate the market of electronic transactions of recharging for mobile telephony at EUR 300 million in 2008, with an average value of EUR 5 per transaction,” Cristina Constantin, commercial director of Payzone Romania SA, tells Business Review.
Next year, the main focus for PayZone as far as investments are concerned will be IT development. “As an electronic transaction company, this aspect requires permanent development and adjustment to the demands on the market. Through development we mean both investments in the hardware, equipment and terminals necessary for transactions, but also software, since Romania has a special development potential for financial services,” says Constantin. By the end of the year, PayZone will have around 14,000 terminals installed in the market and will install another 4,000 to 5,000 in 2009.
“We are working in this period to expand the service of cashing bills in stores owned by independent entrepreneurs, Payzone being the first service of this kind that is available to the public since July following a partnership between Payzone and ING Bank,” she says.
In Romania PayZone offers services and products in the area of electronic recharging of credit for mobile phone calls. The firm also offers electronic processing services for bills paid in the offices of the Romanian Post Office and integrated bill payment collection services in stores owned by independent entrepreneurs.
Bill collection services through independent entrepreneurs will be possible by the end of 2009 in approximately 2,000 locations. “The main focus will be on offering a safe and quick service through the entrepreneurs who wish to and can enroll in a program that will practically change their status, transforming them into companies that also offer services,” says Constantin.
PayZone has signed contracts with all the mobile telephony operators on the market. The company is market leader on the electronic recharging segment. Payzone also processes seven service and utility bills for the Romanian Postal Service and is thus contributing to the informatization of bill payment services in rural areas.
Currently, PayZone makes transactions of approximately 30-32 percent of the volume of electronic recharging for mobile telephony on the market.
“For 2009, our development plans include the expansion of the network, especially in rural areas, and programs for encouraging entrepreneurs to choose to offer this electronic service. We aim to achieve a 10 percent increase on the recharging segment,” says Constantin. She estimates the company will post an increase that will be 80-85 percent higher compared to the revenues posted last year. This growth is due on the one hand to efficiency (by number of transactions) of terminals installed at traders and, on the other hand, to an extensive network development, having increased the number of terminals.
“To the benefit of the consumer, we will give more attention to the status of the entrepreneurs, and the way in which they answer the needs of clients, to the rigor that such an entrepreneur should show in order to gain the confidence of the payer,” says Constantin. “This approach to the quality of the service offered both to the final consumer and to companies that release the bills justifies for us the hope that in 2009 we will reconfirm our position as leader in both the domain of electronic recharging and for the services of cashing bills from the public.”

By Otilia Haraga