Utility payment network provider Payzone has opened a new front in its battle with rival PayPoint after winning a contract to supply Spar stores across the UK.

Payzone has agreed supplier terms with Spar's six regional distribution companies and its central office for mobile top-ups, utility and bill payments.

The company already provides services to about 500 independent Spar retailers, but this deal will give the company access to all 2,700 Spar retailers nationwide. PayPoint currently has terminals in 1,500 Spars.

Paul Charmatz, Payzone deputy managing director, said the company hoped to have cornered at least half of Spar's total electronic payment business by December.

Spar retailers process about 350,000 transactions every week - more than 18 million a year.

Charmatz said he was targeting some of Spar's biggest retailers, such as Tates and CJ Lang, and that he was sure retailers would switch.

"We are confident retailers will see a massive improvement in rates and margins compared with PayPoint," claimed Charmatz. "Retailers will make more money with us."

But PayPoint chief executive Dominic Taylor said he was not concerned by the competition - and claimed his company remained Spar's preferred provider.

"Price is not the only factor for retailers," said Taylor. "We have a broader service set and are convinced - and, more significantly, so are the retailers - that this is what is important.

"We are signing up agents every day. Last year we signed up 800 Payzone agents and I don't know of too many that went the other way. We have a strong relationship with Spar and are sure this will continue."

Spar said the Payzone deal, which will come into effect from 20 July, was strategically important because electronic payments were becoming an increasingly significant part of its business.

"This agreement will enable us to better focus on the development and delivery of electronic service, which is a fundamental part of Spar's future," said Spar licensed trading director Chris Lewis.