VocaLink, the international payment systems provider, with contributions from FSB and Toynbee Hall have launched a report entitled, “Inclusive by Design”, which reviews current payments systems and champions the adoption of a new, more flexible payment system, ‘Request to Pay’.
‘Request to Pay’ is a payments system designed to warn businesses and allow them to prepare for a payment to be taken at a date of their choosing during an agreed period of time. This gives the business greater control of their finances and means they can pay bills when their cash flow allows.
Small businesses and sole traders need special consideration when paying bills as they often suffer from ‘lumpy’ incomes, with cash flow fluctuating across the year. In utilising this payment system, both paying out and when billing others, small businesses can reduce financial uncertainty and give themselves greater oversight and flexibility.
The report explains that multiple stakeholders will need to agree to the adoption but the principles of the system are expected to be supported by the Payments Strategy Forum in the near future.
The report also studies existing and future payment options, with special focus on the Faster Payments Service and potential of the Second Payment Services Directive (PSD2), which is set to be implemented in January 2018.
The existing Faster Payments Service has meant almost instantaneous payments for small businesses allowing greater certainty over cash flow. PSD2 provides the opportunity for small businesses to manage their finances by giving a clearer picture of incomings and outgoing payments and greater information about when and what transactions are expected. This will provide greater transparency for a business and potentially help to streamline payments.
Chris Dunne, Market Development Director at VocaLink, added:
“The increase in small businesses and part-time employment has led to a decline in people receiving regular salaries or incomes, and there is a pressing case for the payments systems to adapt to address these changes.
"The ‘Request to Pay’ system could revolutionise payments for SMEs, while reducing the levels of financial exclusion. It works hand in hand with existing payment methods to help small businesses manage their cash flow and ensures that they don’t suffer missed payments."