Transforming business with payments

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Nick: Mike Mann, Finance Director over at Williams Trade Supplies Limited, the leading plumbing merchants. Mike, welcome. I would love you to tell us what on earth is a man of your great experience doing at a plumbing merchant.

Mike: Hi Nick. It’s to be honest, Williams is one of those weird companies that are just, that just attracts, I think, slightly left field people.

It’s as close as you can get to be family owned without actually being family owned. It’s a 50 year old business. The original founder, Mick Williams is still a non exec director on our board. And it’s a business of individuals, if I’m honest with you, it’s not a kind of grey, there’s no one size fits all at Williams, so I think I kind of fit in, fit in quite well in terms of payment experience, I had Almost no payment experience before I joined Williams other than, the standard thing you’d find in any finance environment.

Most of my previous companies have been strict B2B. So there wasn’t very much much to [00:01:00] go after there in that kind of market. But moving to Williams where, though we are technically B2C, we are we are dealing with, 10, 000 trade customers. But these are trades people who act like a hybrid between a business and a consumer.

So there’s a lot more interest in terms of both user journey payment behavior, payment cost as well, obviously. Yeah, so payments become much more interesting in a business like Williams.

Nick: Yeah, and we’ll get into some of those things as we have our conversation. Today I obviously met you through the context of payments, and that was via LinkedIn, you talking and commenting on payment operations and what you guys are doing over there at Williams to improve your receivables and operational processes.

Tell us a little bit more about how you’ve accelerated your own knowledge in the payment space and that journey that you’ve been on since starting at this position at

Mike: Williams.

Both the big kind of [00:02:00] step changes for us in payments and for me in my in knowledge came out of absolute necessity or bafflement, perhaps is a better word.

We used to take an awful lot of card not present payments from our customers for things like credit control and also for remote deliveries for, from branches. And that was obviously, as everybody knows, but I didn’t know at the time, is a very risky approach to to taking.

Card payments of people and we were suffering six figure losses each year in card fraud and chargebacks. So that was a, it originally started as a fraud question. How can we stop this? And that led us to, okay, maybe we need to stop taking payments over the phone. I’d spoken to a couple of security people at our card PSP who basically said, If you’re prepared, if a customer of yours is prepared to do that, they should be prepared to.

Shout their card details across a busy pub and that kind of resonated. So we moved to, we investigated and then moved to a pay by link [00:03:00] service. It managed to be actually called pay by link to Dutch company. And as I say, that was simply originally to avoid or to reduce those fraud costs, which we did.

Not overnight. There was initial resistance, as you can imagine, from customers who’d spent years and years paying over the phone. But we were, that was 2019. We were enormously helped by COVID in that, just the fact that everybody started, compromising on, what was seen as compromising on, on, or changing accepted procedures for things.

And we’d never look back tonight, back and I don’t think we have a single issue now with any customer saying I’m not prepared to. To pay you your links. And then, yeah, so that was the first step, but it was, as I say, more borne out of how do we stop this one thing from happening than any kind of great strategy and payments.

Nick: You recognize that you had a big problem. And I think going back to that kind of comment about bafflement, you and I have talked before about the [00:04:00] bafflement with kind of the lack of adoption for online payments or digitization of processes in the industry. And I suppose plumbing and trade merchants is on the less innovative end of the spectrum.

But you as a finance director recognized you had a problem and you went after a solution . For those who might be listening, who don’t even know that they might have a fraud problem, dive into what was your problem? What kind of fraud, what was going on with taking payments over the phone and why was it a problem?

Mike: So we, we would, our typical or our average transaction value is about 500 quid. But obviously that, that can be, that ranges from anything from a couple of bits of copper fittings, which might only be a few pounds, to thousands of pounds for multiple boiler order or a big system or something like that.

And our branches, not unreasonably, were always taught to mistrust people wanting, or not mistrust, but be wary of people wanting things on credit. And that, there were always [00:05:00] processes involved in protecting the business from that kind of fraud. But typically, whenever somebody phoned up with a card number, I think there was a degree of trust placed there to go they’re paying us by card, it must be.

a genuine transaction. And of course, sadly, there wasn’t in many cases. First we would know about we’d take a card payment for let’s say a thousand pounds. The first we would know about it was four weeks later, we’d get the statement through from our card PSP, which would have a huge charge back on it.

Obviously we would question that. Dig into it a bit and find out this was never a customer. This was just somebody who realized we didn’t have a good process for preventing that fraud. And of course, the moment that happens, it happens again and again in very quick succession. So we had to put

Nick: in place.

Okay. So this is genuine fraud.

Mike: This was genuine fraud. Yes, this was undeniably genuine fraud. These were. Customers that simply were not customers. Unfortunately, they were boilers that were boilers and they [00:06:00] left us and went to them.

