Ross Macmillan, a market intelligence consultant at Allpay explains why payments are at the heart of the government’s digital economy.
As the ‘digital by default’ deadline looms, the modernisation of payment and transactional platforms is being seen right across central and local government.
Two of the driving forces behind the government modernising its payment platforms are its digital by default agenda, making it simpler, clearer and faster for people to access government services, and its desire to widen access to banking services to ensure they serve all sections of society including social housing tenants and council tax payers.
Reducing costs and increasing choice
With the Government originally marking the end of 2015 for the UK’s public sector services to be digital by default for information and transactional services, there is growing evidence to suggest that the digitisation of services is reducing costs and increasing choice and convenience for citizens.
The government’s transactional services cover a huge range of tasks, from paying car tax and submitting self-assessments to applying for a passport or a fishing licence. Analysis shows that more complex transactions, and particularly those that include a financial transfer, have greater potential for savings by being digitalised.
Contrast two major government departments; the Department for Transport (DFT) and the Department for Work and Pensions (DWP). According to the government’s ‘transactions explorer’, while each processes between 100-150 million transactions per year for high-volume services, the DFT’s costs for this are £283 million, compared to the DWP’s costs at £3.8 billion.
This can be partly attributed to the digital take-up of services from the two departments. The DFT’s services, which includes online vehicle tax renewals, nears 60 per cent, while the DWP’s take-up is less than 20 per cent, hence the latter department’s drive to make the new universal credit digital by default.
Balancing efficiency and accessibility will be key to re-shaping services for the digital age, for example, retaining postal or counter services through high street networks like the Post Office and PayPoint, which allow people across the UK to pay for household bills and government services such as council tax, court fines and vehicle tax renewals.
Wider access to financial services
However, there is another area driving innovation across central and local government – widening access to financial services.
The growing use of prepaid cards by local authorities is further evidence that digitising services in replace of manual, paper-based processes has benefits for all parties. Surrey County Council, for example, is saving approximately £100,000 in annual administration costs by using prepaid cards to deliver emergency grants to vulnerable groups. Users benefit from funds being made instantly available without the need for a bank account, while the authority saves money from reducing cash handling and recouping unspent funds from the cards.
Having been talking about prepaid cards for a number of years, central government is heading towards a wider rollout. Iain Duncan Smith has already publically declared his support for the solution for universal credit due to the ability to help those “on the margins break the cycle of poverty” via spend controls on areas such as alcohol and gambling for those with addictions.
Alongside these measures, the government believes access to a transactional bank account is key to enabling people to manage their money effectively, hence the recent announcement of its landmark deal with the big banks on basic bank accounts, ending fees for failed payments.
The government has already made moves to ensure that customers have access to the right products, including legislation to allow banks to introduce cheque imaging; paving the way for the option to pay in cheques remotely by smartphone or other mobile devices to increase choice and convenience for customers, and a new Payment Systems Regulator will have strong powers to drive innovation in the payments sector from April 2015.
This will build on the industry innovation that we are currently seeing in mobile payments, with apps such as Paym and Pingit revolutionising person-to-person payments. The expansion of online government services does represent an encouraging milestone for the development of the UK’s digital economy and brings to the fore the opportunity to improve services and increase convenience for citizens.
Ross Macmillan is a market intelligence consultant at Allpay.