Faster Payments from May 27 - confirmation from APACS

YorkshireBoy

Heng_Leng wrote: »

The collection accounts are primarily used for incoming payments...

Should work fine then post May 27th, because there's currently no (excessive) delay going in as payments are credited on day 3.

:rolleyes:

Indeed!

ps646566

It will take a while to become more or less 100% for sure. Firstly there's the inevitable bureaucratic inertia. Secondly the banks have nothing to gain from this -- except for customer goodwill which many of them generally seem to care precious little about. They will of course lose the interest on our money whilst it's deliberately held up in their systems for up to five working days.

The possibility of charging is an interesting one. I was under the impression that this is an evolution of BACS rather than a separate payment system. If they do charge per transaction then of course it marks the end of free banking, and as such is a big step which they will want to think carefully about. There is still enough competition in the sector for there to be some organisations who would not impose a charge, in the same way as there are some credit card issuers which do not levy an annual fee.

Nevertheless once the technology is in place (ie someone has programmed out the deliberately inbuilt delay factor), there can be no justification for charging customers on grounds of increased operational cost. All that charging would really involve is recovery of the lost interest (some might call it "stolen interest" since it's interest on our money which is going in their coffers). With the banks currently more under the cosh than they have been for some time, in terms of challenging of some of their unfair, extortionate practices, they may not want to open up that particular can of worms by levying a charge at this time. I suspect that most of them will not charge, and that the lost revenue funds will be recovered largely by a slight surpression of savings rates plus a slight inflation of loan rates. For me that is an acceptable price to pay for elimination of the inconvenience and uncertainty caused by unpredictable built-in delays in the electronic payments system.

MarkyMarkD

ps646566 wrote: »

Nevertheless once the technology is in place (ie someone has programmed out the deliberately inbuilt delay factor), there can be no justification for charging customers on grounds of increased operational cost. All that charging would really involve is recovery of the lost interest (some might call it "stolen interest" since it's interest on our money which is going in their coffers). With the banks currently more under the cosh than they have been for some time, in terms of challenging of some of their unfair, extortionate practices, they may not want to open up that particular can of worms by levying a charge at this time. I suspect that most of them will not charge, and that the lost revenue funds will be recovered largely by a slight surpression of savings rates plus a slight inflation of loan rates. For me that is an acceptable price to pay for elimination of the inconvenience and uncertainty caused by unpredictable built-in delays in the electronic payments system.

Your first sentence (in bold) is rubbish and the remainder of the paragraph is dependent on that to make any sense, so it doesn't either.

If any bank wished to charge for Faster Payments, it could do so because it is perfectly legal, moral and sensible for banks to charge for any service they provide.

There is no need for "increased operational cost" to be used as an "excuse" for a charge - banks have no more need than any other supplier of goods or services to justify a charge for them. If your bank says "We are going to charge 5p for each Faster Payment", you can choose whether or not to bank with them accordingly.

Biggles

ps646566 wrote: »

Nevertheless once the technology is in place (ie someone has programmed out the deliberately inbuilt delay factor), there can be no justification for charging customers on grounds of increased operational cost. All that charging would really involve is recovery of the lost interest (some might call it "stolen interest" since it's interest on our money which is going in their coffers).

Complete nonsense, I'm afraid.

There is no 'deliberately inbuilt delay'. It is a system dating back 25 years or more, where batch overnight processing over a three-day cycle was the only way it could be done at the time.

There is no 'lost interest'. Those who operate BACS directly (eg companies who use it for their payroll etc - that's the vast majority, us using it for online banking is a side issue) suffer no delay at all, thus no lost interest. They do have to send the data two days before, but on entry day (when the money actually moves) it leaves the payer's account and enters the payee's account on the same day.

ps646566

Well my post certainly flushed out the bankers to defend their dubious practices didn't it.

Regarding banks charging for services rendered is concerned, this argument may have some vailidity if (a) all current accounts paid a reasonable rate of interest as an offset to said charges, and (b) the retail banking industry was genuinely competitive is all respects. As we all know the jury is still out on whether or not overdraft etc charges represent reasonable charges for services rendered. Until that matter is settled I do not accept that it is "complete nonsense" to opine otherwise.

Regarding the alleged inbuilt delay and the 25 year old system, this is the crux of the matter. You can bet your life that the banks have moved with the times IT-wise where it has suited them, They are quick enough, for example, to encourage us to operate our accounts online because that saves them money. But they have allowed a 25 year old anachronism to remain in place regarding payment clearance because to change it will cost them money. Of course, successive "business friendly" governments can also be held to account for allowing it to continue for so long.

Regarding lost interest, of course there is lost interest to any of us who move money. Suppose for example a fixed term savings bond expires and it is intended to place the capital with another institution. If both organisations operate on the basis that movements in and out have to be carried out by means of direct credits and debits to and from a nominated (ie current) account, as many do, and which is probably with a third institution, then it can take ten or so working days for all of this to happen. During that time the customer earns no interest on what may be a considerable sum of money. But you can bet that someone is earning interest on that money -- it doesn't just sit in a black hole. And who is that someone ? Answer - the banks.

