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UK SMEs predict 25 per cent sales growth for next financial year

A cross-sector cohort of UK SMEs predict an average 25% sales increase for the next financial year, new industry research reveals.

The research, conducted by SME working capital specialist Skipton Business Finance (SBF), collates the perspectives of almost 1,000 business leaders from SMEs across the UK.

The businesses were also interviewed about whether they can see themselves hiring more staff with over a third of SMEs (35.39%) saying a confident ‘Yes’, and a further 43.62% replying ‘possibly’.

A cross-section of SME sectors was represented in the research including manufacturing & construction, haulage & transport, printing & media, recruitment, maintenance & repair, and food & drink. When grouped into individual sectors the data still reaches a similar 25% average for each sector.

Greg Bell, managing director for Skipton Business Finance said, “We’re shocked and surprised by these results. When we conducted the research, we were expecting to find a modest average of 5-10% but 25% is truly amazing. This is despite SMEs having to face the uncertainties of Brexit and SME confidence hitting a seven year low as recorded by the Federation of Small Businesses (FSB).

“If there is one thing that we can take away from this survey is how the UK’s SME industries continue to be persistent and resilient even in uncertain times.

“We can all agree that this will definitely be a challenging year for us all and statistics like the FSB’s confidence rating prove this. But these statistics show that business leaders can see a silver lining in these foggy times.”

Many SMEs commented in the survey on the uncertainties of Brexit affecting their business while many others commented that having a working capital solution helped to make growth easier.

Bell added,“It’s more important than ever that in times of uncertainty someone can provide SMEs with reliable solutions.

“As cash flow is the life blood of any business, we believe that focusing and improving on this can be a real-life saver for many businesses. In today’s fragile economy businesses that are still looking to expand and grow need the certainty of robust cash flow to fund their aspirations. Invoice finance provides this assurance and allows the management to focus on their business.

“At Skipton Business Finance, we try to do whatever we can to help make that growth possible. When clients have a facility with us, we never provide a traditional one-size-fits-all package but a tailored facility with their own relationship manager who can help adapt their facility through challenges or times of growth.”

A subsidiary of Skipton Building Society, SBF is a leading independent factoring and invoice discounting provider, offering a range of working capital solutions for businesses with annual sales ranging from new-start to £30m.

BY CHARLIE WATTS JOURNALIST

Source: London Loves Business

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London is one of the top 15 cities in the UK to start a small business

Research by card payment solution’s provider Paymentsense reveal the top 15 best cities in the UK to start a business.

Starting a business can be an exciting endeavour, but getting through the first five years is challenging. The cost of rent, consumer demand, beating the competition, and keeping your cash flowing are often tricky things for SMEs to juggle.

Based on factors including business survival rates, weekly salary, average rent, population, and the number of employed adults in the area, they worked out which UK cities offer the best environment for prospective SMEs. If you’re thinking of embarking on a new venture this year, take a look at the below 15 places for starting a business.

15. London

It’s probably no surprise that the capital of the UK, which is often considered to be a leading global city, made the list. London accounts for roughly 30% of UK GDP and is a major location for finance, both nationally and internationally. As well as this, it thrives in the media, technology and tourism sectors.

5-year start-up survival rate: 39.3%
Average weekly pay for full-time workers: £713.20
Average monthly cost to rent a 1-bed city centre apartment: £1,705.35
Population: 7,556,900
Number of employed adults: 3,817,203
Money available per week: £2,722,429,179.60
Index score out of 5: 1.36

14. Glasgow

This city has Scotland’s largest economy and the third highest GDP per capita out of all the UK’s cities. Glasgow has seen growth in its communications, biosciences, healthcare, retail, finance, and creative industries. Tourism is also strong in Glasgow, as it’s one of the most popular holiday destinations in Scotland.

5-year start-up survival rate: 36.1%
Average weekly pay for full-time workers: £573.60
Average monthly cost to rent a 1-bed city centre apartment: £624.75
Population: 591,620
Number of employed adults: 280,700
Money available per week: £161,009,520
Index score out of 5: 1.54

13. Manchester

A textile manufacturing boom made Manchester the world’s first industrialised city – it’s also the revolutionary place where scientists first split the atom and graphene was produced. Nowadays, as well as its continued involvement in science and engineering, Manchester is known for its media, culture, music scene, and sports.

