Saving time, saving money

According to Ticon’s own research, local councils in the UK issue more than eight million cheques per year. Urging councils and other government agencies to stop writing cheques looks exactly like the sort of initiative that needs to be delivered as we attempt to reduce the deficit. However, the cheque remains stubbornly engrained in public life.

In truth, councils and other public sector bodies have tried extremely hard to rid themselves of cheques, but the laws and state of the financial services market is very much against them. Commonly referred to as unbanked, there are an estimated 3.7m unbanked citizens in the UK, and UK banking law does not mandate the provision of a bank service for all citizens. The challenge of extending banking services is also less of a priority than recapitalising vulnerable banks. Understandably, any attempt by regulators to encourage banks to extend services to the poor leads to a chorus of accusations that government wants to give with one hand and take with another.

Dealing with unbanked citizens
Unbanked citizens may have a bad credit history, lack a viable address or may simply not trust the banks; many are immigrants and some suffer from mental or social illnesses that prevent them from managing a bank account. So when the public sector works with the unbanked, they must resort to issuing cheques, cash or even vouchers. All of which are costly and inefficient, and because their clients are vulnerable they must absorb these costs as part of their duty of care to a client.

If that wasn’t enough, public bodies are also hidebound by data protection and privacy rules. Councils can’t demand that a client provides bank details even if they do have a bank account. This means that government agencies are forced to continue to issue cheques, often unnecessarily, further adding to government costs
and inefficiency.

Lack of support
So, when the Payments Council announced in December 2009 that they planned to stop processing cheque payments in the UK, you might expect our politicians to provide vigorous support for their plan. Instead, the Treasury Committee mounted a barbed attack on the plan and on the motives of the Payments Council and their members. Progress, it seems, will have to be delivered from the ground up, rather from the top down.

The good news is that progress is happening already. Today a number of government bodies are already issuing prepaid cards to citizens instead of using cheques or vouchers. Financial Services companies are investing heavily in products that are specifically tailored to helping public sector bodies deliver payments to citizens more efficiently and effectively and without the use of paper. This means that government is increasingly able to draw on a wide range of products that can give the unbanked access to electronic payments and other secure
financial services.

Chief amongst these products is the prepaid card, a simple payment card that acts like a debit card, but can never go overdrawn. The impact of the prepaid card on government business and the citizen could be enormous, not least because prepaid could reduce the bottom line for public sector bodies at the same time as providing a better service to clients.

This isn’t a mealy mouthed improvement either. Citizens without a bank account are likely to spend around £480 more per annum for basic goods and services than their banked counterparts. Prepaid cards can provide our poorest and most vulnerable citizens with access to a fully-functioning and sophisticated payment system at minimal cost to the state.

Efficiency savings
We have looked at the business case for using prepaid cards in over 25 public sector bodies. At the top end of benefits we have seen a 62 per cent time saving on officer time, going down to a 12 per cent saving at the
bottom end.

Cards can also be developed so that transactions can be monitored and approved or rejected at point of sale according to a complex array of factors, including the retailer’s profile, the terminal being used, the transaction value, the number of transactions undertaken and even the postcode where the transaction is taking place. Cards can be used as a method for confirming cardholder activity, for example, a zero value transaction can be undertaken at any point of sale to confirm that a cardholder had attended a specific event, which could be useful for jobseekers’ training or those working with offenders on probation.

There are few occasions where governments can deliver dramatic cost reductions whilst providing improved services to their clients. Through increased knowledge of what is spent where, by reducing the cost of processing payments and by managing their client relationships better, prepaid can deliver significant savings to government.

By monitoring and recording activity and by controlling spend, government can provide funds in a more effective matter, but most important of all, prepaid can be used to help the poorest in society to bridge the poverty that being unbanked exposes so cruelly.

For more information
Tel: 020 78361999
E-mail: ian.makg@ticon.co.uk