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Local authorities are missing out on a potential£99m worth of savings per year by using outdated payment methods t...
Local authorities are missing out on a potential£99m worth of savings per year by using outdated payment methods to pay suppliers and housing benefit payments, according to new research released today by BACS, the UK's automated clearing house.

The research reveals that only 18% of housing benefit payments and 44% of supplier payments are made electronically using BACS direct credit, despite over two thirds (68%) of local authority finance departments stating that they have received requests from suppliers to be paid electronically.

According to BACS, direct credit payments save at least£1 per transaction compared to a cheque. Apart from the cost savings involved, increased use of electronic payments is also an important element of the government's e-initiative.

Ken Brown, local authority sector manager at BACS said: 'This is a genuine opportunity for local authorities to make vast cost savings so that resources can be re-allocated. In addition, by changing payment habits, local authorities will meet the wishes of suppliers and housing benefit recipients to receive payment electronically. Local government does, however, have a long way to go before it reaches the electronic payment targets set by central government.'

Housing benefit - the greatest potential for cost savings

Paying housing benefit electronically offers local authorities the largest cost savings, according to the research. Only 17% of housing benefit payments to individuals and 19% to landlords are made by BACS direct credit at present.

The majority of finance departments (66%) questioned believe that the number of electronic benefit payments to landlords will rise and 60% believe that the number of electronic benefit payments to individuals will rise. Landlords, they believe, will be attracted by the increased efficiency and cost effectiveness of electronic payment, and individuals by convenience, reliability, ease of use and security.

Automated payment - the benefits

Local authorities questioned identified the following benefits of automated payment:

-- 88% considered BACS Direct Credit as the least expensive method of payment.

-- Over two thirds (67%) of local authorities recognised security as a key factor in using BACS direct credit.

For more information about electronic payments, please visit:

Information is also available on the following websites:


BACS Limited (previously known as Bankers Automated Clearing Services Limited) is one of the world's largest automated clearing houses. Established in 1968, BACS is owned by the major UK banks and building societies. BACS' business encompasses the electronic funds transfer (EFT) processing of direct debit, direct credit, standing order, information advices and the management of inter-bank network services. Over 40,000 companies are currently registered users of the BACS service, including all of the FTSE 100.

BACS processes over 3.5 billion financial transactions annually with more than 60 million on a peak day. On an average day, more than 13 million direct debits and directcredits are processed.

The use of BACS products and services has revolutionised the payments industry and enables more companies than ever to realise the benefits of making automated payments, including:

-- Cost effectiveness

-- Reliability

-- Convenience

-- Ease of use

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