Challenging times also present great opportunities
After a rapid ascent and great success in the marketplace, Payzone and its ambitious MD are refusing to stand still and are looking for new avenues for growth By Donal O'Donovan
When the economic downturn put the brakes on Payzone's rapid expansion plan in Ireland, it became a question of adapt or die for managing director Jim Deignan.
Before the crisis, Payzone was on a roll. From a standing start, it built up one of the biggest and most sophisticated retail networks in the country, thanks to its mobile phone top-up terminals.
In fact, if consumers know the company -- previously called Alphyra -- for anything, it is for the mobile phone credit top-up machines.
That market enjoyed a decade of buoyant growth up to 2008.
Even after many older customers moved on to bill phones, the influx of foreign workers and the growing population of younger consumers helped boost demand year after year.
The financial crisis changed all that and the timing couldn't have been worse because its parent company was reeling from a boardroom putsch that ousted former ceo John Nagle in 2008 and it would go through comprehensive debt restructuring that left the banks in a position to hand the company over to new shareholder Duke Street Capital in 2010.
Deignan was forced to turn the situation around.
Payzone decided to use the same terminals customers were buying phone credit over for everything from paying gas bills to top-up bus passes.
"When the prepaid mobile market peaked, the operators became ever more competitive with each other. That meant more air time; better value; and, for us, fewer sales," says Deignan in the boardroom of his Sandyford, Co Dublin, headquarters.
The writing was on the wall.
"We had the technology and the reach, so it made sense to find other services to apply to our existing network. Now we're working with the banks, utility companies, local government," Deignan told the Irish Independent.
Phone top-ups accounted for 90pc of revenues in 2008; now it's down to half.
For the company it means working with a huge range of new clients but also moving to establish Payzone as a consumer brand in its own right.
"We had to move the business on. As we saw it, that meant establishing our own brand and doing more of what we already did well," says Deignan, a pragmatic Dubliner.
Deignan wants customers to think of those in-store terminals as Payzone points, not just mobile top-up points for the likes of Vodafone and Meteor.
He's also moving to establish the same brand for online and mobile pay channels that use the same back-end technology to process payments.
Just like layering new clients on to the terminals, the shift online builds on the payment process infrastructure that already exists.
At the heart of Payzone's core product was a simple device to help meet what was at the time the new demand for phone credit.
It piggybacked off two breakthroughs -- the rise of the mobile phone market and the rollout of internet connections fast enough to process sales in real time.
It quickly gained ground, not least because it was a godsend to retailers.
Before that, shopkeepers had been forced to tie up hundreds, even thousands of euro buying stock of top-up scratch cards, with all the attendant risks of damage, theft and loss. With the terminals, top-ups are bought direct from the phone companies, but it keeps the merchant at the centre of the action.
From a standing start, Payzone's devices have become ubiquitous. The machines are in 6,500 shops in Ireland, 1,500 of those are now Payzone branded.
"We realised that we really have an unrivalled network of pay points. There's one in every town in the country; other than the post office, it's hard to think of any other retailer with the same coverage," says Deignan.
In fact, Deignan sees An Post as his main rival, particularly after moving into the utility bills space. He thinks the Payzone footprint is, if anything, even stronger.
"Our retailers are in the same towns and villages but the guys we work with are typically open seven days a week, early till late operations," he says.
Deignan has seen some of those partner stores go under, but he thinks Payzone's strategy can make a difference.
"The local retailer needs and wants to be relevant to their customer, traditionally the post office or the banks worked with the utilities but we can get those customers into the shop," he says. "The bigger the basket of services we can put together, the greater value we become to the retailer"
Customers can already use the Payzone terminal to pay UPC, Eircom, Bord Gais and ESB bills, Deignan sees no reason to stop there.
Payzone is processing payments for local authorities. In some counties, the plastic bin tags used to show a household has paid for waste to be collected are being replaced with microchipped tags.
"We think we can save local government a lot of money with that -- with our system they don't have to collect coins and they don't have to buy meters," he says.
In Dublin, payments for 25,000 parking spaces can be paid with smart chips. Payzone is processing toll payments for the M50.
"We moved the terminal business on from being dependent on the mobile market; at the same time we developed parallel online and over-the-mobile pay channels," says Deignan.
With the same technology working in the background, the system becomes more flexible all the time.
The M50 toll can be charged to a driver's mobile phone bill -- whether it's pre-pay or bill pay. Their main bank account is not involved.
Cashless wallets and shops that charge mobile phone bills for payments are near-term prospects for Deignan.
For consumers, though, the shift to online banking and chip and pin hasn't all been plain sailing. Improvements in banking technology have also left consumers increasingly concerned and vulnerable to hackers and skimmers.
The palaver to get through Payzone's fortress-like security highlights how seriously the company takes that concern.
"Credibility is the life blood of the business. We know the risks, which is why we have our own technology and the technology (developed in Ireland) is used in markets across Europe," says Deignan.
Payzone is no longer content to rest on its laurels. An integrated transport ticket for Dublin is already being piloted. And a money transfer product will be ready to launch within months.
Deignan sums up his attitude: "We operate in a challenging market but we've been able to move the business on. I think that's really where things are in the general economy, too, I think business is getting on with it."