Rubbish ? Nonsense ? I don't think so.

MarkyMarkD

I can hardly be bothered to pick holes in all of that, but here goes anyway.

Regarding banks charging for services rendered is concerned, this argument may have some validity if (a) all current accounts paid a reasonable rate of interest as an offset to said charges, and (b) the retail banking industry was genuinely competitive is all respects. As we all know the jury is still out on whether or not overdraft etc charges represent reasonable charges for services rendered. Until that matter is settled I do not accept that it is "complete nonsense" to opine otherwise.

The credit interest rate paid and the charges for services are different matters. Both evidently are subject to a competitive market because there is a huge variety in both. I believe you can get credit interest rates between 0% and 8% (or something around that) - if that isn't competition, I don't know what is. And you can get authorised overdraft rates between 0% and around 20%, and authorised overdraft charges of between 0p and 50p per day.

There are many different systems of credit interest and charges. There are over a dozen banks (and some building societies) offering current account services.

In any other product/service, people would consider that this was competitive.

Regarding the alleged inbuilt delay and the 25 year old system, this is the crux of the matter. You can bet your life that the banks have moved with the times IT-wise where it has suited them, They are quick enough, for example, to encourage us to operate our accounts online because that saves them money. But they have allowed a 25 year old anachronism to remain in place regarding payment clearance because to change it will cost them money. Of course, successive "business friendly" governments can also be held to account for allowing it to continue for so long.

The banks have always offered a same-day payment mechanism for payments where the amount, or the urgency, make it worthwhile for the customer to pay a supplementary fee for the service (i.e. CHAPS). Once again, different banks charge different amounts for this service.

But the fact is that the lost interest on the average transaction is so trivial as to be laughable.

If you are paying your gas bill (say) and it's £100, the lost interest relating to that transaction over 2 working days - the genuine period involved - is £6 a year at a generous 6% rate. That's less than 2p per day - so a total of less than 4p on that £100 payment.

Wow, aren't the banks just raking it in?

As I've said in previous posts on this subject, the amounts I transfer by BACS are not huge. Even for those who insist on moving large amounts - say £50,000 a time - via BACS, the lost interest is still only 500 times my 4p - that's £20. Which is about the cost for a CHAPS transaction if it's so important to make the payment more quickly.

How many people, genuinely, make BACS payments of £50,000 or more per annum? And therefore, how many people is this interest delay issue really costing more than £20 per year? And thefore, how valid is the argument that interest delay is sufficient to pay for all "free" banking?

I think the answer is self-evident.

Regarding lost interest, of course there is lost interest to any of us who move money. Suppose for example a fixed term savings bond expires and it is intended to place the capital with another institution. If both organisations operate on the basis that movements in and out have to be carried out by means of direct credits and debits to and from a nominated (ie current) account, as many do, and which is probably with a third institution, then it can take ten or so working days for all of this to happen. During that time the customer earns no interest on what may be a considerable sum of money. But you can bet that someone is earning interest on that money -- it doesn't just sit in a black hole. And who is that someone ? Answer - the banks.

I've already said something about the quantum of this above. But the "ten or so working days" quoted simply is invalid and misleading.

If you notify your old savings account to transfer the money to your current account on a Monday, it will be there on the Wednesday. On the Wednesday, you can instruct your current account to transfer the money to your new savings account, where it will arrive on the Friday.

The total interest lost is 2 x 2 days = 4 days. Or in my £50,000 example, something a lot less than £40.

£40 on £50,000 is 0.08%. If you are moving money between institutions for a change in rate of less than 0.08% obviously you shouldn't be doing it. But for any larger rate differential, it's worth making the move.

And yes, obviously, the four days' lost interest are accruing to one or other bank in the chain.

By the way, you refer to direct credits and debits. If you actually mean these are the methods of payment, there is no interest delay on such transactions and therefore the point doesn't arise. Direct credit and direct debit are same day value.

You mean BACS.

ps646566

MarkyMarkD wrote: »

I can hardly be bothered to pick holes in all of that, but here goes anyway.

I don't mind picking holes in that because it's quite easy.

There is no competition regarding BACS because all the banks etc use it.

CHAPS is expensive at around £20 a throw. It is useful when money just has to be moved pronto regardless of cost, but completely uneconomical for normal transactions. And the fact that CHAPS exists proves that fast transfers can be done.

Whether or not the amounts are sometimes trivial there is no justification for customers losing interest through no fault of their own, and with no realistic way round it. And if £20 interest is occasionally at stake then using CHAPS defeats the object.

I did not allege that the foregone interest is enough to pay for all free banking. But in any case it's not just about the interest, it's also the inconvenience and uncertainty posed by these delays.

From personal experience I can vouch that the delay is often considerably more than three days -- weekends don't count, and it's pretty random.