Nick: He went out the store. Yeah.

Mike: Anytime this occurred, if we knew it we got our branches to the point that our branch staff to the point where they were very alert to this, any attempt to do that from a customer they didn’t recognize or something that’s, we, usual phrasing, if it looks like a fish and smells like a fish, there’s a good chance it’s a fish.

They would get, they would alert all the other branches in their area instantly. And we would see repeated attempts at the same thing. Because at the end of the day, if you’re a business with a weak control, people will push that button every opportunity they get.

Nick: And you don’t necessarily think that this stuff happens in semi slow moving, boring B2B worlds, right? You think, oh, this is happening on fast moving consumer goods. This is where people, try cards, try and get their products delivered. But this is happening to you guys, shipping out.

Mike: Yeah, boilers is possibly a bad example. It does happen with boilers. You might be surprised or even horrified at the number of boilers that probably chained hands in the local pub or on the local motorway [00:07:00] services. But things like copper, for example, if we’re selling copper tube, that is an immensely saleable commodity.

So yeah, it does happen. I believe it happens in every business. It was certainly happening in ours.

Nick: It’s become apparent to me that even in any kind of sector, even if you’re sending out invoices or you’ve got credit accounts with your customers, there is the opportunity for fraud that you don’t even know that’s happening to you.

And if you’re not on top of it, it’s going to cause you problems. It’s going to, you’re going to, you’re going to be. losing stock out the door and paying the cost of it. And you’re also potentially paying for the chargebacks

Mike: as well. This is it. Yes. So it’s a, and it’s an area that people have historically considered reasonably safe.

It’s not selling on credit, so it must be okay, but it wasn’t. So thankfully I’m pleased to say in the last year we have done somewhere in the region of 220, 000 card. [00:08:00] Transactions and we have had one charge back. And that was an error. This is part of my bafflement. Any company doing this will be suffering from that because fraudsters will know the moment you, they call you and you say, give us your card details.

They absolutely know that you would be liable for this if it was a fraud, so they will try it. So The bafflement comes from, are people not doing their research about this and finding out how they, maybe it’s just the fact, being cynical about it, that card card PSP statements are so completely opaque in what they actually show the average finance person, that you just pay the bill and move on.

Nick: I’ve seen enough of those statements to be continually baffled myself. Never mind the hidden fees. There’s all of those chargebacks that are happening. So you’ve got your, you had your problem with fraud. Was there any other kind of business challenges that you had that You’ve been able to resolve with working on the payment operation within

Mike: the business.

Yes, I think things like, , obviously a [00:09:00] lot of very large proportion of our customers have credit accounts with us. Credit controls a big part of that and chasing debtors is is always great fun in a business like ours. One of the solutions to that was a semi automation of the process.

We don’t want to take the humans out of that. They’re a very necessary part of that credit control process for us. It’s part of customer service, albeit on the slightly less less than the front end of customer service. But the idea that, again, being able to do things like upload.

3, 000 payment reminder requests and not just send those out. We could previously we were emailing or contacting people even by post for to chase them. But being able to put in a payment link to that gives an immediacy to the response mechanism as well. It feels absolutely old fashioned now to me to send out a reminder that someone needs to pay us without giving them a method of paying us.

But we were doing that up until four years ago. And the improvement in response to, to speed of response of [00:10:00] people, most of our customers are not, do not deliberately set out to pay us late. That’s not part of their way of working, they’re not big organized business that might deliberately spread payments over as long as they could possibly get away with.

But most of our customers are also not natural business people. So they’ll forget or they will, they will let stuff slip or whatever it is. And, but the reverse is also true. If we. For example, using pay by link, we now send out on day minus three, so three days before the month end, we’ll send out remind, a gentle reminder to all our credit customers who owe us anything at that point to say, just so you, just in case you’ve forgotten, this much is going to be due on Friday.

If you want to pay it now, that’s absolutely great. Here’s a link. You can use the link anytime between now and Friday. And the number of customers who are clearly grateful for that clearly also respond to it and pay us. early is staggering because this isn’t [00:11:00] about, as I say, a relationship where you spin things out to the, as far as you can take them.

This is about just, in my way of thinking, us helping them run their businesses better. It’s and that that’s also enabled us to Spread the timing of things like those chases and so on. So it’s a much more cohesive approach to Collecting amounts due to us.

Nick: No one wants to be desperately chasing debt and people who have the debt don’t want to be desperately chased either So I think it makes a lot of sense in your world And we’ll look at a broader kind of idea in a second, but your world you’ve got Plumbers, coming in and ordering parts and walking out with parts and goods.

