The government has handed PayPoint a seven-year contract to provide welfare payments.

The contract, which begins in 2012, is worth £20m per year and will be shared between PayPoint and Citibank. The new payment system will replace the giro cheques paid out by the Post Office to the 2% of welfare recipients who do not have benefits paid into their bank account.

“Welfare cheques have become outdated, costly and too open to fraud,” said employment minister Chris Grayling. “This new service will be free of charge to customers and accessible over the counter at PayPoint outlets.

“PayPoint outlets are already serving many of our customers and can be found in newsagents, community stores, and other local outlet.”

Citibank and PayPoint were awarded the contract after a competitive tender. The Department of Work & Pensions will pay set-up fees for the new service.

“We are delighted that the breadth, quality and efficiency of the PayPoint retail network has been recognised by DWP and look forward to working with the Department to deliver this very exciting and socially important initiative,” said chief executive Dominic Taylor.

“The proposed new system for cash payment of benefits through our network will make it far easier for the recipients to access their own money at locations and times that are more convenient for their circumstances and lifestyles.”

The news completes a good week for PayPoint, which yesterday clinched victory in its long-running battle to prevent Camelot offering commercial services through its National Lottery terminals.

But the National Federation of Sub Postmasters (NFSP) described today’s decision by the government as “bitterly disappointing”.

“Benefits cheque customers rely on their local post office to provide this important service,” said general secretary George Thomson.

“Many of these customers will be unwilling or unable to travel to a PayPoint outlet such as an off-licence or garage forecourt to claim their weekly pension or benefit allowance.

“Furthermore, we are unconvinced that PayPoint will be able to deliver this important and complex service.

“The company hasn’t consulted with its agents on their ability or willingness to provide the service. Instead PayPoint continues to force a race to the bottom, making below-cost bids for contracts by driving down rates paid to their agents ever further.”

Read more
Camelot denied in commercial services bid (2 March 2011)
Cold weather helps offset mobile slump for PayPoint (25 January 2011)

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