Bank customers who use the phone or internet to transfer money have been promised same-day transfers by 2007.
The number of online and telephone payments is on the rise
The Association of Payment Clearing Services (Apacs) says payments will reach a recipient's account in just a few hours.
At the moment, phone or internet payments take three days to complete, the same time needed for cheques.
Standing orders will also take one day rather then three, and banks will stop earning interest while they take place.
Unlike the internet and phone payments, standing orders will only be processed during normal banking hours.
Paul Smee, the Apacs chief executive, described the forthcoming changes as a giant stride: "Our new system will enable customers to use the internet or phone to make a payment that will reach the recipient's bank accounts in a few hours.
"Crucially the service will also be available all day, every day and on any day of the week" he added.
Apacs said it was making the proposals in response to criticism earlier this year from the Office of Fair Trading (OFT).
In May the OFT called on the banking industry to speed up telephone and internet transfers.
APACS says these account for 7% of all automated payments and are growing rapidly so the banking industry will have to cope with much higher volumes in the future.
The speed of the cheque clearing system, which has long been criticised for being too slow, is under examination by the OFT's payment system task force which expects to report in the summer of 2006.