23 October 2017
Barry Kislingbury

Barry Kislingbuy

Barry Kislingbury - ACI Worldwide

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Payments strategies 2015-2020-2030

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From Tax returns to SEPA - Governments should lead the way

21 February 2011  |  5869 views  |  8

It’s funny where your inspiration comes from.  I had to do my annual tax return recently, which amazingly resulted in a small refund.  What surprised me though (or maybe it shouldn’t) is that Her Majesty’s Revenue and Customs (HMRC) then went to all the trouble of sending me a cheque in the post.  Why does this amaze me?  Well, it was the UK Government that forced the UK banks to implement a whole new system - UK Faster Payments (UKFP) - reportedly to reduce the banking charges it pays for making urgent payments.  Yet its own departments who are responsible for collecting taxes and the millions of transactions that entails, still relies on the process of printing a cheque, posting it, making the recipient fill in a pay-in slip, making me go to my banks, for the bank to process and store the cheque, and for the value to take 4 days to clear after I get there!  I am sure someone out there knows the cost of all this, but given the government is trying to save money, the banks have already invested in UKFP, and the government has my bank account details, surely they could save time and money for the UK economy by using this nice shiny new system?  

Whilst this is a very UK orientated story, there are certain parallels with Europe.  SEPA is over 10 years old now, yet adoption is extremely low.  There is a good argument for the regulator setting an end date, but, if the EU and the EU governments actually used these new payment instruments which they mandated to make Europe more competitive, then the volumes would make the business case viable and SEPA would be a success.



TagsPaymentsRetail banking

Comments: (9)

Neil Burton
Neil Burton - Verifone - London | 21 February, 2011, 20:21

Good point.

The collections process might also benefit. Those of us who got the other kind of letter from HMRC are instructed that we do not need to wait for the letter chasing payment. 'If you would prefer to pay now...if you want to pay by cheque, we will send you a payslip that you should return with your cheque'.....

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Charl Engela
Charl Engela - CGI - London | 22 February, 2011, 07:20

Sorry, but that's just being disingenuous. Since 2001 HMRC or its predecessor has been paying refunds directly into my account, firstly via Bacs and since last year via FPS, whether or not I've been filing a return, and even when I was a non-UK resident for a while. They quite clearly ask for one's banking details in the event they need to make a refund. If you choose not to supply them, HMRC has no choice but to send you a cheque.

It's you, not they, who are holding back the march of payments progress, as it were.

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Neil Burton
Neil Burton - Verifone - London | 22 February, 2011, 07:57

Well Charl, it was a little tongue-in-cheek. But your comment about it being me that's holding back the progress needs a forthright response. I cannot recall having been asked for my details recently, nor having had the opportunity to provide them. Had I been asked, I would certainly have supplied them. Probably I already did. As a payments industry guy, I know you are right, and I absolutely support the automation.

The extracts I quoted are direct from the HMRC P800 form; the only instrument it mentions is a cheque.

To Barry's point, FP (& immediate payments & SEPA) aren't being strongly promoted to consumers; if they were, we might get more adoption. Just a couple of days ago, I helped someone who uses CHAPS frequently for urgent retail transfers; he had never heard of Faster Payments.

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Charl Engela
Charl Engela - CGI - London | 22 February, 2011, 08:08

Neil, I didn't mean you, I meant Barry (was holding back the march etc). I've worked for public-service payments generators in the past, and yes, they kind of define the term non-joined-up, so I've no doubt that there are some arcane departments in the bowels of HMRC who've never heard of electronic payments and send liveried messengers out delivering gold sovereigns instead.

But for PAYE taxpayers and contractors who deal with their own tax and their own refunds - surely the vast majority of us - to claim that HMRC can't do automated payments is just plain wrong.

The fact that the industry hasn't properly promoted FPS as an alternative to slow expensive forms of electronic payment is a whole new can of worms and you make a good point.


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Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 22 February, 2011, 12:19

Last year, I received my IT refund from HMRC by electronic transfer to my bank account. It reached me by BACS and not FPS, for which I've to blame my bank for not having enabled FPS-reachability on the said sort code. At the time, I'd blogged about how we sometimes rush to blame the government for errors of omission and commission caused by others. 

At the same time, I think HMRC still uses only snail-mail for all communications involving Personally Identifiable Information (PII). Does appear a bit uncool under the circumstances.

Since the subject of promoting FPS has cropped up, I've contributed a few comments to another Finextra post in this subject and, coming to think of it, I'm not sure if the man on the street really needs any more promotion or education about backbone payment methods.

IMO, the best service that banks can provide to their customers is to make the whole backbone transparent: Simply ask the payer to provide the amount, and the beneficiary bank details, then use an automated engine to work out the various options available for putting through the given payment at the given time based on reachability, hours of operations, and any other considerations viz. 3 days at GBP 0 (BACS) OR 2 hours at GBP 5 (FPS) OR Instantly at GBP 35 (CHAPS). The customer should be asked to simply choose the option that best meets her timescale / cost considerations. The present method of asking the customer to select a payment method, then add payee valid only for that payment method, select another payment method, add the same payee again, etc. etc. is fraught with too much friction, and I wonder if any amount of promotion / education will bolster adoption of FPS (or ePayments in general) significantly. 

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Nick Collin
Nick Collin - Collin Consulting Ltd - London | 22 February, 2011, 18:26

See my recent comment on the subject - in response to Andy Hunter's blog.  HMRC definitely can't receive payments by FPS - or at least they couldn't the last time I tried to pay my VAT.

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Georgia Leybourne
Georgia Leybourne - Albany Software - Alton | 23 February, 2011, 14:07

I couldn't agree with you more Barry although to be fair to the HMRC this is probably more a data issue than a reluctance to use the 'nice shiny new system'.

As for SEPA .... well, that's a whole different story. Make it accessible to corporates and perhaps things will start moving. 

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Neil Burton
Neil Burton - Verifone - London | 25 February, 2011, 10:55

Just to round this off, HMRC have now sent me the paying in slip - which has been completed by hand - and requested that I send them a cheque (at my cost). No other payment method is offered.

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Barry Kislingbury
Barry Kislingbury - ACI Worldwide - London | 25 February, 2011, 11:51

I was not expecting so many responses and have certainly enjoyed the interesting debate, so thank you all.  I started this blog simply because I was frustrated to receive a cheque in the post from a government agency.  It is the governments who are forcing change and it would be good if they lead by example.  Like many others my tax return is done by my accountant so next year I will make sure that should the same happy situation arise they ask for an electronic payment, and indeed why we did not this year.  Maybe the point here is that an electronic payment should be the default for a 21st century government and that government should be using the modern payments instruments they have mandated.  I don’t think my single transaction will make a difference, nor will relying on the public or corporates who are often poorly informed by the institutes that serve them and who often have different priorities to the regulators and clients.  To me it’s fairly obvious that the market is not that interested in driving change, which is a shame when the whole world has been watching Europe and the progress of SEPA, both from a technical perspective (ISO 20022) but more importantly from the efficiencies our businesses and economy could achieve should SEPA work as originally planned. 

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Senior Principle Solutions Consultant at ACI Worldwide for Universal Payments.

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