5-year start-up survival rate: 37.5%
Average weekly pay for full-time workers: £555.90
Average monthly cost to rent a 1-bed city centre apartment: £746.09
Population: 395,515
Number of employed adults: 194,093
Money available per week: £107,896,298.70
Index score out of 5: 1.66

12. Birmingham 

The UK’s so-called ‘second city’ has a long history as a centre for manufacturing and engineering, although the last few decades have seen the services sector take over the local economy. Public administration, health and education are major employers in the city and it’s the third biggest financial centre in the UK. Birmingham also attracts a lot of conference and exhibition trade, thanks to major facilities like the NEC and the ICC.

5-year start-up survival rate: 39.7%
Average weekly pay for full-time workers: £584.10
Average monthly cost to rent a 1-bed city centre apartment: £752.62
Population: 984,333
Number of employed adults: 400,679
Money available per week: £234,036,603.90
Index score out of 5: 1.83

11. Liverpool

Made famous as the birthplace of The Beatles and home of the Merseybeat genre, Liverpool is one of the most visited cities in the UK. Tourism and leisure are big contributors to the city’s economy, as is the services sector. The future looks promising for Liverpool, too, as the economy has been on the up since the mid-1990s.

5-year start-up survival rate: 38%
Average weekly pay for full-time workers: £544.30
Average monthly cost to rent a 1-bed city centre apartment: £656.02
Population: 864,122
Number of employed adults: 182,270
Money available per week: £99,209,561
Index score out of 5: 1.83

10. Edinburgh 

The history and culture of the Scottish capital, as well as the Edinburgh International Festival and the Fringe, have made it the UK’s second most popular city break. Scientific research, higher education, and financial services also account for a significant portion of Edinburgh’s local economy.

5-year start-up survival rate: 42.9%
Average weekly pay for full-time workers: £613.30
Average monthly cost to rent a 1-bed city centre apartment: £763.63
Population: 464,990
Number of employed adults: 272,000
Money available per week: £166,817,600
Index score out of 5: 2.02

9.Coventry 

Car manufacture and ribbon making are what Coventry is historically associated with. These days, although the automotive sector is still a big part of Coventry’s economy, the city has more involvement in areas such as finance, leisure, logistics, research, and the creative industries.

5-year start-up survival rate: 42.2%
Average weekly pay for full-time workers: £595.10
Average monthly cost to rent a 1-bed city centre apartment: £616.07
Population: 359,262
Number of employed adults: 128,764
Money available per week: £76,627,456.40
Index score out of 5: 2.1

8. Leeds 

As well as being one of the UK’s largest legal and financial centres, Leeds has one of the most mixed economies in the UK. Engineering, publishing, chemicals, medical technology, and food and drink are the most major sectors in the city. However, it also has strong retail, leisure, construction, creative, and digital industries.

5-year start-up survival rate: 41.9%
Average weekly pay for full-time workers: £551.90
Average monthly cost to rent a 1-bed city centre apartment: £659.21
Population: 455,123
Number of employed adults: 333,333
Money available per week: £183,966,482.70
Index score out of 5: 2.28

7. Cardiff 

The Welsh capital is a popular destination for visitors, which is why its retail, leisure, and tourism sectors account for a large portion of its economy. Cardiff is also Wales’s main business and financial services centre and it has a thriving media sector.

5-year start-up survival rate: 42%
Average weekly pay for full-time workers: £529.80
Average monthly cost to rent a 1-bed city centre apartment: £694.12
Population: 447,287
Number of employed adults: 147,955
Money available per week: £78,386,559
Index score out of 5: 2.31

6. Stoke on Trent 

Affectionately known as The Potteries, Stoke-on-Trent has a long history as the home of England’s ceramics industry. Although much of the production has moved out of the city, many pottery firms remain. Tours of the factories for these goods help to boost tourism in the city, as does the canal network.