And then they’re off to their job, right? And they’re very, they’re keen to get on to doing the actual job. So they’re busy people. They probably parked outside on a single yellow or something, and, they want to take that product on on credit usually.

And they just don’t have time to actually go and make [00:12:00] that payment right there and

Mike: then. No, and also, they’re because most of our customers are independents, they are fighting the very big guys who are all offering credit who make it much easier for the householder to buy from them.

So they, they can’t necessarily be in a position to say, I need a hundred percent of that upfront or even I need 50 percent of that upfront because people will just. not use them. So they’re in a credit trap themselves because their customers want to pay at the end of the job and not before. So yes, it’s a credit is a very important part of our relationship with them.

Nick: Tell us a little bit more about the kind of specifics that you’ve got going on. You’ve mentioned some of them already where you’ve Got a link that you can send out and someone can pay that link, really quickly instead of waiting 72 days, because they forgot about the invoice or however it worked.

Tell us like what you’ve implemented in terms of the process and how that’s improved things. And then tell us about some of the other payment methods as well as card that you’ve got going on. Cause I know [00:13:00] you’ve been innovating around open banking, for example.

Mike: Yeah, I think the first thing we were very concerned to do with sending links to people was to make them as credible as they have to be in an environment where people are now being quite rightly taught to be suspicious of requests for money over, over any electronic means.

Doing things like using our own. Email using our own domain name clearly personalizing things to the customer. One of the things we love about the pay by link product is that it is hugely customizable. To the extent that we we issued completely different messaging to those customers, whether by SMS or by email, depending on what the event is.

So it might be, as I said before, a gentle reminder is very different from a third reminder that you are late. We’ve customized, or we have something like 25 different messages that we’ve set up. Even the landing pages that people arrive at when they’ve been, when they’ve clicked on the link that they get by text, we’ve customized those to the extent that we can pre select a [00:14:00] payment method for people so that it reduces their clicks by one.

And also hopefully nudges them towards the payment method they’d like to use, which we’ll come on to. But there’s a whole lot, there’s a whole lot we, You have to be careful with something like this. You can overdo it. We I did a pre Christmas reminder, change, change the normal wording of the pre Christmas reminder.

And I thought it might be fun to, to say to, people don’t get on Santa’s naughty list. Make sure you pay us on time. We had seven complaints. I think we touched a nerve somewhere, but the fact is, if you can’t mess about with Father Christmas, Mike, no, exactly, it’s all, it’s that credibility and also it is part of our.

It’s a marketing term, but it’s part of the Williams voice. If you are communicating with your customers the way you normally communicate, possibly not the way we communicate in a rough and tough builder’s merchant branch, but certainly the way you communicate with them online, it certainly adds a lot of trust to that relationship.

We could, we then took that, a stage further by saying okay, [00:15:00] we can, if we can customise the messaging, we can also. Customize the other content of that to the customer. Things like Amex, for example, we do accept Amex very reluctantly.

But, and we have a process whereby customers can. Basically say, I’d like to use Amex, there’s a little form to fill in, don’t tell Amex for goodness sake, but but we’ll get that form, we’ll go, okay, you are now you now have Amex added to your account, so when you get a link, it will include Amex, whereas nobody else’s will partly because I’m fearful of a mass migration from, already expensive cards to an even more expensive card.

But as I say, that kind of thing, allowing people different payment methods is an absolute advantage of having an integration piece in the middle of that kind of relationship. So the fact we’ve got pay by link sat there means we can add things, if we chose to take, I don’t know, love to shop vouchers or something like that at a future date, we could probably integrate that.

Nick: You’ve got your payment service. This is connected to your pay by [00:16:00] link service, which you’re sending links out via SMS, WhatsApp, email

Mike: channels, email. Yeah, at the moment. We’re not using WhatsApp at the moment,

yeah, so then we then Having got that integrator in place the we almost to be honest We almost stumbled across open banking as a or open banking payments It was a again. There was a There’s a blindingly obvious problem, which was that, as I look down, I’m a finance director, as I look down my very neat P& L statement, I like to have all the big numbers at the top, sales, gross profit, staff costs, rent, that kind of stuff, and I like it to gradually taper in a very neat way to, down to the little things, and down at the bottom little things should be things like bank charges.

But the problem with our P& L was it did conform to that, and there was suddenly this enormous number sat near the bottom of the P& L, which was card processing costs. And obviously the [00:17:00] vast majority of that was interchange. And it wasn’t so much that it was just big. It was the fact that it was growing out of seemingly out of all control.

Because unlike retailers, we, the vast majority of our customers use corporate debit or credit cards. They don’t use personal ones. So they’re in a space that wasn’t regulated. back in 2016. Clearly Visa and MasterCard saw fit at the time not to scare the horses and not really do anything with those particular card types.

