Published on Thursday, February 25, 2010
The introduction of the Faster Payments Service (FPS) over 18 months ago promised flexibility, speed and support for 24/5 operations. But while faster payments can now be sent and received, the majority of the 13 member banks are yet to deliver the full range of services. As a result, too many of the UK's businesses are still not able to achieve the convenience and efficiency of real time payments, explains Georgia Leybourne, Sales and Marketing Director, Albany Software.
The Faster Payments Service (FPS) is the first new payments service to be introduced in the UK for more than 20 years. And, according to the latest figures, FPS has processed more than 290 million payments totalling over £107bn.
The vision of FPS was both clear and compelling: to provide organisations of every size, and consumers, with low cost access to a mechanism that enables one day payments, whether via standing order, Direct Corporate Access (DCA) or Internet. However, while the initial momentum to deliver FPS was strong, with excellent commitment from all of the 13 member banks, the events of September 2008 and the collapse of Lehman Bros has had a significant impact on the roll out of the full Faster Payment Service.
With budgets understandably capped over the past 12 months, many of the member banks have struggled to address the technical issues surrounding the delivery of FPS. And, as a result, the range of services on offer differs from member bank to member bank, creating some market confusion.
Yet at the same time there is clearly strong pent up demand from the corporate world for a payment system that reflects the challenges presented by a 24/5, highly interconnected marketplace.
So how far has the Faster Payments Service evolved over the past 20 months? The good news is that all 13 member banks can receive payments, and some other banks and building societies are enabling customers to receive and/or send faster payments. The bad news is that only two out of 13 banks are anywhere near providing the original vision as hoped for back in late 2005 / early 2006.
Some, although not all, of the banks offer the ability to receive funds by both corporates and public sector organisations such as Her Majesty's Revenue and Customs (HMRC). Consumer Internet bank payments for bills and credit card deductions are also being received instantaneously rather than up to three business days later, from those banks able to send Faster Payments.
Standing order receipts are received up to three business days earlier, again from those banks that can provide the service, and some Internet bank products can make Single Payments in the same day and are now being used instead of one-off CHAPS payments, providing a saving of at least £27 per transaction, although Internet payment value limits vary dramatically between banks, from £10 to £10,000.
Despite the interruption to the planned roll out of Faster Payments, the banks are incrementally improving the range of services on offer. Since August 2009, one of the main high street banks has been able to send batches of payments which are effectively via a Bacs Premium Service - a Bacs same-day service. With this facility, organisations can leverage FPS for a range of payment requirements, from weekly pay and expenses to temporary staff, prompt supplier payments, immediate customer refunds, contras for Direct Debit errors or as a contingency.
Indeed, with this facility, FPS evolves beyond its role as a CHAPS substitute or stand in when the normal Bacs three day cycle has been missed, and can become a cheque substitute against known cleared funds on an organisation's bank account(s) on a particular day, enabling the business to avoid late payment penalties.
Similarly, this high street bank is also able to send same day Bacs-type payments for corporates, including SMEs, via its sponsored Bacs Approved payroll / commercial / payment bureaux.
But are banks really moving fast enough? The problems faced by these banks in achieving the full range of Faster Payment services is increasingly well documented, with the BBC Money Watch programmes highlighting the problems seen by Abbey, Nationwide and Northern Rock which have delayed their provision of a Faster Payment service at all.
Certainly few of the banks have made any attempt to publicise the benefits of Faster Payments; and are planning to wait until a full service is in place. Despite this, corporate demand is growing as organisations increasingly understand the value of a rapid, low cost payment mechanism to combat the challenges created by tough economic conditions.
Indeed, it appears that the ability to deliver the added value of the Faster Payment Service, is rapidly gaining significant market appeal, with some Albany Software customers actually opting to move banks or open an additional account in order to take advantage of the cost and flexibility benefits on offer by those financial institutions delivering a full service.
And while the rest of the banking world plays catch up, there is an opportunity for those with full services in place to consider further enhancements to the core Faster Payments Service. Imminent improvements under discussion include lifting the £10,000 limit per transaction, Euro payments and extending DCA from its current business day 6am to 2pm service to a full 24/5 service.
There is little doubt that had the financial crisis not intervened, the majority of the member banks would have been able to progress the delivery of FPS far faster. The fact that all now offer the ability to receive faster payments is an excellent building block and provides corporate customers with some value. However, it is becoming apparent that as banking fortunes improve, organisations of every size are looking for some clearer commitments from banks on the timing of full FPS.
In this challenging, joined up marketplace, any added financial flexibility is a bonus. Right now, it is those banks that can deliver FPS that are gaining both customer confidence and numbers.
Published on Banking Technology »
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