In this tenth round up of retail payments in 2023, for the 12 months to the end of September 2023, we continue to see double digit growth in the volume and value of Faster payments and double digit decline in paper clearing. The growth in volume and value for the UK’s bulk clearing scheme remain at 2% and 7% respectively with growth in the volume and value for the UK’s real time gross settlement system now at 2% and 3% respectively.
Note: All data is publicly sourced and is the latest available: Pay.UK September 2023.
Source: Pay.UK
Faster Payments
In the 12 months to the end of September 2023 we see that:
- Single Immediate Payment volumes have increased by 19% (12 months to August 19%)
- Total Faster Payment volumes have increased by 14% (12 months to August 14%)
- Single Immediate Payment values have increased by 24% (12 months to August 25%)
- Total Faster Payment values have increased by 20% (12 months to July 21%)
Faster Payments volumes continue to be bolstered by the switch from analogue to digital payments, reinforced due to the pandemic and also by the growing importance of Open Banking initiated Account to Account (A2A) payments.
Continued growth in Faster Payments is expected from Open Banking A2A payments and payments initiated by overlay services such as Request to Pay and Variable Recurring payments. The growth is also 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 (NPA) and, perhaps, through a future planned migration of Bacs Direct Credit payments into the NPA.
Bacs Direct Debit and Direct Credit
In the 12 months to the end of September 2023 we see that:
- Bacs Direct Credit volumes have increased by 2% (12 months to August increased by 3%)
- Bacs Direct Debit volumes have increased by 2% (12 months to August increased by 2%)
- Total Bacs volumes have increased by 2% (12 months to August increased by 2%)
- Bacs Direct Credit values have increased by 7% (12 months to August increased by 6%)
- Bacs Direct Debit values have increased by 7% (12 months to August increased by 8%)
- Total Bacs values have increased by 7% (12 months to August increased by 7%)
Notwithstanding the continued double digit growth in Faster Payments we still see Bacs Direct Credit volume growth of 2% reflecting the ongoing importance of this payment mechanism.
Although in the context of the first iteration of the planned New Payments Architecture platform the future of the Bacs Direct Credit scheme is uncertain, the scheme is now processing just under 2Billion transactions per annum before it finally ‘bows out’ after over half a century of faithful service.
Direct Debits delivered 2% growth in volume for the 12 months to the end of September 2023, again processing nearly 4.8Billion ‘pull’ payments. The value of Direct Debits processed increased by 7% over the same period again perhaps reflecting a further slight flattening in the increase in 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.
However, despite these challenges for both ‘pull’ and ‘push’ payments, with nearly 6.8Billion Bacs payments processed in the past 12 months, it remains a major player processing 60% of all payments.
Cheques
In the 12 months to the end of September 2023 we see that:
- Cheque volumes have decreased by 16% (12 months to August decreased by 16%)
- Cheque values have decreased by 9% (12 months to August decreased by 9%)
Whilst Faster Payments is experiencing double digit value growth the paper cheque continues to suffer double digit decline – the volume of cheques processed has now decreased by 16% over the last 12 months.
Cheque volumes total just 1% of the total volumes processed by Pay.UK’s schemes (Bacs and Faster Payments) and continued decline in this share is expected as actual volumes decrease and growth continues elsewhere, particularly with Faster Payments.
CHAPS
In the 12 months to the end of September 2023 we see that:
- CHAPS volumes have increased by 2% (12 months to August increased by 3%)
This was made up of a 2% increase in retail / commercial based payments and a 2% increase in financial institution payments, compared with 3% increase and 3% increase respectively for the 12 months to August.
- CHAPS values have increased by 3% (12 months to August increased by 6%).
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 is not likely to make a significant difference in the value processed.
Conclusion
After over 50 years of faithful service and now processing nearly 6.8Billion transactions per annum, Bacs, the UK’s bulk ‘push’ / ‘pull’ payments scheme, continues to meet 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) of the planned New Payments Architecture looms on the horizon.
After 14 years, Faster Payments continues to experience double digit annual growth as the boost from digital habits formed during the pandemic remains in force. 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 and overlay services such as Request to Pay and Variable Recurring Payments suggests a very healthy future for this ‘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 of 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 the decline in paper based transactions continues. The agreed measure for the eventual end of the cheque was ‘for as long as they are required’ – at just over 116Million cheques per annum the inevitable decision must be drawing closer.