But since then we’ve seen increase upon increase. We’ve seen caps removed to the point where a transaction, a thousand pound transaction in 2018 that would have cost us 1. 50 in Cat fees is now costing us 15 and the cost of that boiler that represents that 1, 000 payment has not increased in that time on average.

And for that massive increase, which is beyond all level of possible comprehensible inflation, [00:18:00] we haven’t seen a single improvement in service or there is no service to improve. It’s just a tax. So again we’re victims of our vertical. If you like, if we were in retail, I would have.

a fifth of the problem that I have, but we’re not and neither is any other trade merchant

Nick: So you found open banking and open banking payments made possible by the kind of improved networks and connectivity of banks and parties and service providers in the industry. What is open banking? For anyone who doesn’t know in terms of open banking payments and talk a little bit about how you’ve begun to implement that.

Mike: Okay. Without going into the long and. to me somewhat tedious history of how open banking came to be. It’s essentially a, an account to account payment system that uses faster payments to get. Our customers money to us or my money to you using a bank to bank method rather than via the card system.

So by avoiding the [00:19:00] card system, you avoid the interchange fee. That is our big issue here. And the major nine, but the nine major banks in the UK were forced into this by a competition of markets authority review. Following some EU legislation back in, I think, 2016. They did this with, I think, a degree of reluctance, because the people who benefit most from this interchange charge are the banks.

And They were basically being asked to eat their own lunch by the CMA. But as far as we were concerned, this was a customers, especially if a customer is paying us on a corporate debit card, the money’s leaving their account today anyway. So it’s no different from a cashflow perspective from their point of view.

My cashflow improves because I receive that cash instantly or close to instantly, rather than having for it to wait, having to wait for it to go through the card rails. And also from a customer point of view, it’s far more secure than using your card in almost [00:20:00] any environment because you’re authorizing a payment using a banking app.

And if you believe that your banking app is secure, that is a secure payment. And I think most people would probably. Trust their banking app more than they would trust their credit card, you know banking app is I wouldn’t say impossible But it’s nigh on impossible to clone or to spoof the card is very easy So I think from the customer point of view you improved security from a merchant point of view far lower cost faster, generally faster settlement.

And there’s, there are also some other side fringe benefits as well. Things like referencing and stuff. So we can, because if somebody is paying on a card on a normal card terminal, there’s very little idea actually who the payment came from or, there’s a very limited amount of information you get.

If we’re instigating the payment request, we can put in a reference that sits with that payment all the way along. So we can easily reconcile it. When it comes in, so it’s a fringe benefit, but it’s a nice one.

Nick: You’ve got your open banking payment method or your payment [00:21:00] service. You’ve got your pay by link. Your customer gets a link. They open it up. They are forced to or they can choose pay by bank or account to account option. It opens up their banking app, confirm the amount paid and they’re done.

You get the money, they get their receipt all automatically. And they have that high level of trust. And then as you mentioned, what’s quite interesting is and this is something that I talk about. By having an e commerce flow as opposed to an in person flow, you’re able to capture some more information about that customer and then do things with that, like automatic receipting straight to their email address, for example, but also you can do some digital customer management and satisfaction through that process. Is that something you guys do and are keen for?

Mike: It is. So we were very conscious of the fact that an open banking payment is not as slick as a face to face or chip and pin card payment. It’s certainly not as slick as contactless, but most of our [00:22:00] customers aren’t in that kind of contactless.

bracket, their spend is higher than that. It’s still not as good as waving your card or waving your phone over a card terminal. So as well as there being the resistance to any kind of change in our kind of market, there was also the real fact that we were asking people to spend a little more time doing something than they would otherwise have.

have done, make it, making the payment. So we decided we had to incentivize them. And again, this was part of actually the pay by link process of generating these open banking payments as links means that we could then tack on. Effectively a gamification piece at the end of it to I’d say, you might be winning, you might win a voucher at the end of this or, and we’ve got a huge degree of control over that.

So we’ve, in, in one space, we’ve got the payment method itself, plus the incentive mechanism to, to help people. Move people over to that payment method Initially when we started this we weren’t quite so sophisticated We had a prize [00:23:00] draw for every customer who used open banking payments during the month and you could win a very sexy Gas powered barbecue at the end of the month, but which was great.

It was a nice visible prize It was gas powered. So all the heating engineers loved it and so on But it wasn’t immediate, it wasn’t instant gratification, and you could only give away so many of them before you weren’t saving any money at all. So moving to vouchers was actually, to be honest, just inspired by what people like Cafe Nero do for their retail customers.

You go in there at Easter time and you get to tap a little Easter egg and see what comes out. And I wanted something that was that kind of, It’s not a real game or anything, but that, it’s a game of chance that the something that would engage our customers as well in the process of paying.

