Castlefield Stock Story - PayPoint

By David Gorman

As the number of high street banks has dwindled, people who deal mainly with cash have been left with fewer options. David Gorman looks at the inclusive essential in-store payment services provider, PayPoint Group - held in the CFP Castlefield Sustainable UK Smaller Companies Fund.

 

Say it with me: “My bank is not my friend.” Over the past couple of decades, we’ve all watched in dismay as high street banks have left the high street. From 1986 to 2023, the number of bank branches in operation in the UK fell from 14,689 to 5,745, down 60%. Over the same period, the number of building society branches fell from 6,954 to 1,925,[1] a fall of more than 72%. Why so?

  • Running a retail branch network is expensive. Bank branches cost an average of £590,000 per year to run and only around 25% of customers actually visit their bank in person.[2]
  • Less localisation, more centralisation. The traditional bank manager, a respected figure in the area who knew his or her customers and oversaw lending decisions, is long-gone.
  • Who remembers writing a cheque? Advances in financial technology (FinTech) combined with the advents of smartphones and apps mean that most of us now pay for most things using our phones.
  • The decline of cash. We see this in the big decline in the number of ATMs.
  • Security and convenience. Many retailers don’t want to handle cash and neither do most of their customers.

The trouble is, this situation doesn’t suit everyone and it can leave sections of society feeling excluded. 1.3 million British people don’t have a bank account, while 5.4m adults still depend on cash for day-to-day spending, using it to pay most or all of their bills. The People most badly affected by this shift to digital banking and branch closures are those living in rural areas, the elderly, the disabled and the less well-off. The last government tried to improve things but with limited success.

only around 25% of customers actually visit their bank in person

One company stepping in to help is PayPoint Group PLC, its shares we own in our CFP Castlefield Sustainable UK Smaller Companies Fund. You’ve probably seen the PayPoint logo outside your local shop or maybe even seen a PayPoint terminal on the shopkeeper’s counter.

The business operates through four divisions: Shopping, E-commerce, Payments & Banking and Love2Shop, with these operations serving a wide range of customers, from corner shopkeepers to the likes of EDF, Monzo, Asda and Amazon.

People most badly affected by this shift to digital banking and branch closures are those living in rural areas, the elderly, the disabled and the less well-off

PayPoint’s network of over 28,000 retailers and terminals is bigger than all banks, supermarkets and Post Offices combined, putting them at the heart of communities nationwide[3] and offering services such as:  

  1. Counter Cash - cashback without purchase as well as balance enquiries
  2. Foreign currency services
  3. Central & local government cash payments (e.g. DWP) to and from individuals
  4. Bill payments using cash, e.g. energy bills
  5. Cash through to digital - cash deposit and withdrawal services for customers of challenger banks such as Monzo and Revolut
  6. Longer opening hours than traditional banks and building societies
  7. Cash purchase of digital vouchers
  8. Online shopping parcel drop-off and collection, via Collect+

For the retailer, PayPoint helps bring customers into the shop in an era when fewer people are buying things like newspapers and tobacco. PayPoint software also helps retailers run their shops more efficiently and enables them to take part in localised promotional campaigns organised by retail brands.

The company’s activities align with our Financial Resilience and Inclusion investment theme, and it recently published annual results for the year ended 31st March, 2024, which were very pleasing. The outlook also remains positive with a share buyback programme supporting this view too.

 

Written by David Gorman

 

Information is accurate as at 12.07.2024. Opinions constitute the writer’s judgement as of this date and are subject to change without warning. The officers, employees and agents of CIP may have positions in any securities mentioned herein. This material may not be distributed, published or reproduced in whole or in part. With investment, capital is at risk.

 

 

 

 

 

 

[1] Closure of high street banks: Impact on local communities - House of Lords Library (parliament.uk)

[2] High street banking: what does the future hold? - Risk Business

[3] Our Business Model | PayPoint