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Q&A: Faster clearing times

Online banking screen, BBC
Customers have complained about delays when moving money online
Apacs, the UK's payment association, has said the banking industry will introduce a new faster payments clearing service on 27 May 2008.

From that date customers will be able to make one-off same day payments over the internet or by telephone.

The quicker system has been in development for several years, and should have started last November but was delayed to make sure it worked properly.

BBC Radio 4's Money Box programme explains how it will work in practice.

What will I be able to do on 27 May that I can't do now?

From 27 May customers will be able to make one-off payments, up to maximum value of 10,000, over the telephone or via the internet, that will leave their account and arrive in the destination account on the same day.

The system will operate 24 hours a day, seven days a week, between accounts which belong to the system's thirteen founding members.

These are Abbey, Alliance and Leicester, Barclays, Citibank, Co-operative Bank, HBOS, HSBC, Lloyds TSB, National Australia Group, Nationwide Building Society, Northern Bank, Northern Rock and Royal Bank of Scotland/Nat West.

Initially, the new system will be aimed at personal customers, but should be expanded to include business customers as well.

How quickly will my money move?

The transfers will not happen instantly; there will still be some delay between the money leaving one account and arriving in another.

However, Apacs says it expects all transactions under the new system will be completed within two hours, with some taking as little as just 30 minutes.

At the moment these typically take three to four working days.

Will I have to pay for the new service?

Under the current rules, banks charge customers around 30 to make instant payments through a system called CHAPS, which is often used for large transactions such as a house purchase.

The banks have been very reluctant to say whether they would charge when the faster system was made more widely available to customers.

Apacs insists it is a matter for each individual bank.

However, Nat West - which has already started writing to customers about the changes - confirmed to Money Box that it will not levy a fee on customers who take advantage of the new system.

That will make it harder for other banks to charge.

What if I have an account with a bank or building society that is not one of the 13 that developed the new system?

It will depend on the bank or building society's own banking arrangements.

Take, for example, a customer who wants to move his money from the Halifax to the Coventry Building Society.

Coventry already has a relationship with one of the major "clearing" banks which means the transfer from Halifax can happen under the new faster system.

But, at least initially, a payment going back the other way from the Coventry to the Halifax will still take three to four working days.

Apacs believes smaller banks and building societies will face substantial competitive pressure to make the necessary arrangements to join the scheme.

How will direct debits and standing orders be affected?

There will be no change to the present direct debit system.

Payments made under this framework are already credited on the same day.

But standing orders will be affected, after the Office of Fair Trading (OFT) called on the banks to improve the way they worked.

Standing orders will not operate 24 hours a day, seven days a week, like online or telephone payments, but will be available under the same day framework on banking days.

Will this speed up the time taken for cheques to clear?

In a word, no.

The process by which the physical cheque is transported between banks will remain in place.

However, customers are already benefiting from changes introduced to the cheque clearing process last November, when the "2-4-6" system took effect.

Under this, interest must be credited no more than two days after a cheque has been paid in, the money must be available to be drawn out after no more than four days, and is deemed to have cleared absolutely after six days.

Previously, banks were able to recoup money from a customer's account if they discovered the original cheque payment was fraudulent, a problem first highlighted by Money Box four years ago.

Money Box



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