In this final round up of retail payments in 2022, we see how the UK’s bulk clearing scheme is holding is own, compare double digit growth in instant payments with double dight decline in the last bastion of paper clearing and, we are grateful, that the UK’s real time gross settlement system remains a mystery as it keeps the financial markets functioning and helps us occasionally move house.
Note: All data is publicly sourced and is the latest available: Pay.UK November 2022.
Source: Pay.UK
Bacs Direct Debit and Direct Credit
In the 12 months to the end of November 2022 we see that:
- Bacs Direct Credit volumes have increased by 2% (12 months to October increased by 1%)
- Bacs Direct Debit volumes have increased by 3% (12 months to October increased by 3%)
- Total Bacs volumes have increased by 2% (12 months to October increased by 2%)
- Bacs Direct Credit values have increased by 4% (12 months to October increased by 3%)
- Bacs Direct Debit values have increased by 8% (12 months to October increased by 8%)
- Total Bacs values have increased by 5% (12 months to October increased by 4%).
Notwithstanding the continued double digit growth in Faster Payments we round out 2022 with Bacs Direct Credit growth of 2% – with just shy of 2Billion ‘push’ payments processed via the Bacs schemes over the last twelve months.
In the context of the first iteration of the planned New Payments Architecture platform the future of the Bacs Direct Credit scheme is uncertain although, it seems, the scheme will be processing in excess of 2Billion transactions per annum before it finally ‘bows out’ after over half a century of faithful service.
In a similar vein Direct Debits have also had a stellar twelve months delivering 3% growth and processing over 4.7Billion ‘pull’ payments. The value of Direct Debits processed has increased by 8% reflecting the increasing costs of the goods and services that we consume.
In addition to the uncertain future faced by Direct Debits due to the planned New Payments Architecture the UK’s pre-eminent ‘pull’ payment scheme faces future challenge from Open Banking overlay services such as Request to Pay and Variable Recurring Payments.
With 6.7Billion Bacs payments being processed over the past 12 months it certainly is a case of “(over) 50 but not out for Bacs” !
CHAPS
In the 12 months to the end of November 2022 we see that:
- CHAPS volumes have increased by 7% (12 months to October increased by 7%)
This was made up of an 6% increase in retail / commercial based payments and an 8% increase in financial institution payments, compared to 7% increase and 7% increase respectively for the 12 months to October.
- CHAPS values have increased by 14% (12 months to October increased by 13%).
Outside of the banking community and corporate treasurers the CHAPS scheme is a mystery to most of us, aside from buying a house or transferring very large sums of money the UK’s mysterious Real Time Gross Settlement system is not something that explicitly touches our lives very often.
As the Faster Payments (FPS) participants raise their payment limits to or towards the FPS scheme limit of £1Million we will probably see a gradual reduction in CHAPS volumes although, given the value of payments initiated by financial institutions, any migration of retail / commercial payments from CHAPS to Faster Payments will not make a great difference in values processed.
Faster Payments
In the 12 months to the end of November 2022 we see that:
- Single Immediate Payment volumes have increased by 18% (12 months to October 19%)
- Total Faster Payment volumes have increased by 16% (12 months to October 17%)
- Single Immediate Payment values have increased by 27% (12 months to October 26%)
- Total Faster Payment values have increased by 24% (12 months to October 24%).
The metric rise in Faster Payments volumes continues bolstered by a switch from analogue to digital payments, the growing importance of Open Banking initiated Account to Account (A2A) payments and reflecting the increasingly digital society that we live in.
The widespread use of faster payments is a digital payment habit that will be here to stay, reinforced throughout each lockdown and with volumes and values continuing to increase month on month.
Although the trajectory has flattened a little particularly when similar conditions have been in place, an overall significant increase year on year looks set to continue for some while to come – particularly with inflationary pressures also having an impact on the value of payments processed.
The UK’s Faster Payment scheme has been referred to as the “granddaddy of instant payment schemes” and to see 16% annual growth some 14 years after launch is amazing.
The future is certainly bright for Faster Payments – continued growth from Open Banking A2A payments, payments initiated by overlay services such as Request to Pay and Variable Recurring payments is certainly on the agenda. The growth is likely to be bolstered through the introduction of new Faster Payment types (or flavours) as part of version 1.0 of the planned New Payments Architecture and, perhaps, through a future planned migration of Bacs Direct Credit payments into the NPA.
A long time ago the mobile telco Orange claimed that “the future’s bright, the future’s orange” – with an annual volume of just under 4Billion transactions maybe “the future’s bright, the future’s Faster Payments”.
Faster Payment volumes over the last 12 months total 3.9Billion, this now equates to almost exactly 50% of the volume processed by the UK’s bulk ‘push’ scheme (Bacs Direct Credit).
Cheques
In the 12 months to the end of November 2022 we see that:
- Cheque volumes have decreased by 13% (12 months to October 13%).
- Cheque values have decreased by 7% (12 months to October 7%).
Whilst Faster Payments is experiencing double digit value growth the continued decline in the paper cheque continues to suffer double digit growth – over the last twelve months the volumes of cheques processed has decreased to 13%.
With cheque volumes totalling slightly over 1% o the total volumes processed by Pay.UK’s schemes (Bacs and Faster Payments) maybe the time has come for a serious discussion on finally sending the humble cheque to the museum of curiosity?
Conclusion
After over 50 years of faithful service and processing almost 6.7Billion transactions per annum (and growing) it’s clear that Bacs, the UK’s bulk ‘push’ / ‘pull’ payments scheme, continues to be in fine fettle and still meets a clear end user need. The next few years are, however, crucial for the future of Bacs and its schemes as the opportunity (and threat) the planned New Payments Architecture begins to loom on the horizon.
After 14 years, the Faster Payments scheme is no longer the new kid on the block but, despite this, the scheme continues to experience double dight annual growth! The New Payments Architecture will bring new types (or ‘flavours’) of the current single form instant payment which will undoubtably lead to continued volume increases – this, coupled with the increase in Open Banking initiated payments, overlay services such as Request to Pay and Variable Recurring Payments suggests a very healthy future for the ‘granddaddy’ of real time payment schemes.
From the volume and value data it is clear that CHAPS quietly gets on with its function in the background keeping the markets functioning and making house moves happen – but, quite rightly, remains a mystery to most of the UK population.
With annual volumes of cheques processed being close to the single largest Bacs processing day surely the time has come for a serious discussion on sending the humble cheque to the museum of curiosity? The agreed measure for the eventual end of the cheque was ‘for as long as they are required’ – at just 134Million cheques per annum the inevitable decision must be on the horizon!