Wednesday, 13 March 2013

BACS Submissions

As I posted a while ago, Lloyds have dropped their BACS Bureau (Lloydslink) and we had to find an alternative. This has been most educational, and very different to when we first started.

So it may be useful if I share some of the lessons learned...

Three day BACS cycle.
One of the things people do not realise is that there is still a standard "three day cycle" BACS system in place. Whilst a lot of stuff has moved to almost instant Faster Payments, the old BACS system is alive and well. It is used for collecting Direct Debits, and also by lots of people to pay suppliers and payroll. The way it works is that you send a BACS file to BACS which contains payments and/or DD collections on day 1. On day 2 the file is processed by the banks. On day 3 the money moves. Unlike when you do a payment from personal on-line banking on the three day cycle, the money moves on the 3rd (working) day - it is not in limbo for 2 days. It is also necessary to send details of the new and cancelled DD instructions via a BACS file.

HMRC RTI
All of this is because HMRC have insisted that payroll which is paid by BACS has to have an extra field which was previously unused. This messed up Lloydslink, and has meant everyone using BACS has had to make changes. The extra field is a 4 character entry which is used with some other attributes to make a hash that is sent to HMRC so they can match payments to payroll submissions.

Sponsoring bank
In order to do any of this you need a service user number (SUN), also called an originator identification number (OIN), and a sponsoring bank. The sponsoring bank is taking risk if you screw up and so this can be tricky. There are various ways to do it, and we luckily managed to get sponsored by Lloyds without many catches.

Sending the BACS file
There are several ways to get the file to BACS. It is possible to use services which make DD collections under their SUN (as I understand it) and charge a lot per transaction. There are bureau services that allow a file to be sent (e.g. via a web page) and then they send to BACS for you using your SUN. And there are software packages that allow you to send to BACS yourself (Direct Submission). The pricing is complicated, and typically a bureau charges per transaction and per file but are quick and cheap to set up. BACS s/w (BASTEL-IP) is usually more expensive to set up and in ongoing fees but less per file/transaction. We do enough transactions that direct submission is cheaper.

Managed services
It seems there are also bureau type services that work at a different level - managing the DD setup, notice to the customer of collections, regular collections automatically, and allowing ad-hoc collections to be uploaded. These are not quite the same as a BACS bureau as you are not really sending BACS files as such, but they do manage a lot of the admin for you and ensure you meet the rules properly.

Smart cards and stuff
Lloydslink used a card and reader (like a PINSentry) to verify that the file we uploaded was from us. It was a proper challenge/response system. It did have a bug once that meant a null response was accepted and only javascript stopped this, but they fixed that when we told them :-) Otherwise it worked well. It seems most bureaus don't do this and simply allow file upload to a (secure) web site. However, if you have direct submission software you need either a SmartCard from your sponsoring bank or a hardware security module (HSM). The difference is something like £10,000 (based on various quotes we had). With the smart card you have to enter a PIN when sending the file to BACS to get it signed using a key in the card. An HSM allows hands-off processing, and is what bureau services use behind the scenes. It is hard to see how, logically, the two are different, to be honest as a SmartCard  is a hardware module which provides security (signing).

Windows
Sadly all of the solutions we found seem to pretty much need a Windows machine to run. This is rather annoying. Some people suggested they had linux code, but we did not get far with that. So we have had to buy a Windows machine just for this. Oh well. Locked down (physically and firewall).

Recommendations
So, who have we gone with and why?

We spoke to several people. Some said how much better and cheaper the software was, and how expensive a bureau was. Some said how hard to use and set up software was and how quick and cheap a bureau is. It seems to depend which solution they sell. Some seemed horribly expensive. Some less so.

We initially spoke to Smart Debit. It turns out they are a really good managed service provider. Unfortunately we are all set up to use a simple bureau like Lloydslink, and so this did not fit what we needed. If you want something managed for you they seem like a good bunch, handling notice to customers, and regular collections, and so on, all via a web interface.

What we finally went for is Experian BASCTEL-IP windows software supplied and installed by Checkprint, along with their backup bureau service. The backup service is useful as if the PC fails for any reason we can send the same files to the bureau. It is costing a bit more than £2k/year, but Checkprint are very slick - they managed to get everything sorted and us submitting files in just over a week from start to finish (even with the lead time for the bank to send smart cards). They configure it for you and allow various file formats - we went for something simple which allows us to send one file, but they can have different users allowed to provide different files and different formats (e.g. paying suppliers, payroll, AUDDIS for setting up DDs, and DD collections), and different people allowed to import these or sign or send them. If you have a larger company with more people involved, it looks like it will work well for that. For us we just need one file signing and sending by one person and they were happy to set that up.

So, Checkprint highly recommended for this if you need it.

10 comments:

  1. Very interesting!

    I'm sure this is a daft question for some reason, but I'm struggling to figure out why - could the payments not have been made by faster payment instead?

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    1. According to http://www.hmrc.gov.uk/rti/cross-reference.pdf , if the payment is made by a non-BACs method or if you don't have your own Service User Number (SUN), you don't have to worry about the reference. Which is all well and good if you are only talking about a few employees, but I suspect AAISP has quite a number making manual faster payments/non-SUN BACS not feasible (plus I suspect they use BACS for other "routine payments" as well).

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    2. Just a suspicion on my part - but I'd have thought that the "system" would charge more per transaction for FP than standard 3-day BACS... might not appear to be much on the face of it per transaction but if you do many transactions (as is implied by use of direct submission) it soon becomes a noticeable difference.

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    3. paper boy, on my small business account, FP is "free", BACS is 18p per item.

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    4. Not so simple :-)

      We have to use BACS for Direct Debits, and so using that to pay suppliers and payroll is no extra work, and we are not paying anything like 18p either (direct submission is cheapest way to do this as I understand it).

      Fast payments could be added to the s/w, at some significant costs, but we don't have anyone we pay that needs to be paid instantly. Anything with two working says notice we can pay by BACS as normal. The money is not in limbo for two days, it just needs the two days notice.

      The odd case of someone we need to pay now to get something shipped I do manually via on-line banking. It is a lot more work.

      The fast payment system makes sense for people like these payday lenders, obviously.

      What I really want, and still cannot find any way to do, is a system to get live updates on incoming fast payments so we know people have paid us in real time. We can do things with that I am sure.

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    5. Ben - that comes as a complete surprise... having been "helped" by a bank in the past usually they want more to do stuff quicker... perhaps they're relying on inertia to keep their fees up.

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  2. Hmm, this sounds like it might be the software I used to work on for a while when I worked at Experian a number of years ago. I've deliberately forgotten almost everything I knew about it, although it was quite a decent bit of software.

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  3. Are Lloyds withdrawing lloydslink? As $Client have just signed up to Lloydslink for doing their BACS transactions and not been told anything about the service going titsup soon...

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    1. Err, yes, they were closing end of Feb, but extended the deadline a couple of weeks. Causing other BACS providers hassle taking on all their customers.

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    2. Yes "Payment BACS is no longer available to new applications. Please contact your Relationship Manager if you would like to discuss alternative Bacs payment options." is on http://www.lloydsbankcommercial.com/corporate-terms/lloydstsb/ tab B

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