The importance of a payment reference
You wouldn’t send a birthday card without signing your name, so why do exactly that when making a payment?
The number of consumers and businesses making electronic payments to pay bills will increase over the next decade, as use of paper-based payment methods continues to decline and billers continue to favour more efficient methods for receiving payments.
However, in spite of the growing number of electronic payments made using CHAPS, Faster Payments and Bacs, UK businesses lose millions of pounds each year trying to resolve problems caused by customers giving inadequate or incorrect payment information.
A payment reference, which can normally be found on the payment details of a bill, is crucial when making an electronic payment as it links a payment to the account of the person or organisation that has sent the payment.
Using the wrong reference, or not even one at all, is troublesome for both consumers and businesses. For consumers it could mean a late payment as the recipient struggles to link the money to a customer’s account. Whilst, for businesses, not being able to attribute payments received requires them to either return the payment, or carry out time-consuming and costly investigative work to try and match the payment to the customer.
To help address this problem, the Payments Council has worked with a variety of large billers, including HMRC, vendors and payment service providers to agree best practice that billers and banks can adhere to when reminding their customers of the importance of using accurate reference information.
Billers need to make sure their customers are aware of the importance of including reference information and help them to use it by displaying the reference clearly and unambiguously at the top of a bill. They should also try to limit the reference to 18-characters (the maximum transmittable length using the Bacs service).
Best practice for consumers urges them to include the payment reference exactly as it appears on the bill, using all the instructions and details provided.