Since 2020, there have been significant increases in the use of ‘alternative payment solutions’ to deliver financial support under schemes such as the Covid Winter Grant and Household Support Fund.
As the nation faces a new challenge with increases in the cost of living hitting households, our team commissioned research to understand the experience of those receiving funds and how public sector organisations felt about the delivery of extensive financial relief.
The research consisted of in-depth interviews with national policy makers and local authority representatives, as well as input from lower-income individuals who have received funds in the past. A rounded representation of fund disbursement across the country.
Our insights have enabled us to provide recommendations to local authorities and charities so they can feel confident and supported in their hardship funds delivery, while ensuring dignity in relief to communities hit the hardest.
For a full breakdown of the research download our Payments for Good eBook here.
Alternatively, read on for a top line summary along with key considerations for distributing funds in the near future and beyond.
What hardship support will be available in the next few months?
Before we delve into the findings, let’s review what level of funds will be available to support households through the anticipated rising living costs.
Financial support from the Government across the next 6 months includes:
- a £400 universal energy discount which will be paid out in six monthly instalments. A payment of £66 will be processed in October and again in November 2022. Then a further £67 will be paid each month from December 2022 to March 2023. The discount will be provided monthly regardless of whether consumers pay monthly, quarterly or have an associated payment card.
- a £150 council tax rebate available to everyone who pays council tax.
- a £650 cost of living payment will be offered to more than eight million households in the UK who are entitled to means-tested benefits. All eligible households will receive this in addition to the £400 energy grant. In total, the government scheme will distribute £1.5 billion to local authorities which will be shared among those most in need. To qualify you will need to be in receipt of certain means-tested benefits.
While the initiatives are crucial for many, managing the process has and will continue to place large amounts of pressure on local authorities.
What’s important to households receiving the funds
When it comes to distributing hardship funds there are two main considerations that need to be taken into account: how to create a good experience for beneficiaries to receive and use the funds, and how to reduce costs and administrative burdens for local authorities.
In the past ‘traditional’ payment methods such as cash, cheques and BACS have been used to get funds to people in need. However, these methods can be extremely time consuming and complicated, especially when large volumes are required to be disbursed. Plus, with a digital-first world rapidly developing, it’s vital public sector organisations start considering more ‘modern’ ways to interact with the people they support.
We asked beneficiaries where they typically spend their support payments, and they told us:
- 66% Food / Supermarket items
- 56% Bills, e.g. electricity, gas, water, car insurance, etc.
- 26% Rent
- 23% Clothing
- 22% Household items, e.g. electronics, appliances, furniture, etc.
- 15% Transport / Travel costs
- 9% Activities / Entertainment / Holidays
We then asked beneficiaries what was most important to them when receiving fund support. The top four answers were:
- 1. Speed - speed of access to funds was the highest priority.
- 2. Ease of claiming - 81% agreed that this is essential.
- 3. Choice - 84% want to see some level of control over what the support is spent on.
- 4. Ease of spending - cheques had the most negative reaction, whereas only 7% of participants believed spending vouchers to be very or fairly hard.
Finally, when it came to payment mechanisms, vouchers came out on top, with cash, pre-loaded bank cards and cheques following behind.
Disbursing funds more quickly to those in need.
So, in a nutshell, what does the research tell us?
Many local authorities are not geared up to deal with the sheer volume of disbursements from grants and crisis funds, with no dedicated people in place to manage the process. And, as the cost of living crisis worsens, the demand for support funds is only expected to increase.
It’s clear ‘traditional’ ways of distributing cash and cheques is not going to be possible over the next few months. Not only will those in need be waiting for funds over extended periods of time, public sector organisations will also be put under immense pressure.
Realising the level of support local authorities required, we’ve been focusing on our Payments for Good initiative to provide alternative, cost-effective and speed-efficient payment mechanisms to public sector organisations.
This initiative has helped distribute over one million payments to people in need in the past 12 months, and here’s how we’ve done it .
Gift voucher schemes
Voucher claiming processes are easy and they offer some control over where funds are being spent. Voucher schemes also significantly minimise the administrative burden on local authorities and completely remove the cost of distributing funds. This alternative payment mechanism also gives the central government more confidence that local authorities are able to effectively distribute funding without placing undue stress on their existing resources.
Our gift voucher solutions used by public sector bodies provide a platform which allows households to spend funds in a variety of stores or online. The vouchers can only be spent in the retailers who are part of the scheme, which gives local authorities control over where, when and how funds are being spent. Retailers included within many hardship fund voucher schemes include all the major supermarkets, as well as clothing, tech, fuel and energy retailers.
This is our most popular way local authorities choose to disburse funds, and it’s a popular method with the recipients too. They like the speed, ease of use and the retailer choice.
We also provide prepaid cards that can be loaded with funds for people to spend in stores and online where any normal debit or credit card would be accepted. These cards can be issued without the need for a bank account and as with the vouchers, do not hold any sensitive financial information about the recipient.
It is an effective way to help households purchase essential items, such as food and fuel, as they wish.
By providing food, shopping, fuel and school lunch vouchers in this way we find that recipients use the money on goods they need – rather than funds getting lost on overdraft payments or other debt.
The future for fund disbursement
Using alternative payment mechanisms takes away the strain for public sector organisations to obtain financial details while also eliminating the need to chase and hold sensitive data that not everyone, such as the unbanked or underbanked, can provide. If or when vulnerable groups find themselves in financial difficulty, vouchers and prepaid cards can be administered quickly to get funds to people in need.
For more insight, our eBook summarises the administration and financial comparison between cheques, BACs and voucher support. Download here.