Bacs, the UK bank clearing house, is poised to undergo a radical
restructuring, which aims to transform the way payment services are
developed and delivered over the Internet.
The proposed restructuring will see the clearing house, which
handles billions of pounds in salary payments, is due to split into
two separate organisations.
One company will be responsible for running the IT infrastructure
of Bacs, processing transactions and developing new technology for
commercial use, Computer Weekly can reveal after speaking to
industry sources close to Bacs.
The other business, made up of Bacs' member banks and possibly
overseen by payment clearing body Apacs, will be responsible for
running Bacs' direct debit, direct credit and payroll services. The
companies' branding has yet to be agreed.
Changes to the ownership of Bacs will also allow non-banks to
become members of the elite financial club.
The restructuring blueprint, which has been approved in principle,
comes at a time of intense activity in the payment market, with
banks and telecoms suppliers scrambling to deliver new services
online and through mobile phone technology.
Analysts believe a revamped Bacs will help to foster a more dynamic
approach to developing payment technology with software suppliers
partnering with the banks.
UK banks have come under fire from the Government and analysts for
failing to offer businesses real-time payment services over the
Internet and not applying technology to reduce the three-day cycle
for clearing cheques.
Previous attempts by the banking industry to pool their resources
and develop common technology - for online billing and real-time
payments - have either been abandoned or mothballed.
Duncan Brown, consulting director at Ovum, said there was room for
improving the way Bacs uses IT. "The basic [internal] process has
stayed the same for about 20 to 30 years. Bacs could harness the
networks and technology from inter-banking networks such as Swift,
Link or Visa, to reduce cheque clearing times," he said.
Brown warned, however, that a rift could emerge between the two
Bacs companies, over exactly what kind of technology should be
developed and when.
"There could be a possible disconnect between the banks and the
Bacs infrastructure company [over] what the business wants and what
the IT department can deliver," he said.
One banking industry source close to the restructuring discussions
said the changes would widen the choice of payment network
providers that the banks can work with to deliver services to
customers. "You would have competing infrastructures for the banks
to use. The banks could choose to use Visa or Mastercard rather
than Bacs," the source said.
Industry watchers added that the clearing industry is ripe for
consolidation and predicted that European clearing houses would
attempt to break into the UK market over the next couple of years,
particularly if the UK finally adopts the euro.
In a statement, Bacs said it had undertaken a review of its
corporate governance in consultation with its member banks. It
added that it would make an announcement after the review was
complete.
The break-up of Bacs
Restructuring plans will split
Bacs into two companies:
- One will run Bacs' IT infrastructure, process transactions and
develop new technology when required
- A scheme company, comprising the main banks, will run direct
debit, direct credit and payroll
- Non-banks will be allowed to become members of Bacs, paving the
way for software suppliers to develop payment services in
partnership with Bacs.