5-year start-up survival rate: 39.3%
Average weekly pay for full-time workers: £497.10
Average monthly cost to rent a 1-bed city centre apartment: £427.78
Population: 372,775
Number of employed adults: 103,269
Money available per week: £51,335,019.90
Index score out of 5: 2.35

5. Bristol 

Creative media, electronics, and aerospace are the main industries that hold up Bristol’s economy. It’s a popular tourist destination, which is likely helped by its artistic and sporting influence. Plus, the government named it a science city in 2005 because of its contribution to innovation.

5-year start-up survival rate: 44.8%
Average weekly pay for full-time workers: £565.70
Average monthly cost to rent a 1-bed city centre apartment: £828.75
Population: 617,280
Number of employed adults: 197,915
Money available per week: £111,960,515.60
Index score out of 5: 2.38

4. Leicester 

Textiles and shoes were the bread and butter of Leicester’s economy in days gone by. Recent years have seen a resurgence in these areas, as some textile manufacturers have moved back to the city. Much of Leicester’s commerce also lies in the engineering, retail, and food and drink sectors.

5-year start-up survival rate: 40.5%
Average weekly pay for full-time workers: £487.90
Average monthly cost to rent a 1-bed city centre apartment: £568.75
Population: 508,916
Number of employed adults: 128,142
Money available per week: £62,520,481.80
Index score out of 5: 2.42

3. Sunderland 

With roots as a trading port, Sunderland is now a strong centre for the services, automotive, science, and technology sectors. Its success is largely helped by Nissan Motor Manufacturing UK, which is the biggest employer in the region.

5-year start-up survival rate: 41.9%
Average weekly pay for full-time workers: £517.20
Average monthly cost to rent a 1-bed city centre apartment: £550
Population: 335,415
Number of employed adults: 116,562
Money available per week: £60,285,866.40
Index score out of 5: 2.46

2. Nottingham 

Historically, Nottingham was known for its bicycle manufacturing and lace-making. These days, it’s home to many major companies, while other businesses could benefit from the Nottingham Enterprise Zone and Creative Quarter. Digital media, life sciences, low-carbon technologies, finance, retail, and leisure are major contributors to Nottingham’s economy.

5-year start-up survival rate: 43.4%
Average weekly pay for full-time workers: £506.40
Average monthly cost to rent a 1-bed city centre apartment: £579.41
Population: 729,977
Number of employed adults: 112,861
Money available per week: £57,152,810.40
Index score out of 5: 2.66

1. Sheffield 

In 2019, Sheffield is the best UK city where you could start a business. The Steel City is known for its rich, industrial heritage. Although steel production has been in decline since the 1980s, Sheffield still develops advanced manufacturing technologies through its two universities and other research organisations. It’s also a major centre for sport and its public sector is a major employer.

5-year start-up survival rate: 44.9%
Average weekly pay for full-time workers: £542.10
Average monthly cost to rent a 1-bed city centre apartment: £585
Population: 685,368
Number of employed adults: 227,822
Money available per week: £123,502,306.20
Index score out of 5: 2.7

Source: London Loves Business

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Small-business optimism dips over fears of an economic slowdown

Although tax cuts and regulatory rollbacks this year fueled small-business optimism to hit its highest level in decades , the latest CNBC|SurveyMonkey Small Business Survey, released Monday, reveals that small-business confidence is starting to cool.

After hitting a record high in Q3, the Small Business Confidence index declined from 62 to 59 in the fourth quarter, led by small moves lower in components across the board. This new data from CNBC and SurveyMonkey underscores the idea that while sentiment is at or near record highs, challenges still remain for Main Street.

The CNBC/SurveyMonkey Small Business Survey, conducted from Nov. 19–29, polled more than 2,100 small-business owners.

The dip in the CNBC/SurveyMonkey Small Business Survey comes at a time when the markets are punctuated by bouts of volatility and economic concerns loom over trade tensions and the shortage of skilled workers. The data supports other small declines in metrics, from the National Federation of Independent Business’s monthly read on small-business sentiment in September and October, as well as trends around hiring and labor from Bank of America and Wells Fargo.

“Unemployment is down, small businesses are growing, but there are still some very troubling trends,” said Todd McCracken, president of the National Small Business Association, in an email to CNBC. “The rate of small-business start-ups and small-business hiring continues to lag, one-quarter of small firms still cannot get the financing they need, and few can afford a good health insurance plan.”

