why do cheques take so long?

Buzby

In the USA a customer receiving a cheque can deposit it electronically, using an App, the take a picture of the cheque front and the bank does the rest. Bank of America introduced it in 2011.

What are the chances of this happening here? Less than zero, I suspect.

derrick

kiebee wrote: »

No they aren't, the clearing process still requires the physical exchange of the paper cheques between banks. A brief summary of the process can be found here if you're interested: http://www.chequeandcredit.co.uk/about_us_and_our_members/cheque_processing_overview/

Yes OK, I can see that re cheques, but that does not excuse the reason BACS takes 2-4 days,(6 if a weekend is involved), as it is an auto action once set in motion, same as FP, i.e. if I send a FP it is me that does the banks employees work re pressing the required buttons and it is received within 2 hours at my recipient.

But if I send via BACS, be it online or over the phone, the only difference is over the phone, and that difference is the banks employee does the button pressing, so no reason why BACS should take 2-4 days or why it cannot be continued over the weekend because after the button pressing, (by me or the emplyee),the transaction is via an automatic system.


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YorkshireBoy

derrick wrote: »

But if I send via BACS, be it online or over the phone, the only difference is over the phone, and that difference is the banks employee does the button pressing, so no reason why BACS should take 2-4 days or why it cannot be continued over the weekend because after the button pressing, (by me or the emplyee),the transaction is via an automatic system.

BACS, as in the old 3-day process, doesn't exist anymore for personal banking customers does it?

The PSRs require funds to arrive by the end of the next working day. Worst case scenario is initiating the payment late on the Thursday before Good Friday, as the funds don't HAVE to arrive until the Wednesday after Easter Monday. In practice, however, they're almost always much faster than that.

derrick

YorkshireBoy wrote: »

BACS, as in the old 3-day process, doesn't exist anymore for personal banking customers does it?

The PSRs require funds to arrive by the end of the next working day. Worst case scenario is initiating the payment late on the Thursday before Good Friday, as the funds don't HAVE to arrive until the Wednesday after Easter Monday. In practice, however, they're almost always much faster than that.

I am not sure, does it, I am certain I have been told in the last 12 months by various bank employees that BACS can take up to 3-5 "working days".

The point still remains that in this day an age of 24/7 nearly everything, that the banks refuse to "work" on these transaction over weekends and BH's! FP work within 2 hours, why can't BACS which is basically the same procedure?

As I said in my first post on this thread: - "I wonder how the banking staff would feel if, for example, the phones, electric. gas etc stopped over the weekends?". They certainly would not like it would they?

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JuicyJesus

Buzby wrote: »

In the USA a customer receiving a cheque can deposit it electronically, using an App, the take a picture of the cheque front and the bank does the rest. Bank of America introduced it in 2011.

What are the chances of this happening here? Less than zero, I suspect.

The US is still heavily reliant on cheques, and their infrastructure for processing them is remarkably different out of sheer necessity. Things we'd use BACS or Faster Payments for here are typically done with cheques over there.

Here meanwhile, usage of cheques is dying off because BACS and Faster Payments do many of the same things only quicker and more securely, and most bills are paid with Direct Debit. There is simply no great drive to improve cheque clearing because the segment of people who prefer using cheques for things is, almost literally, dying off.

YorkshireBoy

derrick wrote: »

I am not sure, does it, I am certain I have been told in the last 12 months by various bank employees that BACS can take up to 3-5 "working days".

The PSRs have been around since 2009, so the "various bank employees" are well behind the times.

The only 'BACS' function available now is BACS Direct Credit, which is used primarily for salary, pension, and benefits payments. The payments are initiated on day 1 and funds are simultaneously debited/credited on day 3 (as per BACS Direct Debit). Note these are 'working days', so could be as little as 3 days and as long as 7 days (as in my Easter example above).

I do share your view on 24/7 though.

JuicyJesus

derrick wrote: »

Yes OK, I can see that re cheques, but that does not excuse the reason BACS takes 2-4 days,(6 if a weekend is involved), as it is an auto action once set in motion, same as FP.

No. The two systems are architecturally and technologically different. BACS is set up for large batch runs of payments of varying sizes which are fed into the clearing system and settled on the value date (before the advent of FPS, BACS payments accepted by banks weren't ever put into the clearing immediately, they were aggregated into one batch which was sent off in the evening); Faster Payments is set up for smaller, ad-hoc payments which are settled immediately. What you are saying is "my apple should taste like an orange because they are both fruits and they're next to each other in the supermarket".

Now, if you want to have funds arrive the same day they're sent, you have two options: FPS or CHAPS. Many people choose the cheapo option for large payments and elect for BACS, which some banks still do for free for larger payments, and then wonder why it goes through the three day clearing cycle. The way to avoid the BACS clearing cycle is to not use BACS.

