For any organisation that uses the BACS financial clearing house system to honour supplier invoices, collect direct debits from customers or transfer wages to employees, 1 January 2006 is an unbreakable deadline. By that date, all 40,000 BACS customers will need to have migrated from the old BACSTEL system to BACSTEL-IP, the new network for near real-time payments using Internet Protocol (IP) technology that promises reduced processing costs and faster payment submissions.
At present, few companies seem to be viewing that deadline with any sense of urgency – a mere 10% have made the switch in the 15 months since BACSTEL-IP became available.
But executives at BACS, its software providers and its financial services partners are warning that this is no time for complacency.
“BACS’s message to customers is migrate to NewBACS now because it doesn’t cost too much to do, is absolutely necessary and can’t be avoided,” says Mike Hutchison, BACTEL-IP migration manager at BACS.
But given the relatively long lead time, why the rush? The answer is simple, according to Adrian Stafford-Jones, founder and managing director of Albany Software, the e-transactions software company that offers ALBACS-IP, a BACSTEL-IP approved solution. If the number of late-starters does get too high close to the deadline, he says, it is possible that BACS, its approved software companies and banks may not be able to cope with a sudden surge in demand for migration advice and services.
“Educating BACS customers so that they see the benefits of migration, realise how serious the issue is and that they need to get their act together quickly is something that the whole industry is doing,” he says. “Early adoption avoids the potential demand-and-supply bottleneck that might occur as companies rush to comply with the deadline as it approaches,” he says. “Customers who don’t make the move now risk placing their commercial operations in serious jeopardy.”
Moreover, says Stafford-Jones, migration to NewBACS requires significant process review for large organisations and can take up to nine months to complete once the planning, budgeting and implementation timescales are considered.
To add to the pressure, there are two earlier deadlines for organisations using BACS’ authentication/encryption service (30 September 2004) and its X.400 ADDACS mailbox offering (31 March 2005).
No cause for concern?
BACS’s Hutchison claims that the sluggish rate of migration so far is not a cause for concern. “We have got passed the early adoption phase and are now ready for mass migration,” he says. “Plus, it’s important to remember that large companies are using the switch as an opportunity to do a strategic review of BACS within their businesses. So while they haven’t fully migrated, they’re still well into the process.”
Of the companies that have already installed BACSTEL-IP, however, few have allowed their experiences to be published via BACS’s website (www.bacstel-ip.com) or been cited in press releases from approved BACS software providers.
Those that are prepared to talk about their NewBACS migration projects suggest that the process is relatively straightforward. Phil Pettit, corporate information, computing and technology programme manager for Colchester Council in the UK, claims that its migration to BACSTEL-IP was one of the Council’s simpler projects and that it “made sense to get it over and done with now”. Colchester Council took part in a small pre-pilot using ALBACS-IP and sponsoring bank, Barclays.
Richard Moss, finance systems programme manager for Northumbrian Water in the UK, which is close to completing its migration, also claims that implementation itself is not an arduous one. “If companies commit sufficient resources and thought to the planning stage, consider the benefits of BACSTEL-IP for their organisation and ensure that they choose the correct software, they shouldn’t have a problem,” he says.
More information and best practice advice should emerge in the coming months. BACS’s approved software providers are holding events, seminars, briefings and live demonstrations of BACSTEL-IP to persuade companies to make the switch.
Take, for example, Eiger Systems, a software provider that has developed a BACSTEL-IP solution called EigerPAY Gateway. The company held an event in London in May 2004 that was attended by over 300 delegates. The software supplier has also launched a new website (www.migratetobacstel-ip.co.uk), a resource centre dedicated to providing information on how to best exploit BACSTEL-IP and improve payment processing.
Eiger has also published a step-by-step guide to implementing BACSTEL-IP. In particular, the guide warns about two key issues that it says companies need to address urgently. The first is to talk to their sponsoring banks, as each financial institution will have its own schedules and priorities for migrating its customers to BACSTEL-IP. The second is that migration for large companies will have a significant impact on many aspects of their current processes and procedures, and so the sooner they start the switch, the less painful it will be.
Despite the educational resources on offer, however, Albany’s Stafford-Jones concedes that it is inevitable that some customers will not meet the deadline. “Those that don’t will have to employ the services of third-party bureaus which will be able to handle their data for a while,” he says. “Banks could also process transactions but that will come at a significant expense. Plus, the majority of banks will be reluctant to run two parallel systems forever because it will cost them a lot of money.”
The message is clear: Overall, BACS customers will save themselves a lot of grief – and damaging disruptions to day-to-day operations – if they plan ahead and decide to migrate now.