He added that “economic security is a huge drive in how small businesses are faring — they’re less likely to invest, grow, innovate and so on if they fear economic problems on the horizon.”

McCracken pointed to polling from the group’s membership, which also saw a decline in economic outlook midyear in 2018.

For the first time in six quarters, sentiment around business conditions also has taken a slight dip, from 58 percent in Q3 to 55 percent in Q4, although that read is still up 11 percentage points year-over-year, according to the survey.

Positive outlook on tax policy waning
Just 34 percent of small-business owners now say that tax-policy changes will have a positive effect for them in the next 12 months, down from a high of 46 percent kicking off the year, indicating some of the positive sentiment surrounding the law may have waned.

Weighing in on the latest results, Laura Wronski, senior research scientist at SurveyMonkey, said, “I would describe it as a slip, not a fall. It’s not a huge drop, and still up year-over-year.”

She added: “Hiring expectations are about the same, but some of the improvements we saw with changes to tax and trade policy were not sustained throughout the course of the year.”

More small-business owners are questioning the positives the administration’s trade policies will have on their bottom lines. Sixteen percent of small-business owners say they expect changes in trade policy will have a positive effect on their businesses in the next 12 months, a new low for the survey. What’s more, 1 in 5 business owners surveyed do business with China, and they were nearly twice as likely as others to expect a negative impact on their business.

 

Skilled-labor shortage still a top concern
On the job market, 18 percent of business owners said they had roles open for at least three months, an increase of 2 percent from Q3 of this year. To help bridge that gap, 56 percent said they were offering higher wages, 31 percent said they were offering to pay for additional training and 27 percent said they were offering additional benefits to workers. Others said they were offering to help pay for student loans and even relaxing policies around things like drug testing and criminal records.

“I think it’s very interesting that even small-business owners are having to juice their offers a bit because it is a tight hiring market,” Wronksi said. “It’s great for workers but tough on small-business owners.”

Finding skilled labor has also come up as a top issue in the National Federation of Independent Business’ monthly survey, outpacing other major issues, like taxes and government red tape and regulations for more than half of the year in 2018, a trend that could continue into the next year.

Source: Yahoo Finance UK

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UK SME business confidence down almost 20 per cent on 2017

Research commissioned by Dun & Bradstreet revealed UK small and medium-sized enterprise (SME) confidence in future financial success is down 19% compared to last year. The study found that almost a third (32%) of respondents have considered leaving the UK to increase their chances of success.

As well as ongoing uncertainty over Brexit impacting growth, the research also shows that late payments have risen in the past year. Cash flow remains a critical issue, with the average amount owed to SMEs at any one time over the past 12 months now at £80,141 – an increase of nearly 25% from 2017. The consequences of these late payments include cash flow difficulties (31%), delayed payments to suppliers (28%) and reduced profit performance (22%). Nearly two thirds of respondents (63%) feel that there should be financial penalties in place to tackle late payments and 62% believe there should be legislation in place to mitigate the problem.

Other factors cited as impacting the future financial success of SMEs include recruitment of the right talent and resources (35%), adoption of new technology (26%) and ability to deal with increased regulation such as the GDPR (20%). Operating in an uncertain business environment has had a clear impact on SME business plans, with 63% of respondents saying they had a clear business strategy in place, down from 70% in 2017.

“Given the changing political, regulatory and economic landscape, it’s unsurprising that small business confidence is down,” said Tim Vine, Head of European Trade Credit at Dun & Bradstreet.  “There’s no doubt the months ahead will continue to be challenging as we move towards the Brexit deadline. Small business leaders are having to contend with scenario planning on top of dealing with day to day priorities such as cash flow management, late payments and securing finance for future growth.

“Despite the range of factors at play, positively, over half of the businesses we spoke to were confident that their business can achieve financial growth over the next five years. The resilience of SMEs will stand them in very good stead through these changing and complex times.”

Source: London Loves Business

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Chancellor to cut business rates by 33% for half a million SMEs

Philip Hammond will use Monday’s Budget to cut business rates by a third for half a million SMEs.