For avoidance of doubt, the way it works is this:

Working day 1: Payment input, is sent to BACS as batch file
Working day 2: Processing day
Working day 3: Credit hits payee's account and debits the remitter's account

Direct debits work in the same way; the payment is fed into the system on day 1, processes day 2, debits and credits on day 3. "3-5 working days" is a timescale given to allow for processing !!!!!!-ups at either end and to manage expectations.

derrick

JuicyJesus wrote: »

No. The two systems are architecturally and technologically different. BACS is set up for large batch runs of payments of varying sizes which are fed into the clearing system and settled on the value date (before the advent of FPS, BACS payments accepted by banks weren't ever put into the clearing immediately, they were aggregated into one batch which was sent off in the evening); Faster Payments is set up for smaller, ad-hoc payments which are settled immediately. What you are saying is "my apple should taste like an orange because they are both fruits and they're next to each other in the supermarket".

Now, if you want to have funds arrive the same day they're sent, you have two options: FPS or CHAPS. Many people choose the cheapo option for large payments and elect for BACS, which some banks still do for free for larger payments, and then wonder why it goes through the three day clearing cycle. The way to avoid the BACS clearing cycle is to not use BACS.

For avoidance of doubt, the way it works is this:

Working day 1: Payment input, is sent to BACS as batch file
Working day 2: Processing day
Working day 3: Credit hits payee's account and debits the remitter's account

Direct debits work in the same way; the payment is fed into the system on day 1, processes day 2, debits and credits on day 3. "3-5 working days" is a timescale given to allow for processing !!!!!!-ups at either end and to manage expectations.

"Many people choose the cheapo option for large payments ", not sure what you mean by "large payments" as my bank allows up to £25000 per day using FP, (Halifax). Some others, I believe, operate on much lower levels hence why some people still prefer to use BACS rather than pay the extortionate CHAPS fees!

Despite your explanation, it does not explain why BACS cannot use the FP system when they both use the same mechanism, i.e. computers that run 24/7!

It still does not account for why banks still choose to only operate 5 days a week when most others work 7! Weekends these days are not leisure times, and lets face it the banks do operate on Saturdays and Sundays,(via internet and phone, and some opening branches), so if I can send a FP on a Friday and it gets to the recipient within 2 hours, why can the same not happen via BACS? It is a simple question but no one seems to have the actual answer, other than greed re the banks as it gives them the opportunity to hold our money and not pay interest on it! Maybe it should not leave our accounts until the recipient requests it and at that point the interest on the money should swop from the delivering to the receiving bank, thereby the consumer never losing interest!


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JuicyJesus

derrick wrote: »

Despite your explanation, it does not explain why BACS cannot use the FP system when they both use the same mechanism, i.e. computers that run 24/7!

Because BACS and FPS are entirely different systems. World of Warcraft and MoneySavingExpert run on computers that run 24/7 too, but similarly they are entirely different systems. Although, as it's a batch system, the BACS computers *aren't* 24/7.

To refer back to my analogy, what you're saying is "when I buy an apple, why can it not magically turn into an orange because that's what I really want?"

if I can send a FP on a Friday and it gets to the recipient within 2 hours, why can the same not happen via BACS?

Because BACS is a system that, as stated, serves a very different purpose from Faster Payments, a purpose for which no further development is needed - that purpose being timed batch payments. It is not intended for one-off ad-hoc payments.

And, again, they're entirely different systems.

Some others, I believe, operate on much lower levels hence why some people still prefer to use BACS rather than pay the extortionate CHAPS fees!

Thus, you pay less, and receive a lower quality of service. If you know what BACS is then you will know enough that the trade-off is between lower cost for large payments and speed of clearance.

Also, the CHAPS fee is by no means extortionate, it accurately reflects the cost of processing the payment, which involves risk and manual work for both ends of the transfer.

It is a simple question but no one seems to have the actual answer, other than greed re the banks as it gives them the opportunity to hold our money and not pay interest on it!

Can't speak for all banks, but some will pay interest up until the recipient receives the money two working days later. Of course, most now only offer FPS and CHAPS to individual customers, where the funds reach the other side the same day anyway, rendering the point moot.

Maybe it should not leave our accounts until the recipient requests it and at that point the interest on the money should swop from the delivering to the receiving bank, thereby the consumer never losing interest!

See above.

pinkdalek

derrick wrote: »

It is about time the banks came into the 21st century and stopped these "non working days". I wonder how the banking staff would feel if, for example, the phones, electric. gas etc stopped over the weekends?



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Couldn't agree more, same should be in place for schools, council workers, politicians to name a few