Faster payments are on everyone’s agenda in today’s hyperconnected, fast-paced market. In the U.K., one of the largest initiatives to move towards faster payments is underway, and industry group Bacs Payment Schemes Limited is part of that movement.
But speed means little if errors occur, and human error often leads to payments being sent to the wrong account thanks to a mere slip of the finger when entering in sort codes and account numbers.
Bacs, formerly known as Bankers’ Automated Clearing Services, is collaborating with U.K. payment system Faster Payments, again with the goal of speed. Only this time, their partnership is aimed at more quickly correcting erroneous payments when a business or consumer sends funds to the wrong account.
A spokesperson for Bacs, Neil Aitken, told PYMNTS how this initiative is part of the broader picture in achieving faster, more efficient payments across the U.K. The initiative, he explained, builds upon measures first launched in May 2014 in an effort to standardize the process by which banks or building societies investigate claims of payments sent in error.
According to Aitken, updates to the guidelines streamline this process even further.
“The latest enhancements mean that where there is clear evidence of a genuine mistake — whether by a personal or business customer — the receiving bank will prevent the money being mistakenly spent by the recipient of the payment,” he explained.
The Bacs representative stressed that if a sender makes a mistake, there is no guarantee that the funds can be recovered. Still, he added, the updated procedures “mean that, for the first time, in straightforward cases where the recipient does not dispute the return of the funds, the money will be returned within 20 working days.”
Even if funds can’t be reclaimed, the bank will notify senders of the outcome of this process within 20 working days, Bacs and Faster Payments said in their announcement late last month. And, they added, when a dispute is not so straightforward, a sender’s bank will still contact a receiving bank to hash out the issue.
B2B Payments Impacted
The new guidelines encompass a vast majority of payments in the U.K., Aitken explained. According to the representative, Faster Payments accounts for “virtually every mobile, online and telephone banking payment” between banks or building societies.
Meanwhile, the initiative will also incorporate payments made with Bacs Direct Credit, a way for organizations to send payments.
In a statement, Bacs Chief Executive Michael Chambers emphasized the impact that this effort could have in B2B payments.
“Bacs Direct Credit is the payment method of choice for the vast majority of U.K. employers and is used as well to settle supplier invoices and to make other payments directly into bank accounts,” he said. “While our system successfully processes more than 2 billion transactions into correct accounts every year, we welcome anything which provides added security and peace of mind.”
Aitken added that Bacs Direct Credit is used by businesses to pay nearly 90 percent of the workforce, as well as employee expense disbursement and other types of payments made by corporations.
What this means is, while Bacs and Faster Payments are working towards easing the friction for, say, online shoppers to get their money back if they send payment in error, it also means that B2B payments will be heavily affected by these changes.
With the U.K. in the midst of mounting pressure for large corporate buyers like Tesco to improve the speed with which they pay their suppliers and with cybersecurity experts sounding alarms over fake supplier invoices being paid by companies, a mechanism to hasten the recovery of funds sent in error is likely to be a welcome one among the nation’s businesses.
Still, warned Aitken, with no guarantee that mistaken payments can be recuperated, businesses should still implement their own procedures to prevent erroneous payments in the first place.
“While we believe the new process will provide added security and peace of mind and will mean many payments are recovered that would have not previously … it is important to remember that there is no guarantee a customer will get their money back,” he said.
In B2B payments, automated purchase orders and invoice processing are growing in prevalence, but manual data entry remains a common point of friction — and a common source of error. The Bacs spokesperson acknowledged that mistaken payments may never be fully eradicated.
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“It is inevitable that human error can sometimes creep in when lengthy account details are being input,” Aitken explained, echoing a statement offered by Chambers, “but the most important advice is to make sure you get the sort code, account number and any reference information correct when sending any payment.”