Payments and clearing technology provider of the year: VocaLink

John Gieve

Technological advances are transforming the payments industry in a fundamental way. Cash and cheque usage is falling around the globe as new methods of payment are rolled out, creating opportunities for the best electronic payment providers to expand their operations.

VocaLink operates the bulk of the UK's electronic payment services. This includes a system for clearing and settling direct credits and debits (Bacs) and a near real-time retail payment service (Faster Payments).

Chris Dunne

In September 2013, VocaLink launched the central infrastructure for a seven-day account-switching service. The service was designed to allow consumers to move their current account - including all incoming and outgoing payments - from one bank to another within the space of seven days. "The central infrastructure is working well," says London-based Chris Dunne, payment service director at VocaLink, "allowing consumers to switch their accounts easily and securely."

VocaLink had to build the system to a tight deadline, which presented a host of operational challenges. Andrew Haldane, the Bank of England's executive director for financial stability, has repeatedly commented on the difficulty of bringing about change in the payments industry. "We took a very proactive approach," Dunne says. "It was a real model programme in terms of getting ourselves sorted out early, getting things developed early, getting a really strong programme of testing."

The British payments company, whose chairman is former Bank of England deputy governor, John Gieve, was in a uniquely strong position to meet these challenges, as it successfully constructed the infrastructure for a cash individual savings account (ISA) switching service earlier in 2013. This precursor helped the company build up the experience necessary to deliver the larger account-switching service shortly afterward.

Although the cash ISA service was not a dry run for account switching - it was rolled out at a time when the UK Treasury was still debating the merits of account switching - Dunne says it served as "a really good" reference point. "We were able to roll development teams and subject matter exports straight on to the other. It did mean the whole thing was smooth," says Dunne.

Adrian Kamellard, chief executive of the Payments Council, the body responsible for the UK's payment services, says the current account-switching service is functioning well. "VocaLink did very good work with respect to developing the engine behind the service, providing the environment for it to be tested across the industry and providing the actual switching service," he says.

"The testing environment was critical - an essential part of making sure the end-to-end process was working correctly," Kamellard adds. "It is worth noting that, internationally, we think this is the first example of a service of this sort. We do not think there is anything this sophisticated anywhere else."

VocaLink prides itself on the reliability of its systems; that its infrastructure works day-in and day-out without fail. Technological progress can, however, be a double-edged sword. While new systems are a breeding ground for new opportunities they can also introduce security threats.

Security risks

Cyber threats are, in particular, a growing cause for concern. The Bank of England's chief cashier, Chris Salmon, identified ‘cyber risk' as one of the three main problems facing the UK's payment systems in a speech in November 2013.

Dunne explained that VocaLink is "fully compliant" with all industry standards and operates "military grade infrastructure, which process high volumes of payments securely every day". He added that it is "not just about firewalls, but about people and processes - the whole gamut of security".

There have also been a number of developments surrounding VocaLink's Faster Payments service in the past year. Initially launched in 2008, the service is the largest real-time payment system in the world to operate 24 hours a day, seven days a week. "More and more people are using Faster Payments as a way of conducting payments they would otherwise have used cash or cheque for," Dunne says.

Foray into Asia

Building on this success VocaLink has developed an equivalent service, Immediate Payments, which can be implemented in almost any country across the globe, according to Dunne. In October 2012, VocaLink announced it was working towards implementing Immediate Payments in Singapore - the company's first foray into the fast-growing Asia-Pacific region.

This throws up a host of challenges - most notably the difficulty of meshing a platform that has been designed and built externally with Singapore's domestic payment systems. VocaLink is working in partnership with BCSIS - a local payments provider - to ensure Immediate Payments interfaces with the existing infrastructure.

VocaLink does already have experience providing international services, as it has been processing direct debits for Sweden for six years. Sweden's automated clearing house, Bankgirot, turned to VocaLink when it wanted to improve the efficiency of the country's payments industry. Struck in 2007, the deal represented the first time the processing for a national payments scheme had been outsourced abroad.

For its commitment to improving payments technology in the UK and further afield, VocaLink is the standout payments technology provider of the year.

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