The National Payments Plan: what corporate treasurers need to know
‘A strategic framework for payments innovation and change over the next decade’
by Jonathan Williams, Director of Communications and Product Strategy, Experian Payments
The National Payments Plan (NPP) was published earlier this year by the UK Payments Council. The document has been promoted as the first step towards agreeing the future development of the UK payment industry. Indeed, the Plan is a welcome movement towards more efficient and dynamic payment services in the UK. However, at a time when corporates are facing pressure to comply with many pan-European harmonisation initiatives such as the Single Euro Payments Area (SEPA) and the Payment Services Directive (PSD), it is not immediately clear to treasurers how the UK-centric NPP will work with other impending regulations and shape tomorrow’s European payment landscape.
There are still many areas of the NPP which are yet to be agreed and the UK Payments Council has called for an extended period of consultation on several elements in the Plan. Specifically, there is a great deal of work still to be done to address the shifts in the wider European payment landscape and how these will impact the UK market, which is of particular relevance to treasurers and those responsible for compliance and risk management. At present there are few connections between the NPP and the Payment Services Directive. Indeed, the PSD was not correlated with the NPP at its inception, resulting in a lack of clarity in the NPP about the Directive’s influence on the UK market.
Payment types - looking ahead
The demise of the cheque
In recent years, there has been a reluctance to invest in cheque processing efficiency. As a result, cheques have become more costly to process and have risen up the fraud risk scale. Large retailers have already ceased to accept cheques, signalling the long-predicted decline of this payment method and continued migration towards electronic payments. This evolution is advocated by the National Payments Plan. The declining acceptance of the cheque is a positive step for UK businesses due to the expensive in-bound and out-bound processing cost, which can, in some cases, exceed the value of the cheque. Moreover, according to a recent survey by Experian Payments, which questioned the utilities, telecoms and insurance industries, it is also the payment channel that suffers the most fraud. Forty-nine per cent of all fraud suffered by these sectors occurs with cheque payments. To this end, the Plan will help to guide corporates towards migrating their customers onto more efficient and secure payment methods, such as Direct Debit.
One challenge, which must be considered in relation to cheques, is that some companies rely on cheques as an authentication mechanism. Dual or multiple signatories is an ingrained business process for some organisations and if they are forced to use other channels, banks must take care to facilitate the equivalent internal business security benefits.
The NPP currently predicts a 2018 end-date for cheque processing.
Despite the November 2009 deadline for PSD compliance, the Direct Debit requirements affecting UK corporates as outlined in the European-wide document have not yet been taken into account in the NPP. For example, it is not clear on what legal basis Direct Debits will operate between euros and sterling, resulting in confusion for treasurers over areas such as refund laws. If a Direct Debit processed from the UK to an EU country requires a refund, it is not clear to the consumer whether this will have to adhere to UK rights and obligations or wider European regulations on when money must be returned to the customer.
The UK Payments Council must address this omission to clear up any doubt and ensure they are complying with all relevant laws. Due to the strong legal basis of the PSD, it must be assumed at this stage that the NPP will be overruled by the national implementations of the PSD and therefore it is recommended that treasurers take steps towards PSD compliance in this area.