Banks may charge for money transfers
A new system to transfer money from one bank account to another almost instantly will be in place in 2005, but the banks have still not decided whether to make it available to customers, or what they will charge if they do.
Currently, money takes a minimum of three working days to move from an account in one bank to an account in another, and the banks often add on a day or two at each end.
During this time the banks still hold the money and earn interest on it.
The timescale dates back to when bits of paper moved around the City of London. But the BBC has learned that there are now no technical barriers to doing it more quickly.
Marion King is Chief Executive of BACs, the system that processes these payments. She told BBC Radio 4's Money Box programme that it was the banks causing the delays:
"At BACS now we are building a new infrastructure, such that same-day payments can be delivered, and that will be ready by the end of 2005.
"We could in theory provide overnight payments now, but because of the processing that happens within the banks it is three days presently."
It will be up to the banks to offer the faster system to their customers.
Ms King continued: "The banks need to embrace this new system and provide choice to the customer.
"So the decision does not lie with me. The system is being built and it can deliver faster payments."
The new system will be able to offer same day or overnight processing of all the payments handled by BACS, currently four billion a year.
Government pressure
Ms King said it was up to the banks to decide what to offer and what to charge.
"Each individual bank will make its own decision on how it packages and how it charges customers.
"There is an opportunity to create a service that is appealing and is based on customers' demands and what they are prepared to pay."
The banks are already under pressure on money transfers from the Office of Fair Trading.
Last week it told them that any interest they earned on the money they hold onto would have to be credited to the customer.
But when slower transfers stop being profitable, we may all have to pay for faster ones.
In Sweden, money is always transferred on the same day or overnight. But customers pay a monthly charge.
A spokesman for the British Bankers' Association told the BBC:
"The banks own BACS and will spend £100 million to create, by early 2005, a platform to move money, including internet transfers, on the same day.
"Banks will then be challenged to change their own systems to match this.
"UK banking is free to in-credit customers and we believe the model works well for consumers who dislike paying charges for routine services."
BBC Radio 4's Money Box was broadcast on Saturday, 28 February, 2004 at 1204 GMT.
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