MSE News: Osborne commits to speedier bank account switching

JuicyJesus

Consumerist wrote: »

I don't see that banks will need to "chase up" anything. If a call is made on a transferred DD, the old bank just passes it to the new bank for execution. I don't see that as being "a*se-backwards".

It's a technical impossibility. The Direct Debit system is simply not set up to do that. "Execution" in this case would effectively be one bank deducting money from the customer's account with a different bank entirely... who hold no mandate entitling them to do so. Not to mention, there is no technical means of deducting money from another bank's account, other than... the Direct Debit system. There are potential issues with fraud here as well.

Frankly it's all a lot of complexity for very, very little benefit, which also runs up against fundamental structural features of the Direct Debit system. File it under "nice to have but not going to happen". And it's still only something that might be needed because people insist on switching in the "a*se backwards" way that means DDs get switched by the one party who has the least control over them or when payments are claimed from them.

Consumerist

JuicyJesus wrote: »

It's a technical impossibility.

Well, the banks said faster payments were an impossibility for years. Then they were told to do it and it is now done.

Isn't it clever of those banks to do the apparently impossible?

innovate

Consumerist wrote: »

Well, the banks said faster payments were an impossibility for years. Then they were told to do it and it is now done.

Isn't it clever of those banks to do the apparently impossible?

Faster Payments are entirely within the banking industry's (BBA's) control.

Direct Debits aren't. In 99% of all cases the mandates are with an organisation that the banking industry has no control over.

Consumerist

I think you and juicyjesus are running a mutual admiration society here.

The banks run the DD system so they could modify it if they wanted to.

But that would mean providing a service which customers might want to facilitates easier switching and that is something the banks don't want.

I hope Cameron keeps his word and drags the banks kicking and screaming, as is usually the case, into the 21st century.

DaveO

JuicyJesus wrote: »

It's a technical impossibility. The Direct Debit system is simply not set up to do that. "Execution" in this case would effectively be one bank deducting money from the customer's account with a different bank entirely... who hold no mandate entitling them to do so. Not to mention, there is no technical means of deducting money from another bank's account, other than... the Direct Debit system. There are potential issues with fraud here as well.

It's actually technically very simple. If you know what accounts have been switched, which you do, then you simply intercept the DD request and send it to the account holders new bank.

This requires a table to be held and maintained that holds all the accounts that have been switched along with the new bank and new account details and that the table is searched each time a DD request is made. That may sound horrendous but it actually isn't given the numbers of accounts needed to be held in the system at any one time. An account will remain in the table for a number of months to cater for yearly DD's etc.

Account switching for Standing Orders and Faster Payments work like this as well and believe me I should know because lets put it this way, I won't be allowed to go on leave when they switch it on in Sept!

Frankly it's all a lot of complexity for very, very little benefit, which also runs up against fundamental structural features of the Direct Debit system. File it under "nice to have but not going to happen". And it's still only something that might be needed because people insist on switching in the "a*se backwards" way that means DDs get switched by the one party who has the least control over them or when payments are claimed from them.

It's actually quite simple. The interesting part is making it go fast enough.

As to the value it adds you need to consider that as soon as the new account is set up DD's (and payments) will be directed to it right away it becomes active. So despite the fact the local council stuck the notification to change your DD in the instruction in the in-tray and then sent the DD request to your old bank it goes to your new bank. A similar thing happens with payments. Suppose you send money to your con/daugher at Uni, they switch to a new bank account and don't tell you. No problem, the money will end up in the their new account.

Consumerist

DaveO wrote: »

It's actually quite simple. The interesting part is making it go fast enough.

Nice to see someone talking sense at last.

Care to expand on the speed issue?

DaveO

Consumerist wrote: »

Nice to see someone talking sense at last.

Care to expand on the speed issue?

I am not going to give any figures - I might get slapped wrists for that but essentially it boils down to how many accounts are held in the table you need to search, how fast you can physically access the table and how many times you have to access it. As most accounts won't be in the process of being switched it ought to be no surprise most searches will be fruitless.

If you are into your computer science you will know searching is a well understood topic so the effect of adding the search into the mix has been considered.

Consumerist

It occurs to me that the issue, as far as a customer is concerned, is that the payment request is not returned unpaid as happens at the moment. It should not be of much concern that the recipient gets the funds a day or so late because they haven't acted on the advice of bank change.

Is the payment delay likely to be longer than a day or so?

DaveO

Consumerist wrote: »

Is the payment delay likely to be longer than a day or so?

I can't say with regard to DD's but for SO's and faster payments how long it takes to set up will be down to how fast the individual banks take to process the account switch request.

As soon as they give the info to the central switching system and that is updated then payments will be going to the new account right away. How often updates are applied is another operational consideration I am not aware of. Technically it could be updated as often as you like but I'd guess it will be once a day probably before standing orders are run.

So how long it takes to start payments being redirected is not a technical limitation but an operational one. I assume (but don't know) the seven days mentioned in the press is the time the banks will have to get the operational side sorted out and supply the required information to the computer systems.

Alpine_Star

JuicyJesus wrote: »

And Donald Cruickshank is talking out of his 'arris. Sure, it would revolutionise competition - it would also, using his same example, make financial institutions remarkably susceptible to bank runs and general instability.

I must remember that one.