The Chancellor is expected to say in the Budget that he has listened to pleas from the nation’s embattled high street by unveiling £900m in immediate business rates relief for 496,000 small retailers.

Retailers have long campaigned for reform of business rates, which are calculated based on the annual market rent value of a commercial property, and disproportionately affect bricks-and-mortar high street retailers as opposed to digital retailers located in out-of-town industrial parks.

A long-delayed revaluation of properties last year pushed up business rates across the country. Accountants EY calculate that business rates have risen by 15 per cent in the last seven years.

This has added to rising costs for SMEs already battered by what Federation of Small Business chairman Mike Cherry has called “a perfect storm” alongside rises in the National Living Wage and the imposition of the Apprenticeship Levy.

However, the Treasury has resisted wholesale change of the system, which raises around £30bn a year for the Exchequer. It has instead focused on providing business rates relief to smaller businesses, which it estimates has saved companies £10bn since 2016.

The £900m relief will apply to small retailers on premises with a rateable value of £51,000 or below. The fund will only apply to England, as the devolved authorities have responsibility for setting their own business rates. It remains unclear how long the relief will apply, but it is understood that 90 per cent of small English retailers will be eligible.

The FSB called the measures an “early Budget treat” for its members, though it said business rates relief should extend beyond retail to the hospitality and service sectors.

FSB national chairman Mike Cherry said: “In the lead up to the Budget, we’ve been urging the government to provide targeted support to struggling small firms on our high streets. This announcement shows the Chancellor has listened and this relief is a welcome step in getting the urgent help that all small businesses need. This fund will help keep high streets at the heart of our communities.

“Small firms are the lifeblood of our high street. They are under a huge amount of pressure, with current business rates bills adding to that ever-increasing strain. For far too long they have come up against an outdated and unfair rates system and it’s clear that change is needed.”

Source: SME Web

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One third of business owners unaware of alternative finance options

More than half of SMEs expect to increase income or turnover in 2018-19, according to British Business Bank

One in three British SMEs want to grow their business but are unsure how, according to a new poll by British Business Bank. Often, smaller businesses want to grow but do not consider, or know of, the alternative finance options available to them.

The new polling reveals, for example, that only 5 per cent of businesses have considered angel investment whilst only 7 per cent have considered crowdfunding.

Older business owners are significantly less likely to be aware of or to have used alternative growth finance options than their younger counterparts. One in five (19 per cent) millennials (under-35s), for example, have considered crowdfunding, compared with fewer than one in 20 (3 per cent) over-35s.

The good news is that business confidence is high among those surveyed, with more than half (51 per cent) of business owners saying they expect to increase their income/turnover in the next financial year, with fewer than one in 10 (8 per cent) expecting their income/turnover to decrease.

Piers Linney, non-executive director at British Business Bank, believes that businesses need to look beyond the high street to finance their growth.

Linney said: “Getting investment for your business does not have to be as scary as going into the Dragons’ Den. There are plenty of ways to get finance and access support – the challenge is knowing where to look, making the time to find out about them and getting investor ready.”

Keith Morgan, CEO of British Business Bank, added: “The financial landscape can be complex and confusing for smaller businesses trying to finance their growth ambitions. Our polling shows that too often smaller businesses want to grow but don’t know where to start meaning we miss out on their growth.”

The British Business Ban, the UK government-owned economic development bank, recently launched a Finance Hub – a new website dedicated to providing independent information on finance options for scale-up, high growth and potential high growth businesses.

Source: SME Web

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10% of SMEs fear collapse within three months

The number of SMEs predicting they could close has doubled from 5 per cent to 10 per cent in just three months.

Over the past two years, the proportion of small business owners fearing collapse has been consistent at around 4-5 per cent for seven quarters. That figure has doubled for Q3 2018, according to research by Hitachi Capital Business Finance.

Retail is the sector most fearful of collapse in terms of the proportion of small businesses that think they will struggle to survive in the next three months. Seventeen per cent were afraid for the future in Q3 compared with 12 per cent in Q2. This follows bleak industry predictions last weekend that 10,000 retail stores will shut this year, half of which will be independents.

Eight of the industry sectors tracked by Hitachi Capital saw a quarterly rise in the proportion of businesses fearing for their livelihoods.