Because the one thing we, I think, have all probably agreed on, and I think every PSP and all the open banking providers have, I think, finally now realized is customers don’t care about payments. It is not a thing that features in their mind at all. [00:24:00] Necessary evil. Yeah. It’s a non, it’s a non thing.

It’s, Nick, we, we’ve spent, or I’ve spent time with you and I’ve spent time around the, in the open banking ecosystem for a couple of years. Everybody is absolutely fascinated by payments because it’s their job. But nobody else is, and to try and get a customer to move their payment behavior is really boring to them, but we had to make it, we had to make it interesting.

So as I say, directly incentivizing them, giving them a, giving them vouchers or whatever it is, we’ve now got a mechanism whereby we can do that

Nick: It is really boring. And as you say, unless it’s deeply painful, a lot of friction for the end customer, they don’t care how it happens.

They just care that they can get on with their lives. And you care that you can collect the money. What I like about what you’ve just is quite often with the digital payment experience we’ve taken some of that human touch out of it. And in fact, it’s become even more transactional than it ever was, because you’re not handing physical cash over to someone and looking them in the [00:25:00] eye and walking out with some goods.

But you’re by adding almost a game in there your. You’re creating some element of delight into this purchase. It’s quite, I like it. It’s very good. And as you say, you’ve incentivized open banking

Mike: with it. Yeah, and through messaging and so on when we send out a payment request to people when they receive a text in one of our branches, you’ve got that, it’s not just the reward at the end of it, we can also give them, we can give the messaging up front, we’ve even put messaging on emails explaining why we’re doing this, because It is costing us a fortune if we don’t and actually, a lot of our customers, when we’ve talked to them face to face, have said fine, if it saves you money, I’ll do it.

They didn’t even really need incentivising, necessarily. Some of them would, obviously, but I think anybody, any of our trade customers who themselves takes card payments knows what this means. The numbers might be different, but it’s still painful.

Nick: Absolutely. You mentioned some customers will come in and [00:26:00] historically pay in store with a terminal. Are you sending any of those customers an SMS with a payment link who are in person there as well? And how has that kind of gone? Because you’d think that might add some friction into the process.

Mike: Yes, 80 percent of our business is transacted in branch face to face. Like you say, it’s a human thing. Our customers like being in our branches. That’s they like bricks and mortar service. We offer very high standard of service and that’s why they use us.

So whatever we did had to work in branch. Otherwise we were only ever going to hit a percentage of 20 percent of our customers. About available market. We knew that was going to be the hardest one to crack. But equally, we knew we had 300 and something people in our branches who were our ambassadors for this potentially who could present it to customers in a way we can’t do online.

The time we, the only thing that was available to us was SMS or or email. So we opted for the SMS route. So now in our branches that the one of our guys who goes behind [00:27:00] the till can simply tap in a customer account number, put in the amount they’re due to pay the system knows what kind of customer this is.

Are they a call only customer? Are they a returning open banking? Customer. If they’re returning open banking customer, they get the text as a preference. This is still done by defaults and nudges, but we can get, we can encourage people quite strongly in branches to, to do that.

Because there is still a human element in it. In terms of our teams initiating that, they could just hand them the card terminal and just keep quiet about open banking because there is that human element. And because our branches are run semi autonomously. There’s a lot of different ways of running a plumbers merchant branch.

We do get success rates. very variable success rate. So we have some branches where they’re achieving more than 50 percent of all their payments are being done on pay it, which is the open banking product we use from now west. And, but we have other branches where it’s less than [00:28:00] 5%. The customers are largely the same.

So this is a, there’s a big team education and team. Buying peace in this, which I’ve come to understand over the last couple of years is actually every bit as big as the customer buying. We have a kind of trust relationship with our customers. Anyway, they’re not walk ins off the street.

We are trade only. They’re in our branches every day or every week. You’ve built a big, good relationship with them, they trust you to advise them on, the correct flu to go on this boiler. So if we advise them on a payment method, they’re also, to some extent, trusting, and that really helps.

It’s still not as slick as the card process, 50 years to, to develop.

Nick: I think consumers are very Used to that car process as well. What is. Interesting for me is what open banking is doing to challenge the manual bank [00:29:00] transfer methods in the B2B world. So Williams could send an invoice or a statement out and just stick some bank details on the bottom of that invoice, right?

For their UK based customers and hope that someone’s going to go and pay that. You’ve been talking about transforming this both with the kind of link service and now using an account to account method that they used to, but actually it’s digital it’s on their phones and it’s secure.

It seems to me, I don’t know whether you can talk about this, but there’s this huge opportunity. Where in the UK, something like the average invoice is paid after 72 days. We can get those invoices paid a lot sooner and faster with some more transparency about what’s going on.

