I thank Deputy Troy for raising this very important issue. I am taking it on behalf of the Minister for Social Protection who regrets she cannot be present. Deputy Troy should be assured she is aware of the issues he raises. The concerns raised by the Deputy have been raised by other colleagues in the House and I am pleased to allay some of their concerns by setting out the Department's plan to modernise the payment of welfare on a progressive basis over the coming years. The Department is a key player in the payment services sector in Ireland, being the largest issuer of electronic funds transfer, EFT, payments in the country and given the scale of cash payments disbursed weekly. The decisions made by the Department about how payments are made to customers impact on the State, most notably in respect of costs.
The Department undertook a root and branch examination of its payment processes, methods and approaches. This resulted in the preparation of a payment strategy which was approved recently by the Government. The strategy has the goal of reducing significantly the level at which welfare payments are made in cash. At present, 50% of all social welfare payments are disbursed in cash. This amounted to approximately €9.5 billion distributed over 43.7 million transactions last year. The analysis undertaken for the payment strategy indicates the very significant variation in the cost of different payment methods. The movement of cash imposes security risks on customers and staff alike who handle, distribute and receive these moneys. Cash limits the options for customers to make onward transactions, limits the scope for customers to avail of cheaper prices online and curtails financial inclusion of customers.
The move to digital transactions is in line with wider Government policies and objectives on better public services and more effective electronic payments as set out in the public service reform plan and the eGovernment strategy 2012-2015. The goal is also shared by the national payments plan and the roll-out of the standard bank account. These initiatives have made the case quite strongly for a move to electronic payments which will contribute to improved national competitiveness.
Cost containment and efficiencies must be sought by all public bodies and the Department is required to examine the means through which all welfare services are delivered, including payment processes. The payment strategy is a multi-phase strategy that will be implemented over a number of years. The first phase has commenced and contract negotiations are currently under way with An Post for the provision of over the counter cash services to ensure that customers can continue to receive their payments in cash at local post offices for the foreseeable future and provide an assurance on the continuity of cash payments to customers for up to six years while other aspects of the strategy are progressing.
The next phase of the strategy will be the progressive migration of customers to electronic funds transfer, EFT, payments. The move to electronic payments for social welfare transactions is a trend that has been apparent for some time and most new social welfare customers, aside from jobseekers, are choosing EFT as their preferred method of payment. The Department does not intend to migrate higher risk customers to an electronic payment until appropriate and robust measures are defined and fully implemented to mitigate the potential for increased risk of fraud within an electronic payments environment.
Undeniably, a loss in the current revenue stream from social welfare payments would impact An Post. I understand that in anticipation of the increasing use of EFT generally, An Post has prepared and implemented a strategy which aims to address the reality of increased use of electronic payment methods within the economy. On the revenue side, An Post has made significant progress in developing new commercial opportunities with other financial and payments institutions and insurance services bodies, notably AIB, Danske Bank and Aviva. New lines of business have been generated, such as foreign exchange where An Post now holds 30% of the domestic foreign exchange business. Post offices were also used as a payment channel for the property tax.
My colleague, the Minister for Communications, Energy and Natural Resources, envisages a strong future for the post office network in which it remains a key player as a front office provider of Government services. The Department of Social Protection is happy to continue to work with the post office network, which delivers excellent and trustworthy services to customers. I assure the House that the phased move to electronic payments and the fact An Post is the preferred bidder for the cash services tender, subject to contract, will provide the board of An Post with the time necessary to ensure its network and services can continue to meet the needs of a changing society.
