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.