Mike: Yeah, I think that’s absolutely true.

And I think the. One of the problems with manual transfers it’s a worse situation than with card payments, is there’s so little connectivity between that transfer being done and you requesting the payment and you reconciling the payment. It’s a, [00:30:00] it’s, for us, it’s our highest burden.

method of somebody paying, not financial burden, but in terms of admin. Our customer makes a manual transfer from their bank account to us, they make up the reference, we ask them to put the right reference on, they never do. We’ve got, we’ve written our own script, which is hundreds and hundreds of references that customers have used in the past.

It’s a very early form of machine learning that we wrote. Three or four years ago that says, Oh if I put that reference in, there’s a very strong probability that this is that customer. And if that customer happens to owe that amount, then you’ve probably got, you’ve probably got the right one.

But that’s it’s not a very it’s not a very robust method of determining who’s paid what. It works, but it’s very time consuming, especially time consuming when it goes wrong. Whereas with open banking, as I said before, the reference flies through with the payment. It’s, we can leave the customer number on there with a customer account number on there, which is absolutely perfect.

So it does streamline that

Nick: process. That sounds like chat [00:31:00] GBT version zero. Yes, absolutely. Yes,

Mike: yes, before that was even a thing, to be honest. But they and it’s, from our point of view, I would rather, like you said, I would absolutely rather somebody responded to a request for them to pay us.

In a method that with the health that helps us, that doesn’t hurt them, importantly. I think one of the limitations is that Open Banking is very mobile friendly and not particularly PC friendly. So if you are a larger. Some of our larger customers, they will actually have a proper person doing payments.

It’s not the norm for us. Average, I think the average number of employees of our customers is probably about two and a half. But so true B2B, I think there is a more of a hill to climb there because you’ll have a, you’re not using a banking app to pay at all normally. That’s not to say it can’t be done.

You will be using your online banking. But it’s a different, it’s a different environment. And as I say, for us, that’s those customers tend to be on the fringes [00:32:00] of where we deal. And if I’m honest from a pure cost point of view, if they’re already paying us by a low cost method, I’m okay with that.

Our larger customers who insist on paying us by Amex, I would far rather move to open banking. That’s a separate story.

Nick: Two gas barbecues you can have. Yes.

I like that. Get the caravan as well. And you’ve got this template now for how you’ve done it at Williams. And it sounds to me like this is, if you look at this in a very generic way. It feels like you could apply this to other businesses. They don’t have to be, trades merchants. What, where do you see the other opportunities or businesses that you can almost cookie cut this with a bit of, bespoking?

Mike: I think the opportunity, the opportunities are absolutely enormous. I think the it’s almost better to look at it the other way around and say, where would it not work? Because it will work everywhere else. So where it wouldn’t work, I think at the moment in its current form and not talking about future developments, but its current form, anything that requires a very high [00:33:00] speed checkout process is this is going to feel like a lot of friction now in our environment.

We love customers to dwell in our. In our branches, because we’ve got beautiful displays of lovely, sexy power tools and work wear and things that they may or may not need, but the longer they spend in branch, the more opportunity there is to serve them that we are renowned in our vertical for having the best coffee of any builders merchant in the country.

And that is a huge cost to us every year. It’s a proper, bean to cup system and stuff in every branch. But that is so that customers will stay there and because we want to say thank you for, spending money with us. We’ve moved a long way from the kind of ghost ghastly little brown clicks cups and the equally ghastly brown liquid that used to go into them.

So for us dwell time not actually a problem in an environment. In a much more, in a much faster moving environment, it would be a problem. There are other ways to solve it, but at the moment, single immediate payments [00:34:00] is a slow process. But and obviously where transaction values are lower, because the card fees will, so the interchange is based on a percentage of the value, as that drops the card fee itself drops away as well, in equal proportion.

Whereas, depending on what, The commercials are for your particular open banking deal. They may not, it may be a fixed fee. There is a point at which open banking becomes more expensive than taking a card. But for us, it’s a very low point indeed. It’s well below our average.

Certain types of retail, absolutely. Other types, would you expect to see this appearing at Tesco’s at the checkout? I don’t know. I think you might if you incentivize people, there are all sorts of experiments going on in, in that kind of market in supermarkets at the moment. I think there’s a Dutch chain that has now introduced slow lanes for older, this is post COVID, older people who want to have a chat.

I’m sorry, that’s not meant to be older people. That’s any people who want to have a chat. [00:35:00] But people who don’t want to feel pressured into completing their transcript in the most efficient way possible. No, I think the combination of any business. The combination of having a lower cost payment method, that is more secure for your customers.

