Public sector payments do not tend to generate a lot of buzz in the payments industry, they certainly don’t command the same attention that AI, stablecoins or the latest in retail payments innovation might. Despite this, almost £188 billion flows through the public sector ecosystem a year, that’s comparable to the total welfare budget allocated by HM Treasury for 2026 once benefits for pensioners, disabled people, housing support, and working age welfare are added together.
Numbers of this scale make public sector payments significant, but that pot of funds is there to achieve a goal. A public sector payment plays an important role in society – to solve a problem, whether that’s paying for food, keeping a home warm, replacing something that is broken or helping a family through a period when they no longer have financial stability.
This is the idea that sat at the centre of the Payments Innovation Forum’s Innovation Day on public sector payments, offering a useful reminder that designing payments around people requires a different way of thinking.
The vulnerability misconception
Often when we think of vulnerability we think it applies to a particular group of people, but the Financial Conduct Authority’s Financial Lives research has found that roughly half of UK adults show at least one characteristic of vulnerability at any given time, whether that is poor health, a recent negative life event, low financial resilience or low capability. And, that vulnerability can arrive suddenly, someone who was managing perfectly well last month may now be struggling because their boiler packed in or they lost their job. Financial resilience is often about what happens to a person, rather than who they are.
The scale of the exposure is stark – a quarter of Britons hold £200 or less in savings, according to recent consumer research drawing on FCA data on financial resilience, leaving a huge segment of the population one broken appliance away from needing help they never expected to ask for. This should fundamentally change how we think about the payments experience.
Rethinking access
The payments sector has spent years making everyday transactions as close to frictionless as possible, it doesn’t take much more than a few taps on your phone for food to be delivered to your door. But when someone needs emergency financial support, that experience can be vastly different. There can be lengthy forms, supporting documents, bank statement requirements, and potentially weeks of waiting. For someone already under acute financial stress, that gap in experience can quickly become a barrier that keeps people from support they are entitled to.
Platforms built specifically to close that gap are starting to prove what is possible. Lightning Reach lets someone build a single profile and matches it against more than 2,500 grants, benefits and local schemes in one pass, rather than forcing them to discover and apply to each one separately. It is a small structural idea, one profile instead of dozens of forms, but it addresses the exact friction that stops people accessing money that is already theirs by entitlement.
The pros and cons of cash
The move towards digital payments shouldn’t mask the importance of cash. LINK’s most recent Cash Index found that 61% of people had used cash in the previous two weeks, and while the proportion is declining, cash undeniably remains a part of life for many. For someone receiving public support, it can also offer a sense of normality and control, particularly for those without a bank account or with limited digital access.
There is, however, a tension between flexibility for the recipient and accountability for the organisation providing the money. Once a crisis payment has been handed over as cash, the council may have little visibility of what happened next. Was it spent on food? Heating? School uniform? Something else entirely? That lack of visibility is not necessarily a problem from the recipient’s perspective, but it creates a genuine challenge for public bodies responsible for demonstrating that public money has been used for its intended purpose.
This is why prepaid cards and virtual payment rails, restricted to specific merchant categories such as food or utilities, have become such an important middle ground. They preserve choice and dignity for the recipient while giving the paying authority a genuine audit trail. Crucially, they also reach people who sit outside mainstream banking altogether. The FCA’s own data shows that around 900,000 UK adults remain unbanked, down from 1.3 million in 2017 but still a significant population that traditional bank transfers simply cannot serve.
Creating an ecosystem
None of this works in isolation, as an effective public payments journey needs several elements to work together smoothly. People need to be able to discover the support that is available to them, while authorities need a procurement route that has already done the security and financial due diligence. There then needs to be reliable payments infrastructure that is capable of getting the money where it needs to go reliably.
Collaborative procurement across national frameworks, rather than each council reinventing its own contract, is one of the more underrated ways this sector could move faster. It reduces administrative burden precisely where it is scarcest, in stretched local authority teams trying to get money out of the door before a crisis deepens.
Beyond the one-off payment
Digital payments create possibilities that cash cannot easily offer such as data and visibility while potentially making it easier to connect people to longer-term support. That needs to be balanced carefully against privacy, consumer protection and the risk of creating overly restrictive systems, but it’s an opportunity worth exploring.
Perhaps the most useful lesson from PIF’s Innovation Day came from looking at the sector through fresh eyes. In many ways, public sector payments are a microcosm of the problems that exist across the wider payments ecosystem. Identification is difficult, trust matters, digital access cannot be assumed, and every piece of friction has a greater impact when the person on the other side of the transaction is already under pressure. So, if we can make payments work better for the people who face the greatest barriers, there is a good chance we can make them work better for everyone.
About the author
Scott Dawson, CEO at DECTA UK, is a highly motivated and results-oriented individual with over 20 years of experience within the payments industry. He is committed to driving DECTA’s UK strategy forward, with a focus on its growth within the UK and supporting small to medium businesses with its broad range of payment solutions.
About DECTA
DECTA is a global payment technology provider offering comprehensive solutions across acquiring, issuing, processing, white label gateway and a digital banking platform. Serving merchants, banks, payment service providers and fintechs, DECTA delivers tailored payment services as a standard, ensuring accessibility and flexibility for every client.
