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Focus
on banking:
Tune in, turn on, check balance |
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| Improvements
in technology and security mean that online banking has become
an easy, cost-effective method of dealing with accounts. Now
increasingly being used by charities, Sandra Haurant finds
out what efficiencies can be gained, and how much money can
be saved, by going online |
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Managing
a charity’s money used to involve reams of paper, meeting
after meeting with bank managers, piles of cheques, endless
phone calls and far too many faxes. It required patience,
gritted teeth and a whole lot of very valuable time.
But banking has been undergoing something of a revolution.
More than 45 per cent of small businesses are now banking
online, and although figures are hard to come by, anecdotal
evidence on charities suggests a similar trend. And in our
personal finances, logging on to check a balance, pay a bill
or transfer money has become the norm.
Charities, it seems, are beginning to see the merits of managing
their funds on their own computer screens. Clients of Butterfields
Private bank, which include charities and small to medium
businesses, have increased their use of online banking by
400 per cent over the past two years, while Triodos and CAF
Bank both report a significant surge in the popularity of
internet banking among charities.
So what is attracting so many charity customers to switch
to internet banking? To begin with, it is cheaper, and in
some cases it’s actually free. Triodos charges its charity
customers 40p per paper credit and debit, such as the paying
in of a cheque. Online payments, on the other hand, cost between
10p and 20p, while transfers between accounts are free.
Butterfields allows its paper-based customers to clear 23
cheques at no charge, but beyond that, says managing director
Paul Turtle, the charge to clear a cheque runs into pounds.
With paperless online transactions, on the other hand, there
is no fee. And the benefits work both ways. “The last
thing we want is lots of cheques to process,” says Turtle.
Online banking removes the need for staff to physically process
pieces of paper, and so the costs to the bank are lower. These
reductions are in turn passed on to the customer.
At CAF Bank, a registered charity with a mission to help other
charities make the most effective use of their finances, all
transactions are free, whether paper-based or online. Director
of charity financial services operations, Peter Mitchell,
says that for the bank’s customers, the greatest benefit
of online banking is the control it gives organisations over
their own finances.
The range of services available online is steadily growing.
Perhaps the most frequently put to use, the banks say, is
simply the ability to view balances on the screen. To charities
large and small, knowing whether a grant has finally come
through or whether a cheque paid out to a supplier has cleared
is vital to the everyday management of cashflow. And running
a fine toothed comb regularly through the finances in this
way means that waiting for a monthly statement to arrive in
the post becomes a thing of the past.
They can also set up standing orders and direct debits, make
BACS payments and pay salaries. “A lot of charities
have people they pay regularly but different amounts each
time. They can set up a payment online but change it each
month,” says Mitchell.
The time saved in making online payments compared to the traditional
chequing method is just one area where online banking comes
into its own. With paper-based payments, the process is painfully
slow. You sign a cheque, then you find the person who needs
to countersign it. You put it in an envelope, frank it and
post it. It bravely makes its way through the perils of the
Post Office and, fingers crossed, into a pile of post for
the recipient. He or she takes it to the bank to deposit it,
and three working days later the money should be in his or
her account.
Payments made online may still require more than one authorisation,
which can be carried out online, and certainly still have
to follow the out-dated clearing process set up for the receipt
of cheques, so that a payment authorised on Monday morning
will not be with the recipient until Wednesday. However, take
away the passing around of a signed piece of paper and you
are likely to shave two or three days off the time it takes
to pay your supplier. And when the overhaul of the clearing
system, due in 2007, takes place, online payments could become
instant.
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Liz Benton, relationship manager in the charities team at
Co-operative Bank, which is planning to launch a full internet
service soon, says: “With the advent of the faster payments
system in 2007, the e-banking market will become even more
crucial to both the banks for their product delivery and also
to the charity market for their daily banking requirements.”
Before fully fledged internet banking was the dial-in service,
like the one Co-Operative has been running for more than a
decade. This is a PC-based system which uses an analogue modem
to contact the bank, and which can be used to make salary
payments and so on. The dial-in system was sophisticated enough
to allow for more than one person to authorise transactions,
in line with the Charity Commission’s guidelines.
However, online banking struggled to come up with a suitably
secure solution which would give charities the same level
of authorisation. Some high street banks, along with specialists
such as Butterfields, have opted for charities to draw into
their mandate the fact that one person has been given the
authority to carry out transactions on the charity’s
behalf. As an extra layer of security, Turtle says the bank
would contact the charity about any unusually large payments.
Others have found ways to allow more than one signatory to
authorise transactions. Triodos, for example, operates a Digipass
service. Each person with access to the account holds a Digipass,
an electronic device which generates access codes, and the
bank charges £10 per Digipass.
CAF Bank, too, sets up accounts which require the authorisation
of a second signatory on certain transactions, including payments,
which has proved popular with its customers. “A lot
of our customers said they would like to be able to access
their accounts online, but that if it was made so that just
one person could see them they would not want the service,”
says Mitchell. Two people should be in charge of the charity’s
chequebook, so two people should have to authorise payments
made online, the customers said.
Under CAF Bank’s online accounts system, one person
can sign in and set up payments due out that month, the first
stage of authorisation, and then contact the other signatory
to say that those payments are ready to go. He or she would
then sign in and release the payments. “It doesn’t
matter where in the country they are, one could be in John
O’Groats and the other in Lands End, the result would
be the same,” says Mitchell.
A combination of technology catching up in this way and an
increasing willingness to use that technology means that charities
have been signing up to online banking in their droves. Sue
Cooper, senior loan manager at Triodos, says: “We have
been developing our current account service over a period
of years, and over that period [online banking] has become
more and more essential. Our customers are very keen because
it gives them access to information directly.” Online
access is now available to all of Triodos’ existing
and new customers.
According to Mitchell, larger charities are leading the march
towards online services, perhaps because of greater headcounts
and so more capacity to take on new procedures. But many small
charities are equally keen, and computer literate. According
to Turtle, the number of cheques coming through Butterfield’s
back office is falling, but, conversely, charities still remain
big users of paper-based banking, despite the higher costs
and greater inconvenience involved.
“In a lot of cases, managers would like to be using
online banking but their trustees may be a little conservative,”
says Mitchell. “But as trustees change we are seeing
that it is having an impact on the way people behave.”
As in so many areas in the sector, charities are finding they
have to become more businesslike in their approach and a large
part of that is finding the very best ways to manage their
finances. Mitchell says: “It is about recognising that
where people have made a financial commitment, it behoves
a charity to make sure that this is dealt with in the most
efficient and cost-effective way.” And, if technology
can keep pace with security imperatives, then online banking
can certainly help to meet those obligations.
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