Public sector moves £188bn a year; payments hinder access

Delegates at the Payments Innovation Forum’s Innovation Day heard that the UK public sector processes about £188 billion in payments each year and that application complexity and delivery friction are preventing many vulnerable people from receiving entitled support.

The forum highlighted research showing vulnerability is fluid. The Financial Conduct Authority’s Financial Lives work indicates roughly half of UK adults display at least one characteristic of vulnerability at any given time, such as poor health, a recent negative life event, low financial resilience or limited capability. Separate analysis based on FCA data finds a quarter of households have £200 or less in savings. The FCA also estimates about 900,000 adults remain unbanked.

Speakers contrasted fast commercial payments with slower public disbursements. Ordering food through an app typically takes minutes, while applying for a council hardship payment can require multi-page forms, identity documents and bank statements and can take weeks to process. A platform called Lightning Reach was presented as an example that lets a single user profile be checked against more than 2,500 grants, benefits and local schemes in one pass, removing the need to find and complete many separate forms.

Cash use remains common. The LINK Cash Index found 61% of people had used cash in the previous two weeks. Councils told delegates that cash provides dignity and choice for people without bank accounts or with limited digital access. At the same time, cash offers no audit trail once it leaves a council office, making it hard for payers to show funds were spent on the intended needs.

Authorities are increasingly using prepaid cards and virtual payment rails that can be restricted to merchant categories such as food or utilities. These instruments provide a spending record while allowing recipients some choice. Delegates noted these rails can also reach people outside mainstream banking, with FCA data showing the unbanked population at about 900,000, down from 1.3 million in 2017.

Speakers described public payments as an ecosystem requiring tools to identify eligible citizens, procurement routes that reduce council workload, and reliable processing rails to move funds. Framework agreements such as NEPO’s payment card services were cited as a way for local authorities to call off pre-vetted prepaid and digital payout suppliers without running a full tender each time.

Delegates discussed reforms beyond single crisis payments, including analysing how digitally disbursed funds circulate through local high streets and exploring where automatic enrolment into eligible support could operate within FCA consumer protection rules. They also identified persistent problems around identification, trust and accessibility in public sector payments.

“Payments experts who spend their careers focused on retail, travel or corporate flows can learn a great deal by listening to a sector that deals daily with the sharpest edges of financial exclusion, stigma and crisis,” a participant noted.

Delegates called for greater collaboration on procurement and technology adoption to reduce administrative burdens and speed payments. They warned that without system changes, many households will continue to miss support because application and delivery routes remain too slow or too complex.