And small businesses predicting growth for the next three months has hit its lowest level for more than one year.

Hitachi Capital said protracted uncertainty and political infighting around Brexit is creating an economic ripple that could cause lasting damage to the small business sector – “the engine room of the British economy, ventures which need certainty, support and access to funding to grow,” the small business financier said.

SMEs in the North East believe themselves to be most at risk, with a startling 20 per cent fearing for their survival in Q3 compared with just 3 per cent in Q2.

Wales is also spooked, with 14 per cent of SMEs afraid of going under compared with 7 per cent in the previous quarter.

Gavin Wraith-Carter, managing director at Hitachi Capital Business Finance, said: “For the past year, our research has shown that the small business community has seen political and economic change as an opportunity. Many have looked to expand into markets beyond the UK and create jobs in the communities where they do business. Our latest findings, though, suggest the protracted nature of Brexit negotiations may now be taking its toll.”

Hitachi Capital Business Barometer surveys 1,201 small businesses across the UK each quarter.

Source: SME Web

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SME Owners Need a Year’s Financial Buffer to Feel Safe: Despite Existing Debts

Nearly a third (28%) of small business owners don’t feel financially confident unless they have a buffer big enough to cover running costs for a year, according to new research* from merchant services provider Paymentsense (https://www.paymentsense.co.uk). The study found that despite this, more than four in 10 small business owners (41%) admit to having no such buffer in place, meaning as many as 2.3m UK small businesses may have no financial backup plan.

This ‘financial confidence gap’ between what business owners need to feel secure, and what they actually have, comes after the British Business Bank published a report revealing that small business confidence and demand for finance are declining.

The government-owned development agency found the proportion of businesses confident of loan approval fell recently from 58% to 43%. The report also highlighted that lending was flat to small businesses in 2017.** These findings arrive at a time of uncertainty over European trade negotiation outcomes, and reports of an expected medium-term interest rate increase.

For those businesses that do have something in reserve, Paymentsense found that the most popular backup is cash savings – held by nearly six in 10 (59%) of prepared businesses. A third (34%) said their buffer included property and nearly a quarter listed an overdraft (23%). Plant and machinery featured for a fifth (20%), with 17% using business credit cards.

Michael Foote, who founded UK price comparison site Quote Goat (https://www.quotegoat.com) in 2015, said: “As a small business owner, feeling financially secure has always been one of my top priorities. For me, this means ensuring I have a cash buffer that covers company costs for at least half a year, to safeguard against potential cash flow problems.

“Initially it was difficult to build and meant taking the bare minimum out of the business whilst it grew. However, it’s let me focus my efforts elsewhere in the business, enabling Quote Goat to successfully compete against larger competitors in the industry.”

The Paymentsense study also found that almost two thirds (61%) of SME owners are in debt, with monthly repayments averaging almost £3,600 (£3,589). What’s more, over half (55%) admit to deliberately paying suppliers and partners late to ease cash flow problems. More than a fifth (21%) said they do this at least once a month.

Guy Moreve, head of marketing at Paymentsense, comments: “We know that feeling financially confident is critical for small business owners. Aside from helping you sleep at night, it enables accurate long-term fiscal planning for growth rather than just survival. Having a buffer is just part of the picture. Cash flow monitoring and proactive credit control are also essential. However, we’d caution against routinely delaying invoices to partners and suppliers, as it risks damaging important business relationships.

Working with over 60,000 small businesses across the UK, we understand their financial anxieties. Despite recent drops in the rate of inflation, a future increase may lead consumers to become more cautious with their purchases, and would make existing business loans more expensive to manage for SMEs. With this in mind, having a buffer makes great business sense. Actively setting aside a little each month will help balance slower trading periods, and unforeseen expenses. Even something as simple as a weekly cash flow report can provide insights that will enable you avoid future problems.”

The most popular financial buffer

Cash Savings 59%
Property 34%
Overdraft 23%
Plant / machinery / equipment 20%
Business Credit Cards 17%
Asset-based lending / factoring/ invoice finance 16%
Bank Loans 14%
Stocks and investments 13%
Help from family and friends 8%
Government funding scheme 8%

Source: Payments Journal