Two of the driving forces behind the Government modernising its payment platforms are its ‘digital by default’ agenda – making it simpler, clearer and faster for people to access Government services – and its desire to widen access to banking services to ensure they serve all sections of society writes Ross Macmillan
The government’s transactional services cover a huge range of tasks, from paying car tax and submitting self-assessments to applying for a passport or a fishing rod licence.
Analysis shows that more complex transactions, and particularly those that include a financial transfer, have greater potential for savings by being digitalised.
Contrast two government departments – the Department for Transport (DFT) and the Department for Work and Pensions (DWP). According to the Government’s Transactions Explorer, while each processes between 100-150m transactions per annum for high-volume services, the DFT’s costs for this are £283m, compared to the DWP’s costs at £3.8 billion.
This can be partly attributed to the digital take-up of services from the two departments. The DFT’s services – which includes online vehicle tax renewals – nears 60 per cent, while the DWP’s take-up is less than 20 per cent; hence the latter department’s drive to make the new Universal Credit digital by default.
The Government’s intention to modernise its payment and transactional platforms is being seen right across central and local government – seen most recently by the Department for Transport allowing motorists to set up direct debits online for vehicle tax renewals.
However, balancing efficiency and accessibility will be key to re-shaping services for the digital age, for example, retaining postal or counter services through high street networks like the Post Office and PayPoint which allow people across the UK to pay for household bills and government services such as council tax, court fines and vehicle tax renewals.
Widening access to financial servicesThe other area driving innovation across central and local government is around widening access to financial services.The growing use of prepaid cards by local authorities is further evidence that digitising services in replace of manual, paper-based processes has benefits for all parties.
Surrey County Council, for example, is saving approximately £100,000 in annual administration costs by using prepaid cards to deliver emergency grants to vulnerable groups.
Users benefit from funds being made instantly available without the need for a bank account, while the authority saves money from reducing cash handling and recouping unspent funds from the cards.
Having been talking about prepaid cards for a number of years, Central Government now also looks to be nearing a large-scale roll-out as it looks to pilot the solution for legacy benefits through local authorities.
Iain Duncan Smith has made no secret of his interest in the solution for Universal Credit due to the ability to help those "on the margins break the cycle of poverty" via spend controls on alcohol, gambling etc for those with addictions.
Alongside these measures, the Government believes access to a transactional bank account is key to enabling people to manage their money effectively, securely and confidently on a day-to-day basis.
It has thus recognised the Parliamentary Commission on Banking Standard’s recommendation that the major banks come to a voluntary agreement on minimum standards for basic bank accounts, which is forcing innovation and increasing accessibility from the sector.
It has already made moves to ensure that customers have access to the right products, including legislation to allow banks to introduce cheque imaging; paving the way for the option to pay in cheques remotely by smartphone or other mobile devices to increase choice and convenience for customers.
And a new Payment Systems Regulator (PSR) will have strong powers to drive innovation in the payments sector from April next year.
This will build on the industry innovation that we are currently seeing in mobile payments, with apps such as Paym and Pingit revolutionising person to person payments.
The expansion of online government services does represent an enthusing milestone for the development of the UK’s digital economy and brings to the fore the opportunity to improve services and increase convenience for citizens.
Ross Macmillan is a market intelligence consultant at allpay specialising in financial inclusion and emerging payments.