If you can then combine that with the link based approach or even a QR code based approach that allows you messaging to your customer. It takes the payment part of the journey from utterly dull or not even a thing to potentially a positive thing. I think that could be. If I go to the local, to my local garage, which is an Asda store, they’ve got a point of sale display facing me, tells me what my order is at the moment that they’re keying in.

But also, the moment I’ve done my payment asks me for a, gives me a satisfaction survey about the queue length and this kind of thing. There’s no reason why you can’t build that into a. That is viewed as a payment method, perhaps even on a payment device, and make it much more of a, to come back to your point, much more like [00:36:00] handing cash over to the person.

You can have a little con, almost a conversation with them. And I think that may be a trick that is being missed by the payment payments industry because everyone’s so focused on the payment itself. You don’t realize you are in a customer service environment. Whatever the business is, it doesn’t matter if it’s a builder’s merchant or a plumber’s merchant or a retail environment.

I think that’s, that ability to personalize that kind of thing, that’s not a function of open banking, but it, but the fact that you are making people wait. necessarily could be turned to your advantage.

Nick: I think there’s a great opportunity to improve the buying experiences and actually innovate and look at. These older experiences and actually move them forward. We’re trying to get this hybrid model of digital and physical, this digital model and work it to our advantages where we’ve got all the convenience and safety of digital transactions, but also the potential to have really good human interactions and improve our [00:37:00] customer service and making it less transactional actually.

So I, I really liked that. I was just going to summarize some of your key points there actually. So I, I like looking at the idea of where isn’t open banking going to work. And we know that it, as you said, it’s going to work in high ticket items where there’s effectively a fairly slow kind of checkout process appreciated.

And where it’s B2B because you may be dealing with corporate cards, which are very expensive. Some of these opportunities that are out there are like corporate travel. The booking process is slow. Your corporate cards, there’s this great opportunity for B2B travel merchants or in your case, trade merchants.

Mike: We’re talking about about an, also we’re talking about the current version of what open banking looks like and that it, because it was in initially viewed as an e-commerce something that works in the e-commerce environment.

The first conversation we ever had with the guys that pay it. Was about, was not about e [00:38:00] commerce. It was about, as I say, the other 80 percent of our business. And I think everyone’s very skeptical about whether this would ever work in that kind of environment. And my view was the integration costs, because we already have pay by link as an integrator, the integration costs were not high.

So cost of failure, not really a, not really an issue. Potential upside, absolutely enormous. But this is mark one. This is a process we know to be in a journey. We know to be inferior to the very slick card journey, move it forward another couple of years and we should have, a much slicker, potentially a one click or even no click checkout process. But there’s a lot of work to do for that, but I think the industry seems very focused on that goal. Whereas actually, I think there would be a, there’s a huge advantage in focusing on what we currently have. And I sound like a really boring FD when I say that.

But we’ve got this thing that can be made to work. Now it might not supplant cards, I don’t think [00:39:00] it will. They’ve got decades of experience and some very high powered brains making cards work better for people. But if it sits alongside cards as a viable but mainstream alternative, then you actually get the funding and you get the level of engagement and the level of recognition from the market to make that next step even easier.

It’s an absolute hobby horse of mine that open banking payments, don’t have a brand and we use Pay It. Other people use True Layer or, you name it any of the very imaginatively named open banking providers.

There are very many of them. And I don’t think that inspires confidence in the end user. If I go into any old store and I put my card on the card terminal, I don’t care or know if the card terminal comes from Ingenico or Dojo, if the acquiring is done by Fiserv or Lloyd’s Cardnet, I don’t care.

I’m just paying by card. Pay by card. It’s a phrase. So the industry [00:40:00] and everybody has been very focused on the mechanics of it, on the technology. I absolutely get that. That’s done. It’s there. Works. Then really, to me, there just needs to be a brand for this. And I think again, people are, we’re focusing on, Oh, we’re now moving from open banking to open finance or open something else.

And you go yeah, but from a customer point of view, open banking would, for example, enable you to see your Barclays account on your NatWest app. Fantastic. That’s got nothing to do with payments as far as. The average consumer is concerned. It’s a complete, they don’t need to know. It comes from the same tech stack and the same piece of development.

It’s not, it’s just that one’s a payment method. One is accounting information. So don’t try and create a brand for the entire thing. Cause you’ll never do it. Cause if open banking is the brand in, in, in my recent. Survey of about a small number of customers, [00:41:00] zero percent could explain what open banking was.

And that’s after, what, eight years in the development? So even my own customers, even our own customers at William, we don’t talk about open banking. We never talk about the banking now, but if I change that to pay by bank tomorrow. I think our customers would be okay with it, especially if they saw that pay by bank brand appear on HMRC’s website or the NS& I website or, another big merchant or something like that.

