Banks to speed up cheque clearance but not till 2007

"A donkey could deliver cheques faster than banks can put money into customers' accounts."

24 05 2005 United Kingdom

The Office of Fair Trading has announced agreement with the banks to reduce clearing times on electronic payments, but improvements in cheque clearance must wait until at least 2007.

Telephone and internet payments and standing orders will all be speeded up and the money could be available to the recipient on the same day, according to an agreement between the Office of Fair Trading (OFT) and the banks and building societies.

David Bishop of the Federation of Small Businesses explained:
“At present when you press a button on your PC and the money leaves your account, you expect it to arrive in the recipient’s account on the same day.

"But it actually takes 3 days to arrive, or 5 days if the payment is made over the weekend. This is because electronic payments are based on a clearing system that existed before computers were invented.”

“The changes announced today will finally introduce a same day / overnight system to the UK which has existed in Scandinavian countries for many years,” he said.

However, today’s agreement does not affect the time it takes to clear the 6.5 million cheques processed each day. It will take more than two years before small businesses see any improvement in their cashflow - seven years after reform was proposed.

Competition concerns about United Kingdom payment schemes were raised in the Cruickshank report of 2000, which highlighted the big banks’ monopoly over the UK’s systems for transmitting money.

It was proposed to give the OFT special powers to regulate payment systems but this was dropped by H M Treasury in favour of the Task Force which has just reported. In the meantime the banks have profited from five years’ delay in implementing the Cruickshank recommendations.

High street banks earned almost £1,000 a second last year, says the Independent Banking Advisory Service, 20 per cent up on the previous year. A survey of 12 of the major high street banks showed that the Royal Bank of Scotland, Alliance and Leicester and the Co-operative Bank took the longest to clear cheques.

National Consumer Council chief executive Ed Mayo told to the BBC today, "Cheques must not become the Cinderella of the bank payments system. A donkey could deliver cheques faster than banks can put money into customers' accounts."

Back to top of page

© 2005 Copyright topenterprise uk ltd All rights reserved