Similar to their European counterparts, Irish consumers have increasingly moved online, both for their shopping and for their banking. Over the past year, consumers who had previously never used digital channels turned to online and mobile banking for the first time. The use of cash declined while contactless payments surged, with a record €1 billion payments made in May 2021. While the use of digital banking has been on the rise for a number of years now, the pandemic urgently accelerated a shift in digital behaviour. A survey conducted at the start of this year found that 69% of Irish consumers trust digital banking providers with 62% of these saying it was due to the simplicity of their services.
It should come as no surprise that this change in digital behaviour is also reflected in how businesses are managing their payments. As technology continues to advance and consumers become more experienced with digital banking, their behaviour is reflected in their decision making in the workplace. This has already been seen in the payroll sector.
In the UK, we’ve seen payroll processors adopt digital banking solutions in order to improve their payroll workflow, have more flexibility with making payments, and to send faster payments to their employees. Accountants and payroll bureaus have also begun offering it as a new service to customers.
An integrated system between the payroll software and the digital finance platform can offer a smoother, more efficient payroll workflow. Using an API (Application Programming Interface) users can initiate payments from within the payroll software enabling them to pay employees and subcontractors with a few clicks of a button. It saves time and is more efficient.
Those payroll processors experienced with using traditional bank payment methods will be used to the overly long process of submitting bank files every month or even every fortnight, to pay employees’ wages. You’re typically required to submit bank payment files at least three days in advance of when the payment is due which can be quite a manual process with numerous steps involved in it.
Digital banks offering access to the Single Euro Payment Area (SEPA) allows businesses to send payments across the EU member states (and 8 other countries) and can also offer the option of EUR and GBP accounts. Payments can be sent on the day they’re due (before 2.00pm) and if they’re sent any time after that or sent on a non-working day, they’ll arrive by the following working day.
BrightPay users now have access to Modulr, the payments platform behind banking app Revolut, to pay employees. Payroll processors looking to speed up their workflow with a more convenient payment method will have access to SEPA credit transfers. By signing up to Modulr, the payroll processor can initiate payment from within BrightPay once the payroll has been finalised. The payment then needs to be approved by two-factor authentication using their phone before being sent to employees.
Learn more about BrightPay's integration with Modulr.
SEPA is a much better alternative to bank payment files which is why there has been such an uptake of it across the EU. It allows for quicker payments and faster processing times. However, as part of their long-term strategy, the European Payments Council have developed SEPA Instant Payments. With this, users can send payments instantly 24/7. While this has not been rolled out by retail banks in Ireland yet, it’s likely we’ll see the rollout of this by more digital banks in the near future. Stay posted!
The European Commission has issued a six-month grace period with regard to the upcoming Single Euro Payments Area system, beyond the Feb 1 deadline.
While it technically remains in place, the update means firms not in full compliance by the start of next month won’t suffer from their payments systems being automatically shut down and leaving them unable to pay staff or suppliers.
SEPA is being introduced by the commission to improve domestic and cross-border payment efficiency within the EU. Until a few days ago, non-compliant firms were facing a countdown to their credit transfers and direct debt facilities ceasing to function.
“An efficient single market needs an efficient SEPA. The entire payments chain — consumers, banks, and businesses — will benefit from SEPA and its cheaper and faster payments,” said Michel Barnier, the internal market and services commissioner.
“Cross-border payments are no longer exceptional events which is why an efficient cross-border regime is needed.”
He noted that migration rates for credit transfers and direct debits are not yet high enough to ensure a smooth transition to SEPA by the beginning of next month. He stressed that while existing payment systems will be accepted for another six months, the start of February remains the preferred migration deadline.
“I have warned, many times, that migration was happening too slowly and call once more on member states to fully assume their responsibilities and accelerate and intensify efforts to migrate to SEPA so that all can enjoy its benefits. The transition period will not be extended after August,” he added.
A recent survey by ISME showed that only 22% of small firms in Ireland were SEPA-compliant in the run-up to the end of 2013.
The National Payment Plan (NPP), announced by Finance Minister Noonan in April, aims to reduce cheque usage in Ireland to EU levels by 2015, a reduction of nearly 66%.
Cheques would be classed as being one of the more expensive methods of payment, as each bank has their own individual processing charge for cheques, up to .30c each and then there is the compulsory Government Stamp Duty of .50c on each cheque also. So before the cheque is even written, it has cost the issuer upwards of .65c.
In the world of payroll, cheques are not very common, for cost reasons more than anything but also with the increase and popularity of electronic pay systems like online banking and credit transfer, writing cheques is more cumbersome and timely.
With changing consumer habits; the Single European Payment Area (SEPA) enforcement, credit transfer payment methods, and a government drive to cut costs by implementing the National Payment Plan, does this mean cheque books will soon be consigned to the history books??
To read more about the NPP, please check out; http://www.centralbank.ie/paycurr/paysys/documents/national%20payments%20plan%20-%20final%20version.pdf
The latest version of Thesaurus Payroll Manager (2013.2.0 onwards) allows you to prepare SEPA compliant credit transfer files if you bank with AIB or DanskeBank.
From a payroll prospective, it is important to note that, at present, SEPA is really only beneficial to you if any of your employees wish to have their wages paid directly into a euro bank account in another EU state. Otherwise, the only benefit to you is being an early adopter and knowing that this is one less thing you will need to do next year.
If your bank requires a SEPA format credit transfer file for the payment of wages then you can use the SEPA feature within Thesaurus Payroll. This operates seamlessly, converting each employees bank details into BIC and IBAN formats for all domestic payments. In short, you need only obtain BIC and IBAN details for those employees who require payment into a euro bank account in another EU state.