Clearing banks' 3 day scam

flying_teddy

As a newbie to the board, I'm sorry if this has been brought up before, but it really pi... annoys me.

My grief is the 3 days that it takes clearing banks to move money. The whole point of being a clearing bank is that they have a system with which they move money between each other painlessly. Now, we all know that it is possible to move data within a secure network within a few microseconds. With diversity and security checking, this could be as much as a few milliseconds. Why then, does it take 3 days to move money between two points on this network; i.e. between branches of different clearing banks? The clearing banks are connected together by such a secure network. For example, every time you withdraw cash from an ATM, this network is used to authorise the withdrawal, thus proving that it is possible and in fact is done thousands (if not millions) of times every day.

If I send some money, it is removed from my account the same day. 3 days later, it appears in the recipient's acount (5 days if a weekend is involved - and oh yes, if I'm overdrawn, do I get charged interest for weekend days? I wonder...). Where is the money in the meantime? To whom does it belong, and who gets the interest? On any one day, there must be millions (if not more) of pounds in transit between accounts.

To my mind this is a completely unnecessary scam on the part of the banks to gratuitously use customers' money for their own ends without permission from the owner of the money.

Does anyone have any ideas about how we can force the banks to move into the 21st century and stop pretending that these sums are authorised by Royal Mail and perform electronic transfers the same day? All other service industries can do this, why not the banks? I have asked my bank about this some time ago, and yes, they did say that hard copy between branches was required to authorise!!! Yeah. Right. :rolleyes:



Rant over....

jobbingmusician

Yes, it is an enormous scam.

I think I've heard that it will change (later this year???) though - keep watching!

Zippy123

:mad: :mad: :mad: Goodness you want something for nothing don't you. The banks run your account for no fees save for charging when you go overdrawn - years ago you had to pay 25p per cheque (like £2 now).

The banks offer this free service because they make money by lending yours out. They lend upto 9 times the amount you deposit. They do this so that they can pay interest on your deposits, keep the buildings going, pay staff etc. etc. When a loan goes bad they don't come back to you and say "tough" you can't have your deposit back, they must pay for this out of profits which they make by not paying interest for the three days clearing. Cheques do not clear fully electronically anyway. They go to a central depot and are sorted by the sort code and are encoded (the amounts are read by operators who key the amounts). The cheques are then sent to the appropriate account holding bank who check availability of funds and make payment as appropriate. They then send that data back to the paying in bank.

The 3 days clearing effectively covers money phyisically moving around the system. The banks pay companies like Securitas to move the money and this costs a lot. They pay £thousands for cash point machines and staff to refill them.

Most processes for cheque clearing run overnight, the system is not live, it is run on mainframe computers overnight and they process millions of transactions, pc's just would not cope with the volume of information. The data is run overnight because the banks use their computers in the day for account enquiries etc.

The banks systems are thouroghly tested and even relatively simple programms can cost a fortune as the testing has to be rigourous - so that the system remains secure and does not muck up customers' details.

The banks also operate in a highly regulated environment. Adhearing to the regulations for your protection costs money, as does providing the infrastructure etc. Will you pay a donation next time you are in a branch?

They provide staff free of charge to answer your calls and serve you at the counter. And you complain about a few days clearing!

tomstickland

Well, how about a compromise where they can have the interest for 3 days, but move the money straight away?

Chobra

i done this subject at university a year or two ago, if my memory serves me correctly they have the whole system in Sweden (i think,maybe norway) so that the cheques are cleared in a matter of hours rather than days.

One of the directors of a major bank had said they were going to implement the idea but then changed his mind and stated that they were puting the idea ''on the backburner'' for the time being.

The main reason for this is due to the extent the banks can invest the money in the overnight moneymarkets throughout the world and the need to keep their shareholders happy rather than the customers.

deary65

Zippy123 wrote:

:mad: :mad: :mad: Goodness you want something for nothing don't you. The banks run your account for no fees save for charging when you go overdrawn - years ago you had to pay 25p per cheque (like £2 now).

