Considerations for Building a Secure and Resilient Bacs Payments Process
In part one of this two-part series, learn how to mitigate threats and unlock automation to increase business stability and resilience
By Liz Carroll, Senior Product Manager, Financial Marketplaces at Finastra
Operational resilience is the lifeline that keeps businesses thriving through unforeseen disruption, with automation being a key component of a threat mitigation strategy for payment processing. This is especially important for the UK market, where Bacs serves as a primary method for making and collecting recurring electronic payments.
To illustrate why downtime and payment processing represent a profound threat to a business’ success, think about two common, but significant disruptions. During a payroll cycle, a payment processing system briefly experiences a glitch, leaving employees unpaid and unable to make their bill payments. Then, a similar disturbance occurs when collecting recurring payments from customers, resulting in an interruption to cashflow.
While both challenges may have been brief, they likely resulted in decreased employee morale and trust, eroded business growth, and long-term reputational damage, all because resilience was not built into the business’ payments process.
Limitations imposed by the Bacs scheme put companies at heightened risk when disruptions occur, especially when considering the increasing expectations for rapid or same-day processing. These limitations include payments taking a minimum of three days to clear, no processing on weekends or bank holidays, and observance of strict daily cut-off times, meaning your payments must be submitted in a timely manner for prompt processing.
These restrictions can be frustrating in a society that expects instant gratification, and a look to the future only increases challenges faced by the industry. While Bacs Direct Credit payments are expected to remain relatively steady, Direct Debit payments are forecast to continue to grow over the next decade, with 5 billion payments forecast in 2032, highlighting the need for a resilience plan. Added payments can create additional stress across the network, requiring organisations to anticipate a potential increase in disruptions and delays. However, with a clear strategy supported by technology, recovery can be swift and seamless.
Building resilience through automation
To achieve resiliency and to mitigate these potential threats, automation is key. Automated payment solutions remove manual steps from the payments process, from invoicing through to approval and payment submission, reducing instances of error and improving process efficiency. 46% of CFO respondents indicated that payment automation reduced disputes and exceptions, emphasising that the right technology can significantly streamline the payments lifecycle.
Reducing errors during payment processing also plays a critical role in mitigating overall organisational risk. Manual data entry presents many challenges, with simple errors such as adding an extra zero during a batch request or uploading last week’s file instead of the current one causing significant delays in processing. Errors like this, which can be eliminated with an automation strategy, can negatively impact a company’s relationship with its suppliers, customers, and employees, damaging the bottom line along the way.
The same types of errors can be reduced elsewhere in the payment process, with functions such as adding Confirmation of Payee for bank account number and sort code validation checks being prime targets for automation. By eliminating manual data entry, the organisation may experience decreased operational risk. The human side of these process changes also provides added benefit, with automation playing a key role in improving employee productivity.
77% of workers feel they would be more productive if they could automate routine tasks, with 50% of employees using automation tools saying they saved an average of 3.5 hours or more per week. By taking these manual tasks out of the equation, employees can focus their time on improving processes elsewhere in the organisation, unlocking more opportunities for strategic thought and innovation.
Finding the right partner for effective implementation
The digital payments market has experienced tremendous growth in the last few decades and is poised for further expansion in the coming years. Regulatory changes, evolving customer expectations, and the emergence of new technologies have all contributed to a dynamic payments sector. Amidst this landscape, finding a technology provider that has the expertise to deliver automation and a streamlined payments process is important.
In the second article of this two-part series, I will explain how leading payment service providers offer distinct security protocols that make payments processing more efficient and secure, helping to ensure resilience at every level of your payments landscape.