How Elavon's Sage Pay deal offered a path for growth amid the pandemic
Payment processor Elavon purchased Sage Pay four months ago, completing the acquisition on March 11. Two days later, Elavon's entire workforce was operating remotely as the coronavirus forced it into lockdown.
Though many companies would see this as disruptive, for Elavon it demonstrated the importance and timeliness of bringing on a company that specializes in digital commerce.
Elavon, a unit of U.S. Bancorp, bought Dublin-based Sage Pay — now called Opayo — to gain a stronger small-business presence in the U.K., specifically in helping convert customers to digital technology. The coronavirus pandemic put Opayo in high demand throughout England, Scotland and Ireland during a growing pandemic.
Over the course of 15 years, Sage Pay entered numerous e-commerce partnerships for different shopping platforms or point-of-sale integrations, building a significant set of APIs and services for helping businesses obtain an online presence.
Second-quarter 2020 sales reports from Opayo revealed the number of businesses enquiring about e-commerce solutions rose 30% in May and 52% in June year-over-year.
"A certain percentage of customers have businesses that were born online or in the cloud, but a lot of the uplift was coming from retailers and businesses that would not really have e-commerce in the forefront of their mind," said Sean Wilson, managing director for Opayo.
As an example, Wilson cited garden-center retailers that traditionally rely on face-to-face business with customers. "We are seeing those businesses now looking to take payments over a phone or a website or when delivering the products," he said. "Car parts are another good example of businesses looking to offer more online services."
Elavon's research of U.K. consumers during the pandemic indicated more than half, at 52%, had increased their online spending. Many small businesses were also seeing an increase in monthly transactions, because consumers are not traveling as much. "They are staying local and following brand loyalty," Wilson noted.
In addition to a growing interest in e-commerce, the pandemic also pushed consumers' mindset toward contactless payments to reduce touchpoints and limit cash handling. Opayo also specializes in contactless, mobile POS operations.
The U.K. is known for its small shops like grocery and apparel stores, pharmacies and hair salons in small-town centers. During the COVID-19 pandemic, all of those types of retailers had to adapt operating models to promote hygiene and social distancing.
Even the J. Lupton butcher shop in Glasgow Southside in Scotland had to convert to card-based and contactless payment acceptance to establish curbside pickup and limit customer contact at a store that previously mostly handled cash.
"I had to protect my staff, my family and our customers, so we've made adjustments," owner Richard Lupton said of the shop his father started in 1972.
After setting up a mobile point of sale terminal curbside, the butcher saw cash transactions decline from 65% to 35%, and it's a trend Opayo says it has seen occurring throughout the U.K. and all of Ireland.
Ireland operates as part of the Single Euro Payment Area, while the U.K. currency uses pounds. A surge in contactless payments took place even prior to the pandemic because Ireland raised the limit on contactless payments from 30 to 50 euros, and the U.K. increased it from 30 pounds to 45 pounds.
The timing of these changes was fortunate for Elavon, said Aite senior analyst Thad Peterson.
"The explosion in digital commerce caused by the COVID-19 pandemic has been beneficial for every firm with a significant presence in the digital space," Peterson said. "In the same way, the timing for Secure Remote Commerce (pay buttons on sites) was also fortuitous, and it's been good for the networks."
Going forward, digital transformation and digital commerce are going to be the two driving mantras in the payments space, Peterson added. "Every organization in the space, except for POS hardware providers, will be focusing on delivering a robust and comprehensive digital payment offering."
Sage Pay was essentially an independent payment gateway and sales organization that had worked with Elavon for 20-plus years before Elavon acquired it and changed the brand name. However, the ISO partners that Elavon has in place will now work in Opayo's favor as well – boosting the acquiring proposition and adding e-commerce through the ISO channels that increases value for Elavon services.
"We knew their business and they had a good idea about us too," Wilson said. "That has helped with some of the typical learning curve you would have when you come together. And it really helps mitigate some of the challenges from COVID."