Ireland prepares for payments overhaul

16 July 2010 | 10529 views | 1 cash

The Irish government has agreed to the creation of a high level group that will establish a National Payments Implementation Plan (NPIP) designed to wean the country off its dependence on paper-based cash and cheques.

The bank-backed Irish Payments Services Organisation (Ipso) says cheques and cash usage dropped dramatically in 2009, but remain way above EU norms.

The year saw an 11.5% drop in the value of cash withdrawn from ATMs and a 13% decline in the volume of cheques.

Despite this, Irish citizens recorded an average sum of €5,644 in cash withdrawals per annum per person - the highest cash figure in the EU and more than double the European average.

And while cheque volumes have declined, cheques still account for 66% of the value of all noncash payments in Ireland versus an EU average of only three percent.

As a proportion of all payments, electronic alternatives to the cheque, such as credits and direct debits, now account for about 41% of all non-cash payments. However, in value terms these electronic payments account for only 30%. This compares poorly against EU averages which, in 2008, were 54% of volume and 96% of value.

Pat McLoughlin, chief executive, IPSO says the drafting of a national strategy to move away from cash and cheques is essential if Ireland is to remain competitive with its EU counterparts.

A special NPIP Advisory Group made its final report to the Minister for Finance in 2009 in which the establishment of a high level group to prepare and implement a National Payments Plan was recommended. The Minister accepted the recommendation and it is expected that the group will be established and the National Payments Plan will be prepared and agreed in 2010.

Says McLoughlin: "Businesses now have to plan and prepare to update legacy, cheque-based accounting processes with electronic ones. Apart from being faster, more secure and more cost-effective, modern, electronic payment systems give the beneficiary certainty of payment, particularly important in these difficult, economic times."

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Jonathan Williams - Experian - Rugby | 26 July, 2010, 10:18

While there are distinct differences between Ireland's payments infrastructure and that of the UK, for example the lack of central automated clearinghouse (ACH) and the different payment instruments actually in use, it seems as though banks in Ireland are facing the same problems around the clearing of cheques as their counterparts in the UK.

In the UK following consultation in 2007/8, the Payments Council incorporated into the National Payments Plan a proposal to phase out central cheque clearing. This resulted in the publication last December of a target date of 2018 for closure of the centralised interbank cheque functions. With its own National Payments Implementation Plan, Ireland is therefore following 2-3 years behind the UK and hopefully can avoiding the adverse media reaction to retirement of cheque processing which happened over here.

However, the move away from paper-based to electronic payments bears some associated risks. Individuals who have been unfamiliar with providing their bank account information now need to be comfortable with passing it to their suppliers. In the UK, for example, the increased use of paperless direct debit has meant that it is the organisation's responsibility to verify the customer's payment data and validate their bank details such as identity, account number and address to mitigate the risk of fraud and to ensure continued efficiency.

The migration to electronic payments clearly has its advantages - it can speed up and simplify customer sign-up processes, whilst at the same time further increasing an organisation's administrative cost savings. It is also more convenient for many customers too, with no forms to complete or the possibility of delays.

In particular in the context of SEPA, a project which many hope will be completed in the next few years, it is now necessary to educate the population on the International Bank Account Number so they can make and receive SEPA payments. It is therefore important for organisations and banks to future-proof their payment systems now, before migration to these electronic methods. That way, Ireland can remain competitive with its EU counterparts and, ideally, get ahead of the curve.

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