Last week we spoke to PayPoint’s retailer director Andrew Goddard about the company’s commission caps. betterRetailing spoke to the NFRN chief executive Paul Baxter about their legal threats, advice for retailers and the exclusive PayPoint boss interview.

What do you think of reasons PayPoint gives for the commission caps?

They claim they don’t make much money from the services they provide, but they still made £45m profit in their last results. They need to understand that if they are bidding for contracts that don’t allow them to offer sufficient payment to retailers, who are actually delivering the service they are offering the suppliers, it’s a bad business model.

To rely on the argument that PayPoint generates footfall to cover the loss retailers make is unsustainable. At what point should a retailer be subsidising a PayPoint-type business, utility companies or local councils?

What are the next steps in the NFRN’s legal action plans against PayPoint and the utility companies?

Firstly, we’re writing to Ofgem, because part of this issue is driven by utility companies not allowing sufficient margins. We want them to investigate the massive profits that are being made by the companies and how that is not washing its way through the system.Paul Baxter_badge cropped

The problem is PayPoint are underbidding to get the utility business. They are allowing for the fact that they are expecting retailers to do this for free or sometimes at a subsidised rate. Remember, PayPoint don’t lose any money at all. Nowhere does it say on this model that PayPoint loses money, it’s only the retailer who loses.

We’re also gathering information – we don’t do these things on a fit of pique. We are writing to the Competition and Markets Authority to ask them to review the monopolistic position that PayPoint and others have. We are taking legal advice from our contract legal experts to see if there is a legal challenge.

I hope the more information we get the better it will be. Maybe we can convince PayPoint to change their position or give them the ammunition to go back and renegotiate their terms.

But what exactly are you hoping to get out of it?

That providers like PayPoint or Payzone will pitch correctly – so utility companies pay the right rate for the job and that retailers, who PayPoint are employing to do the service for them,  can ensure their costs are covered.

What’s your advice for retailers who are currently questioning their PayPoint contract, or similar?

They need to seriously review the service they’re offering. We are not saying everyone should pull PayPoint out – even though there are a lot retailers calling for that – we’re saying they need to seriously understand the impact it’s having on their business. They need to analyse the data and understand if it’s sustainable so they can make a sensible business decision.

Some services may be profitable, but for a lot, they’re only using it because they’re providing a service to their customers. They need to balance the desire to offer a service to a customer and the affect that it has on the profitability.

There are some schemes, like self-fill ATMs, which offset some bank charges and PayPoint do offer that through CashZone. But there are limits: minimum transactions, minimum turnover, and fixed contracts. It’s complex.

Do you think retailers should boycott the company?

It’s right for those retailers who think it’s right for them. Would I call for a day’s boycott to send the message home? I’d rather we have all the facts in place and understand what the best options are. This is a commercial discussion, but if we can’t solve it commercially and we’re allowed to go down the legal route, then we will.

Will you arrange a meeting with PayPoint?

They are seeking a meeting, but we don’t want a meeting just to talk. If we’re going to meet we need to have some practical resolutions, they are not going to make us go away by being nice. We have a good relationship with them, I have no issue with them personally, but it’s not about personality it’s about the reality of an industry. We will consider their request if they can give us some more assurances that it’s more than talking shop.