The speeding up of clearing

I'm sure that 'interested parties' will endeavour to slow if not halt any moves to implement same day money transfers.

Adrian Smith

Very true Adrian. The 'interested parties' make too much money by holding onto balances within clearing to give it up that easily. AFAIK it is presently possible to clear transfers almost instantaneuously but there is an inbuilt delay in the system for the old historical reasons when cheques used to be sent from bank to clearing centre to bank.

Well of course, but this can't continue forever and I'm sure it was some kind of parliamentarian of sorts that first raised the issue when I heard about it in the media as I said a few months back in the first place, so I do hope it can be acted upon and bought in as new legislation sooner rather than later.

Failing that, maybe we can hire in some French hooligans to go out and protest for us.

In message , snipped-for-privacy@invalid.invalid writes

This link

gives your answer I think.

Banks would love to get rid of paper, especially cheques, but despite a marked reduction in the use of cheques and paper based bank giro credits millions of people still want to use them. I find it particularly amusing when people say things like 'well they've got computers, why cant it be quicker? But I always use cheques myself, and never use direct debits,' It just sums up this country.

'Truncation' of the cheque clearing system was enabled by the Cheques Act 1992 but to remove the cheque clearing cycle is impossible if people insist on using the damned things.

The credit clearing is another matter. The link above doesnt mention paper based bank giro credits - it only refers to internet and automated payments.

Comparisons with europe dont stand up because no other country in the world has the bank clearing network that exists in this country, sadly though our banks substantial legacy IT networks, despite having been the largest and earliest in the world are now lagging a bit.

I always laugh when I see remarks that seem to assume that banks are somehow making huge wodges of dosh from the 'interest' that is earned by all the money in the clearings. When somebody pays a cheque into their account at a 3rd party branch, until the cheque clears there is no money upon which interest can be earned.

Hmm, so they've set up a Task Force (makes me laugh to think of these groups of "experts" needing to join together to work out what would happen in an area they are already supposed to have achieved expertise in - surely they should already know what would happen / be needed by virtue of being experts?! Surely they could just have a few meetings and then decide on a course of action). I note they've had 7 months so far...

Leaving cheques out of the equation, I'm more interested in knowing how / why my banks take so long to basically "clear" a credit from one of my online banking accounts to another? I know from being in IT this is literally an computerised authentication process with an update of a database somewhere which should take seconds not days!

And that is where I'm sorry - someone - IS making money on my money. It leaves my account instantly when I transfer and then it only appears in my other account in 3 days time. Someone has made interest on those 3 days and it wasn't me. That's what's got to stop in this scenario, it should all be authenticated immediately and then updated (cleared) on both sides.

As I understand it, banks apply something they call a "value date" to transactions they handle. The value date associated with a particular transaction may or may not be that same as the actual date that the item appears on the ledger. The value date is the date used for things like calculating interest applied, even if the transaction appears to have taken place on some other date. For transfers of funds between accounts, as long as the "value dates" for both the debit and credit entries are the same, it doesn't really matter what date appears on the statement of account.

Chris

There is one very good reason that I still tend to pay my credit card monthly payments by cheque and that is that it provides me with a record that I have done it.

Very, very few of the online banking systems I use (and I use HSBC, Abbey and Nationwide) provide even rudimentary ways of seeing a history of payments or other transactions. OK, I can look at a statement but it gives little clue as to where a payment went, what it was for, etc.

One particular weakness of the bill payment system (Abbey I know is like this, I have complained about it) is that once a payee is set up you can't get to see the payee's account details so there is no way to check if a payee on your list is the actual one you want.

On line banking needs to improve considerably before people (well me anyway) will be happy moving away from cheques.

Oh yes, and one final need before we go 'chequeless', how do I pay money to someone whose bank details I don't know completely?

Can you explain how using a cheque provides a record, in a way that paying via on line banking doesnt?

That is nothing to do with using cheques, all you are doing is writing down who you intended to pay and when, plus it doesnt show the date the cheque was sent or when it arrived. You could of course do the same if you were paying online simply by writing it in a notebook! In addition you'd know your bank had received the payment.

FWIW, for a cheque transaction my on line bank account or the printed statement only says the date, the amount and the cheque number, giving me no clue what it was for unless I have written it down. OTOH, for an online payment, it says the date, the amount, the name of the institution, and a reference number (usually my account no with them).

Yes, there's whatever I have written on the counterfoil. I realise this doesn't provide any proof whatsoever that the item has been paid but it does provide *me* with a record.

None of the online services I use provide anything as useful as the few words I can write down on the counterfoil.

But how often does someone pay a cheque into their account at a third party branch? Most people pay into their own branch. The point was that given today's IT systems and with the 6 digit sort code and 8 digit account number it should be possible to clear the cheque and debit it to the payers account immediately. The three day clearing thing is purely historic.

Similarly what about when someone pays something by bank giro credit or direct credit, whatever. The money leaves the payers account immediately but, if the payee it at another bank it takes 3 days before the money is credited there. Don't pretend that money disappears for 3 days. It is somewhere and earning interest! For who? The bank!

In message , SandalsMan writes

Whenever they pay a bill that way.

Not so. The vast majority of cheque credits are paid in at third party branches.

There is just tad bit more to it than your simplistic example.

Agreed.

I am sure there is more to it, that's why I made it simple. But it should be possible, thats what I was saying.

John please re-read carefully what I said. The clue is in the words "their account". I am not disputing that there is no loss where a bill is paid by cheque at another bank. I was talking about people paying a third party cheque into THEIR own account at another bank so that it takes 3 days to get the funds. That must not happen frequently and with most banks (certainly Lloyds and Co-op) if you pay in at another branch of your own bank you get an instant credit.

Maybe the real problem is that most politicians who have any real power are too old and simply don't understand modern technology. They have to rely on focus groups and advice from so called business leaders to guide them.

Adrian Smith

In message , SandalsMan writes

Fair comment!

Yes, Instant credit within the same bank has been around for a number of years. Instant inter-bank payments will be some time off because the number of inter bank transactions would rise by a factor of many hundreds of thousands, possibly millions, per day. At the moment inter bank settlement is performed via their accounts at the BoE as a small number of transactions at the end of the day representing the sum of all the days transactions. CHAPS payments are the best you can get at the moment.

In the example you quote above (which I have read more carefully this time!:-)) you refer to a cheque and a credit. The route the credit takes is different to the cheque which still has to be 'paid' and clear in its own way.

There is some further information in an APACS press release on 16 December 2005 that appears to indicate that internet and telephone banking transactions will be completed on a same day basis, 7 days per week, this to be implemented by the end of 2007. The press release also states that standing order transfers will be completed on a same day basis, but the arrangement for standing orders will only apply on banking business days. See details at

There was also an article in The Times on 17 December 2005 which indicated that "While all the major high street banks, as well as smaller banks such as Alliance & Leicester and the Co-operative, have signed up to the deal, Nationwide is the only building society that has so far pledged to do so."

In message , Alan Law writes

As far as I can remember, Nationwide is the only Building Society who are members of APACS and used to be the only one who existed as its own right in the clearing system without 'piggy backing' on another banks membership.