Faster Money Transfers on the way

gt94sss2

I've posted here a few times that faster money transfers are on the way by November next year.

As ever the government wants to take credit for something it hasn't had that much to do with, hence the following Reuters story today:

LONDON (Reuters) - The government will on Tuesday outline plans to speed up electronic money transfers and provide clarity on cheque clearing times from next year, as it sets up a new industry body to monitor the payments system, according to Treasury officials.

Treasury Minister Ed Balls will say the measures will increase certainty and clarity for making payments by the Internet, standing order, cheque, over the counter or over the phone.

As part of the proposals, from November 2007 the time taken to clear payments made over the Internet, phone or by standing order will fall from three days to a matter of hours, and potentially near real-time for Internet and phone payments.

For cheque payments, the changes would mean that by the same deadline interest will be payable on a cheque within two days of it being paid into an account, money can be withdrawn within four days and the cheque will not bounce after six working days.

Balls will outline the plans at a meeting on Tuesday with the banking sector and consumer groups, the officials said, and will announce the creation of a new Payments Industry Association, which will be chaired independently and monitor the implementation of the new agreements.

The BBC also has a item on this.

Regards
Sunil

Dagobert

Undoubtedly, we will have to pay monthly fees instead. Great saving.

Milarky

See here, Ed Balls' name used to be 'Andrew Smith'!

..in 1990 cheques earned interest from the date of deposit (that's when we all slipped comatose into accepting these irksome delays) notwithstading how long it took to clear them
..banks often insist on paying us our own money in cheques - particularly for largish amounts - this issue of their discretion seems to have been unaddressed in this yet-another-promise-of-action-announcement
..that's twice recently Balls has used 'clarify' - the other occasion being the hand-waving decision to keep ISAs, and 'clarify' the distinction between cash and shares. 'Clarify' seems to be nulabour code for: 'tell you, later'
..as usual it is the banks, the industry concerned, that have agreed these changes in their own time. It just seems that it always left to self-regulation these days and the gov't is too busy taking civil liberties to actually make big business do anything differently

ManAtHome

...but not for cheques http://news.bbc.co.uk/1/hi/business/6144756.stm

Milarky

See here, in the Guardian:

[Apologies for the longish select quotes used] But I thought we need to spell a few things out here:

[1] Capitulation by the Regulator
[2] Industry takes the reins
[3] nothing has happened for six years on cheques
[4] Consumers were't really consulted actually, were they?
[5] & [6]..says APACs, but what about the bigger average value of the single monthly cheque you recieve?
[7] So cheques will still lose two days added interest if paid in on a Thursday or Friday, as they will cross two ''non working days" at the weekend before the third working day is reached - and consumers will have scarcely benefited at all from this 'sweeping' change [a mere single day shaved off an unacceptably long period]
[8] Who are they? scarcely acting as on the ball consumer champions if they can see any real inprovement in these provisions...

"OFT backs down from forcing banks to clear cheques quicker"

[1]The Office of Fair Trading has backed down from forcing banks to speed up the time they take to move cheques between accounts... the OFT's Payments Systems Task Force has instead recommended a number of changes to standardise practices. Ed Balls will announce today that [2]the task force is to be replaced by the Payments Industry Association, a self-regulator whose working will be reviewed by the OFT after two years. The PIA will be created early next year; it will be required to publish minutes of its meetings.

[3]Cheque-clearing and other payments were highlighted in the Don Cruickshank review of banking six years ago. [4]The decision not to replace the three-day cycle was taken after discussions with consumer groups and the industry. It has been concluded that [5]consumers would lose from faster cheque clearing, according to Apacs, the body which clears payments in the system. It said [6]customers typically write two cheques a month and receive one.

The OFT ..has concluded there is "no float" in the central cheque-clearing system and that the float created by individual banks would be wiped out by the requirement for customers to receive interest more quickly.

The task force's recommendation requires [7]money paid into accounts to receive interest, or count against overdrafts, "no later than two working days" after the cheque is deposited, while customers should be able to withdraw funds "no later than four working days" after the cheque is deposited.

[8]The National Consumer Council welcomed the change. "Britain's centuries-old cheque clearing system has for too long been slow and confusing," said Philip Cullum, the council's deputy chief executive.

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It's still a welcome and most useful to speed up BACS payments of course, but should that be the talking point? - the wool-pulling nature of this announcement should be!

gt94sss2

Milarky wrote:

It's still a welcome and most useful to speed up BACS payments of course, but that should be the talking point? - the wool-pulling nature of this announcement should be!

Hmm - as the Guardian article also states that cheques are going out of use with the number issued falling by 8% a year. Added to that, more and more shops are refusing to take cheque payments, so I would expect the rate of decrease to increase + it will be even faster now due to the faster transmission time for electronic payments which will benefit more and more people over time.

Its just not worth spending money on something less and less people are using each year.

Also, the one thing you didn't mention about cheques is that many banks already meet or exceed the new 'minimum interest rules' and I would expect this to continue.(i.e some pay interest from day 1 anyway)

I think the 'win' for customers who pay in cheques is that they will no longer be returned 'unpaid' after 6 days, which will be a big reassurance to people who sometimes need to worry about such things.

Regards
Sunil

Milarky

gt94sss2 wrote:

as the Guardian article also states that cheques are going out of use with the number issued falling by 8% a year.

Courtesy of the horse's mouth:

6.5 million cheques and credits pass through the GB interbank clearing each working day. Cheque volumes reached a peak in 1990 but usage has fallen since then, mainly owing to increased use of plastic cards and direct debits by personal customers. However, cheques remain popular in the business sector for paying suppliers.

Overall cheque volumes are expected to continue to fall from a level of 2.8 billion in 1999 to about 1.7 billion by 2009.

http://www.apacs.org.uk/uk_payment_schemes/cheque_credit_clearing.html

..and I wrote:

"..in 1990 cheques earned interest from the date of deposit (that's when we all slipped comatose into accepting these irksome delays) notwithstading how long it took to clear them"

So it appears cheque use was curtailed when the banks introduced that handy 3 days wait for your interest [I recall it coming in at Nationiwide that autumn.] Interesting. I just didn't like it the way they introduced that change without any one year lead-in time and probably no consultation either. I'd just like them to credit cheque interest from the date of receipt. If as they say there geniunely is no 'float' then why retain the float mentality as a standard? Why maintain a dual approach to 'cheques' and 'transferred funds' provided people aren't drawing on cheques instantly? They said they can't justfy making any efforts to speed the process - despite there still being about 1.7 billion to handle each year. And why should we be damned by the weekend (two non-working days) if we can't always control on what days we recieve cheques. What this announcment has actually done is deceive some dim-witted people at the National 'Comsumer' Council, passed the 'Balls Test on Clarity' and in the process actually stretched the difference between the two kinds of transactions from what they are today:

....................Now................. Nov 2007

Cheques.........3 WD..................2 WD

BACS.............2 WD..................0 WD

Difference...... 1 WD.................2 WD