It’s that universality, contactless, direct debit. They’re all really well, they’re not understood that nobody understands the technology behind that except the payments geeks, but customers, but consumers think they understand what it means. And that’s the important bit so the next step is not the technical one. To me, the next step is that is the universal [00:42:00] recognition of what this is that will drive adoption.

Nick: I can agree more. I think you’ve got two sides of that coin there. One is, as you say we need a brand for recognition. So everyone knows what it is that we’re talking about, even if they don’t know how it works, but also we need a brand for trust. Because if you’ve got all of these other wild brand names in the mix, you’re like I don’t know what these things are.

And are they part of this open banking thing or not? But I just want to associate. This type of payment method which I find really convenient with a brand or a name that I trust on. And you’re right. We are still very early on in that journey, and it’s going to be a difficult one. But I’m very interested in And getting that sorted out, but also having businesses adopt it, because ultimately we’re all consumers nowadays.

And if you get, if you solve some of these B2B problems where it’s really ripe for solving, and then you drive this brand awareness into that space. It will be much easier in my opinion to roll it out to consumers trying to get consumer adoption first [00:43:00] at a very fast moving consumer goods level is very difficult.

Mike: Yeah. And I think, we made the mistake, not the mistake, but we made exactly that comment originally, but the other way around to go it would be, wouldn’t it be great if there was, I don’t know, one of the big utility providers or, mobile phone company or something like that.

would take this on. But I think you’re right. I think that there is less of a, there’s less of a, less of an urgency for them to do that. They’re not being hit by the same level of card fees that, or the same percentage level of card fees that, that trade or business, the B2B businesses are. And the kind of B2B we’re talking about is not.

Huge corp paying huge corp, this is individual trades people or, nail people, nail bar people or whatever it is being paid by and paying other small businesses. And there are many more of those around and they come much closer to people’s personal lives. I think that kind of, the one, one of the things that I’m very excited about was people being [00:44:00] offered.

or apps being offered to very small micro businesses like, nail salons and that kind of thing where it’s, it might even be an individual so that they can accept open banking payments and free themselves from the card. from the cartel, if you like both, both my daughters run micro businesses.

One is a Pilates instructor, the other one does wedding styling and they both benefit from the fact that I can get their customers to pay them using open banking. It’s much better for them than And taking cards financially, and it’s much slicker for them than for their customers. Doing manual, manual bank transfers.

Nick: I think it’ll probably be those cartels that end up owning all these open banking companies and the brand anyway, I wholeheartedly agree with everything that you’ve just said. Very interesting. Coming back around to your business and what you’ve done operationally and to transform your business. You’ve mentioned saving, saving six figure sums because you were getting all of these sort of chargebacks and fraud [00:45:00] problems.

And then operationally. Improvements there. What would you say to any business that has recognized that they’ve got an issue with payments? What would your advice be?

Mike: I think actually my advice would be to the people who haven’t recognised they’ve got an issue with payments.

I think the I think if you have recognised it you’re almost certainly doing something about it. And I think the idea, the thing I would say is there are enough companies out there, there are enough businesses out there, there are enough people out there who are experts in the field to get good advice on this.

I think, but the problem is it’s a move from a very traditional Kind of one to one relationship with your card, PSP or acquirer, where might even have been the people who provided you with the card terminals, who then said, Oh, we can also do the payments because it’s just the same thing.

It’s moving away from that into an environment where you’ve got slightly, you’ve got more choice. You’ve got more You got more at your disposal. So the hence why people like, the guys at pay by link that we talked to or prompt or other people like that [00:46:00] who are in the, in that middle space are, I think, critical to this because if everybody has to do an integration one to one with an open banking provider and that doesn’t sit properly with their card.

Provider and blah, blah, blah. It’ll never happen. But generally, from our point of view, we had to do all this blind. We didn’t really know what we were doing at all. Some would say we still don’t, but we did it. And the ROI on this, coming back to me as an FD, is absolutely astronomical. It’s not expensive to do.

Yes, it took time. If we’d found the right people quickly, it would have taken less time and been less expensive. But it’s perfectly doable. There are lots of businesses out there doing it now. And just do it. It’s as I say, if you can’t persuade large quantities of your customers to do this.

You won’t have spent a huge amount of getting there. But if you can, the difference to the bottom line is enormous.

Nick: Awesome. Thank you, Mike, FD over at Williams. Innovator in payments and open banking transforming the business [00:47:00] over there. It sounds huge, the difference that you’ve made. So I really appreciate you coming on, having a conversation with me. Lots we could talk about, but we’ll save it for another section on open banking.

Specifically, perhaps maybe we’ll get a picket line at some of the open banking conferences. Really appreciate your time and your conversation with me today, Mike. Thank you so much.

Mike: It’s been an absolute pleasure, Nick.