Faster payments: Cheque migration plans – interest in using Faster Payments to replace cheques ahead of 2018 deadlineThe latest figures from
the Payments Council show that Faster Payments Service (FPS) usage
has rocketed while cheque use has plummeted in popularity by 10% in
2010 compared to the same period in 2009. However, these statistics
should come as no surprise.

With cheque clearing being phased
out by 2018, UK corporates are starting to think about alternative
solutions for replacing cheque payments. While many corporates will
assume Bacs, which provides direct debits and Bacs direct credit is
the answer, FPS is coming to the fore – not only as a viable
alternative to the cheque but also due to its automated, real-time

Recent research conducted at
Experian Payments’ annual Payment Strategies event in June 2010
found that those companies which continue to rely heavily on the
cheque are showing a growing interest in the UK’s (FPS).

In our survey, half of the utility
companies questioned and 40% of insurers questioned still use
cheques to make around half of their payments. In their cheque
migration plans, 83% of utilities and half of insurers are planning
to make use of FPS.

As companies look at how to replace
the cheque within their business, many also see the opportunity to
make their payment processes run more efficiently. The FPS supports
these dual objectives by offering an automated, real-time payments
infrastructure that is growing in popularity.


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Opening up to

Consumers have enjoyed the same-day payments service for over
two years now, but the launch of Direct Corporate Access (DCA) in
September 2009 opened up access to the FPS infrastructure to
corporates too. As well as leading to greater payments efficiency,
the FPS infrastructure can also reduce risk by providing a
contingency payments mechanism so that if Bacs processes are
delayed for any reason, payments can still arrive on their due
date, reducing the risk of missing deadlines.

FPS is also available at a
considerably lower cost than CHAPS, a same day service for
real-time gross settlement of sterling transactions. With the
single transaction limit recently rising from £10,000 ($15,416) to
£100,000, FPS can now replace an even greater proportion of
organisations’ CHAPS payments. The limit increase could have
significant benefits for corporates that are looking to improve
their payments efficiency. For instance, businesses providing loan
facilities will now be able to use DCA for FPS, which has the
higher £100,000 limit for funding borrowers’ accounts.

However, simply increasing the
value limit is unlikely to persuade corporates to flock to the
channel. There is still work to be done to educate businesses and
banks around the benefits of using the FPS. They also need clarity
about whether payments will be handled through the FPS before they
transact and when it will arrive so they can manage their

Businesses also need to amend their
internal payment processes to enable the FPS and this will take
time. In particular, the larger corporates and public sector
organisations, which are in a position to deliver the higher
volumes, take considerable time to change legacy systems and are
currently grappling with other issues that are deemed of higher

Finally, external factors such as
the deadline of 2018 to close the central cheque clearing will also
drive the need for alternative payment methods such as the FPS.
While increasing the transaction value limit of the FPS, DCA is
unlikely to have an enormous impact on volumes; it will certainly
help to broaden the scope of the channel for corporates, along with
banks business internet banking services, which should position the
FPS as a favourite in the race to replace the humble cheque.


Norman Taylor is product
manager at Experian Payments, a business unit in Experian that
develops strategic payments software