I did mean Direct Debit because for internet banking some institutions insist of setting up a Direct Debit arrangement with a nominated account for the purpose of paying money into the internet account, and vice-versa. This typically takes as long in practice as simple BACS transactions do, regardless of the theoretical time that it should take. Even if no interest is lost with these transactions there is still the inconvenience factor.

We all know that with modern IT pretty much all online transactions can routinely happen more or less instantaneously, and certainly on the same day (or next day if actioned at a late hour). Hopefully the May 27 initiative will start to move us towards this. If it is in fact no big deal for the banks and they really haven't much to lose, then they will have no reason not to cooperate full with a speedy implementation, will they.

Biggles

ps646566 wrote: »

Well my post certainly flushed out the bankers to defend their dubious practices didn't it.
<snip>
Rubbish ? Nonsense ? I don't think so.

Wow, promotion! Now I'm a banker. First time I've been called that without rhyming slang being involved!

Just more nonsense, I'm afraid. I'm merely a reasonably content user of banking services as they stand, quite happy that it's free to me while lazy users of banking are paying my fees by incurring charges - until the results of the ongoing court case, obviously......

ps646566

Biggles wrote: »

Wow, promotion! Now I'm a banker. First time I've been called that without rhyming slang being involved!

The rhyming slang possibilities were not lost on me either, but I decided against mentioning it. However since you draw attention to it yourself .....................

MarkyMarkD

ps646566 wrote: »

There is no competition regarding BACS because all the banks etc use it.

That's pretty obvious - it's the only industry-wide bulk payments system. Such systems are not the sort of thing you need more than one of.

CHAPS is expensive at around £20 a throw. It is useful when money just has to be moved pronto regardless of cost, but completely uneconomical for normal transactions. And the fact that CHAPS exists proves that fast transfers can be done.

CHAPS is not a bulk payment system. It involves lots of manual processing at one, other or both ends of the transaction. It wasn't built or implemented as a means of moving all transactions to "faster payments" and it isn't the basis of the Faster Payments initiative.

Whether or not the amounts are sometimes trivial there is no justification for customers losing interest through no fault of their own, and with no realistic way round it. And if £20 interest is occasionally at stake then using CHAPS defeats the object.

I did not allege that the foregone interest is enough to pay for all free banking. But in any case it's not just about the interest, it's also the inconvenience and uncertainty posed by these delays.

The primary basis of your argument, up to this point, has been lost interest. As I've pointed out that this is trivial, you've now moved onto a convenience argument. That's fine, but it's a different point. And frankly, the inconvenience of a few days' delay when moving savings around isn't very great. When you say inconvenience, don't you really mean that it's a pain for people who can't plan a few days ahead?

There isn't any "uncertainty posed by these delays". If you pay money from your bank by BACS, you know it will arrive two working days from when the transaction is initiated by your bank - which will be at most one working day after the time you instruct it online or on the phone (if you miss the cut-off time for the transaction to start on the same day, or your bank doesn't start them the same day).

From personal experience I can vouch that the delay is often considerably more than three days -- weekends don't count, and it's pretty random.

You previously said "ten or so working days" which was rubbish. Obviously weekends don't count if you are talking about working days. The delay is NOT often considerably more than three working days. If you choose to erroneously include weekends in your calculation, then you'll get a result more than three on some occasions.

By choosing the day on which you start a transfer between savings accounts to be a Monday, as I've stated, you can minimise the total number of days' lost interest by avoiding weekends.

I did mean Direct Debit because for internet banking some institutions insist of setting up a Direct Debit arrangement with a nominated account for the purpose of paying money into the internet account, and vice-versa. This typically takes as long in practice as simple BACS transactions do, regardless of the theoretical time that it should take. Even if no interest is lost with these transactions there is still the inconvenience factor.

Once again you've changed tack from interest delay to inconvenience. Instructing a DD transfer between accounts indeed takes the same time as BACS, but there's no interest delay so it's a better method of payment and that's why some savings institutions use it. Obviously if they were seeking to maximise profits, rather than serve their customers better, they'd tell you to use BACS to transfer the funds - funny that they have selected DD then eh, according to your theory that banks do everything in their own interest?

We all know that with modern IT pretty much all online transactions can routinely happen more or less instantaneously, and certainly on the same day (or next day if actioned at a late hour). Hopefully the May 27 initiative will start to move us towards this. If it is in fact no big deal for the banks and they really haven't much to lose, then they will have no reason not to cooperate full with a speedy implementation, will they.

I don't know what you are trying to prove with this paragraph. Obviously Faster Payments is technically possible, as it's going live in a few months' time. Equally obviously it is a big deal for the banks; it's taken them several years of intensive IT development to introduce this system; it involves the use of a new third party payment system and it's costing them a lot of money in IT resource for what is no financial benefit to them.

The banks aren't seeking to not co-operate for any ulterior motive; the development has simply taken a long time because it's very complex.