In October 2018, we held our first Dispelling The Myths around UK Payments event. Here, experts in UK banking and finance spoke about hot topics such as open banking and Request to Pay, revealing why they’ll be game-changing for UK payments. Here’s a round-up of how these innovations may impact your business.
Bringing payments into the 21st Century
New tech is changing how businesses handle and store money. The payments landscape is shifting so rapidly, and with new laws like PSD2 coming into play, it’s all a bit of a blur. Quite understandably you may have concerns that you’ll have to pay massive amounts of money to update your ERP, TMS and payroll systems if you want to get on board with this revolutionary tech.
We’re here to dispel this myth. We’ve had a lot of practice building ultra-modern tech on decades-old payment rails, making it easier than ever for corporates to connect with banks. Our credentials are impressive. We’re the first Bacs and Faster Payments approved software supplier in the cloud. We also have the first SWIFT-certified app to leverage the cloud. We know what we’re talking about.
Our Product Manager, Danny Doyle, was invited to end the event with a speech covering four key issues; open banking, Request to Pay, Confirmation of Payee and the New Payments Architecture (NPA)….
What does open banking mean?
The most talked about issue in UK payments right now is open banking. This allows third parties to build apps and services around financial institutions such as banks. There are two ways this works.
Firms can become AISPs (Account Information Service Providers) and access your banking info. An example is AccessPay, who can display your multiple bank balances in one place to make financial planning easier. They can also become PISPs and make payments on your company’s behalf.
Players in this market can provide these services through open application programming interfaces (APIs). It’s up to the banks to develop these interfaces for third parties. There is no need to update your systems. This will all make UK corporate banking more competitive, so you’ll enjoy access to ever-more sophisticated products.
What is Request to Pay?
Another topic of discussion was Request to Pay. This hands you control over how and when you pay bills (e.g. to suppliers). Created by Pay.UK, the UK’s leading retail payments authority, it allows you to pay bills in full, in part, ask for a delay or deny requests when you’ve been billed unfairly. At our event, we found out that it will generate around £1.3 billion per year for the UK’s economy. As a result it has huge potential.
You’d expect that something like this would be a logistical nightmare for your firm. No. Request to Pay will be laid on top of current systems, running alongside Direct Debit, and it’s a secure messaging service. You won’t have to put much effort into rolling out Request to Pay in your office at all. It’s more of a money spinner really, as it could save you on huge costs like reconciliation fees.
How does Confirmation of Payee work?
Something else that could take UK corporates by storm is Confirmation of Payee. The goal of this is to help financial institutions deal with mistakes in payments. Simply put it’ll check the accuracy of your customer’s name, along with sort code and account number, during payments. Working on a bank-to-bank basis, through open APIs, this will be a huge anti-fraud measure in the years to come.
A piece on Global Banking and Finance Review shows fraud costs the UK economy £110 billion each year. This robs businesses of 6.8% of their total spending budget, so it’s a serious issue. Confirmation of Payee not only checks names to reduce fraud but adds an extra layer of security (like SAC under PSD2). But this introduces friction, slowing down transactions when presented with mismatched names. So it’s not all good news. Also, it’s geared to consumers, as the focus is on online banking, not BACs (which is the most popular scheme for British business payments).
Most large firms prefer Bacs, as its ideal for bulk payments. Over 100,000 direct or indirect users send payments via Bacstel-IP. That’s a large slice of the business payments market that’ll go underserved. It is possible to extend this service to corporates. Look at Rabobank’s SurePay Confirmation of Payee solution which was created with a business-first approach. Confirmation of Payee is something you need to be aware of, and you’ll probably be able to take advantage of it eventually, but not yet really.
NPA: New blueprint for payments
We can’t chat about all this without going over the thing that underpins it all; the NPA. This is a radical revamp of a payment infrastructure which has stood untouched for 50 years. This may make you think that traditional payment tools like Bacs, Direct Debit and Direct Credit are disappearing. No. The tech behind them will change but never fear, they’ll still be there.
The NPA could end up being one of the best things for businesses since sliced bread. It’ll allow your finance team to send much richer data with payment instructions. Say you’re paying a supplier. You could attach an original copy of the invoice with the payment instruction for example. With tech like this, reconciliation can be completed almost instantly, saving you so much in time and admin costs.