Faster Payments takes off for small business

Latest figures from the Payments Council show a dramatic rise in the use of Faster Payments, with volumes of spontaneous customer-initiated payments (knows as ‘Single Immediate Payments’) rocketing by 24% in the year to July 2014.  In comparison, cheque volumes fell by 11% in the same period and Bacs Direct Credit volumes were flat.

Some of this rise is tied to the dramatic rise in the use of mobile banking; according to the BBA we logged on to our banks seven billion times last year, with this increasingly being done on mobile devices.  As advertised by NatWest, the most popular bank branch may well have become the train or bus into work.

The value of those Single Immediate Payments rose 26% and the average value of each payment edged up to just over £850. 

So who is making these payments?  This isn’t just people repaying friends for their share of last night’s bar bill, these are reasonably large amounts; each single payment can be as high as the scheme limit of £100,000.

As consumers we are increasingly logging on to make ‘just in time’ payments on credit card bills and for sending money to relatives and tradesmen, and we are choosing to do this at all times of the day and night.  Data from the Faster Payments Scheme shows that just over half of all Single Immediate Payments are now made outside of the usual nine to five, Monday to Friday banking hours.  The ability to make payments 24x7, from our bed and our bathroom, is changing the way we make payments as consumers.

It is also changing the way that businesses pay.  Thus far we only have anecdotal evidence, but we are increasingly aware of small businesses paying salaries to their employees using Faster Payments.  This is typically the case for paying wages to casual staff; on a Friday you can pay Fred for the 27 hours he worked that week after he has actually done the work, and he will see the money in his account the same day.  This works well for both parties although for regular monthly salaries it is usually cheaper for an employer to use Bacs Direct Credit, and it makes no difference to the employee so long as they receive their salary on the expected date.

One other emerging use is in the SME supply chain.  The need to hold stock is greatly reduced if you can order ‘just in time’ and pay using Faster Payments to release the goods from the supplier.  The small business enjoys the benefit of having less capital tied up in stock, and the supplier has no bad debt risk.  It doesn’t work for everybody, but rather like the hourly wages example it shows how FPS can increasingly provide real value to small business.