The banks offer this free service because they make money by lending yours out. They lend upto 9 times the amount you deposit. They do this so that they can pay interest on your deposits, keep the buildings going, pay staff etc. etc. When a loan goes bad they don't come back to you and say "tough" you can't have your deposit back, they must pay for this out of profits which they make by not paying interest for the three days clearing. Cheques do not clear fully electronically anyway. They go to a central depot and are sorted by the sort code and are encoded (the amounts are read by operators who key the amounts). The cheques are then sent to the appropriate account holding bank who check availability of funds and make payment as appropriate. They then send that data back to the paying in bank.

The 3 days clearing effectively covers money phyisically moving around the system. The banks pay companies like Securitas to move the money and this costs a lot. They pay £thousands for cash point machines and staff to refill them.

Most processes for cheque clearing run overnight, the system is not live, it is run on mainframe computers overnight and they process millions of transactions, pc's just would not cope with the volume of information. The data is run overnight because the banks use their computers in the day for account enquiries etc.

The banks systems are thouroghly tested and even relatively simple programms can cost a fortune as the testing has to be rigourous - so that the system remains secure and does not muck up customers' details.

The banks also operate in a highly regulated environment. Adhearing to the regulations for your protection costs money, as does providing the infrastructure etc. Will you pay a donation next time you are in a branch?

They provide staff free of charge to answer your calls and serve you at the counter. And you complain about a few days clearing!

Talk about having something for nothing!! Watch these two videos!
http://www.propagandamatrix.com/multimedia/Money_Masters_Tape1_Part1_all.wmv
http://www.propagandamatrix.com/multimedia/Money_Masters_Tape2_128KBps.wmv

Alfie_E

Zippy123 wrote:

Most processes for cheque clearing run overnight, the system is not live, it is run on mainframe computers overnight and they process millions of transactions, pc's just would not cope with the volume of information. The data is run overnight because the banks use their computers in the day for account enquiries etc.

I think the OP was more referring to transfers by BACS, which is also an overnight batch process. It’s not so much that it has to be an offline process on a mainframe than it had to be that way. In computing terms, the systems are very old, and were cutting-edge when introduced. If they were being designed today, they’d be designed completely differently.

As Zippy123 wrote, any change, even a small one, is hugely expensive. Unfortunately, the current systems are of benefit to the banks, and there’s no incentive to change them. Things do change, eventually. The SWIFT system, the system for transferring money internationally, for example, recently moved from an old X.25 system to a new IP-based (Internet) system.

exel1966

The following link will give you all the low down on BACS system changes to be effective by 2007.

http://www.fool.co.uk/news/comment/2005/c051216f.htm

IvanOpinion

Others have already mentioned the BACS system which currently is the bottleneck (I worked on this many years ago) ...I could go into a long explanation about how BACS works and why it takes 3 days but you can easily find this using Google, the system is just antiquated ... but is due to be replaced.

Three days is acceptable ... what concerns me more is that the T&C will probably state that it can take up to 6 working days (I trust you did read these before you agreed to them) - therefore you can not complain if they are doing it in half the time.

Other things to be aware of though is that a cheque has two stages in the clearing process. The money looks like it present after the first stage but the bank can claw it back if the second stage fails (often leaving their clients overdrawn). A lot of people on eBay exploit this loophole.

Ivan

stugib

I once missed a credit card payment date (a bank transfer over the phone rather than cheque) because it took a couple of EXTRA days to clear because of the bank holiday weekend (like they switch off all the computers when they go home! ).

Halifax have an ultra confusing system - pay a cheque in and it appears in your account and in your balance immediately. But they also have a mysterious 'cleared balance' which doesn't include the cheque amount but does include payments that are due to come out soon, and that's what they use when you're trying to move money around:

I want to withdraw £50
"Sorry, you balance is £10"
But my balance says £50
"Ah yes, but that that £40 cheque you paid in and we show in your balance isn't really there yet"
:rolleyes:

flying_teddy

What an interesting variety of views;

I'll put it another way; if I run a bakery and you want a loaf of bread, how would you feel if I say "Thanks for your money, I'll give you the bread in 3 days time. Now that I've got your money, that gives me time to go and buy the flour etc., and bake the bread then test it, and when I'm completely satisfied, then you can have the bread. Sorry if it's inconvenient; I can see that you're hungry today, but hard luck. You can't possibly complain, because I've already had to pay out for premises, the ovens, the mixing equipment etc. If you look at my terms and conditions of trading, you'll see that I reserve the right to take a week to give you your loaf, so actually I'm doing you a favour."

Sound good to you?