20 April 2018
Why a history of innovation bodes well for the future
Direct Debit and Bacs Direct Credit continue to be popular, even decades after their launch. The world in 2018 is an exciting place. Technology has brought amazing opportunities across so many sectors, and the payments space is no exception. We have seen more innovation in the last few decades than in the preceding 100 years – mobile wallets, contactless payments, financial apps, and cheque imaging are just a few.
Yet a company that first opened its doors in 1968 has continued to thrive, breaking record after record, year after year. We provide access to some of the most important payment methods to an ever more demanding consumer, as well as to businesses, charities, and government – almost everyone in the UK is touched by our products and services, which now extend far beyond our two core schemes.
Bacs is not the same company it was in 1968; back then, our focus was on moving money between banks electronically. In fact, that’s what we were called: the Inter Bank Computer Bureau. It was two years later that we launched Direct Debit, and a year after our name changed to reflect our new role as we became the Banker’s Automated Clearing Services – some people still mistakenly believe that stands today.
Of course, our bills have changed, too. In 1968, our regular household commitments were pretty limited to energy, rent, and mortgages. Now, we have mobile phone bills, broadband bundles, gaming subscriptions, in-app payments, half a dozen different types of insurance, plus many more. A substantial proportion of those are paid by Direct Debit, something evidenced by its growth; we broke another annual record in 2017 when we processed more than 4.2bn Direct Debit payments. In addition, Bacs Direct Credit is used to pay over 90 per cent of the UK workforce, as well as a billion benefit payments, and pensions and dividends. Between the two schemes, we set a new combined transactional daily record last year, too, with 111.7m payments processed in a single 15-hour window.
When our company launched – before man walked on the moon, when mobile communicators only existed on sci-fi shows, and as Apple’s Steve Jobs was just entering his teens – banks of computers filling entire rooms processed our transactions, and the data was stored on huge magnetic disks. Today, the smartphone in your pocket has more computing power than NASA had for its Apollo missions, and we certainly no longer have man-sized computers to process payments.
Bacs doesn’t actually own any computers for transactions in 2018. In 2003, following the Cruickshank Report into competition in the banking industry, the company separated into two parts – Bacs Payment Schemes Limited, which continues to own and manage the schemes, and a company that was later to become Vocalink, running the technological infrastructure through which our processing runs.
And that isn’t all that’s changed. Our payments are now recognised by the government as being of critical importance to the financial infrastructure of the UK. On top of that, we have worked hard to lead the way for the country’s payments industry, providing vital managed services to the sector.
We own and run the high-profile Current Account Switch Service (CASS), which has been changing the way people and smaller businesses and charities switch bank accounts since 2013, with the stress-free process encouraging competition and movement in the marketplace.
From CASS, another new service was created: the Bulk Payment Redirection Service plays a pivotal role in moving multiple bank accounts between banks and billers, particularly important for the ring-fencing process currently underway in the UK banking industry.
We created a central website for assigning new sort codes, something which has, again, helped with competition, and we run the Extended Industry Sort Code Directory, and Biller Update Service, both ensuring bank account details are kept up-to-date.
Our doors remain firmly open to new banks, too. In the year through to February 2018, we welcomed four new banking participants, providing even greater access to our products.
We also take our corporate social responsibilities very seriously. In 2012, we became carbon neutral and our environmental commitment continues – indeed, we became carbon positive in 2017. We have raised more than half a million pounds for charity in recent years, and funded the planting of thousands of trees in the UK and overseas. We are also committed to ensuring equality in the workplace, taking an active role in the Treasury’s Women in Finance initiative from launch.
The last 15 years have been a fascinating journey for me, leading the company through a time of pacey evolution – I was privileged to have a joint role during that time, guiding not just Bacs but also taking charge of Chaps Co, where we moved Faster Payments away from being a part of Chaps to become a standalone scheme company in its own right.
And now we’re looking at more changes. As Bacs celebrates its 50th birthday, we are about to blaze a new trail. In May of this year, the company is set to become part of the New Payment System Operator. It will be joined by Faster Payments and the Image Clearing Service, bringing these major retail payments under one consolidated roof. But, even as everything changes, everything remains the same. Bacs will continue to run as it always has, and it will be business as usual for our payments and services that are widely relied upon by so many.
As these 50 years come to a close, I’m thrilled with all that Bacs, and more importantly, its people have achieved. As a new era begins, we can look back at our accomplishments with a great deal of pride.
This article originally appeared in this article originally appeared in the New Statesman - https://www.newstatesman.com/page/supplements