Historically, when you make a payment either by cheque or online, the payment takes around 3 working days to go through the BACS payments clearing system. This can be frustrating, especially where you’re expecting to receive a payment and could benefit from the money being in your account right now.
The good news, though, is that things are about to change. All the main UK banks are due to participate in an initiative entitled the Faster Payments Scheme. This will mean that a payment, from one participating bank to another participating bank, should go through in near-real time. The scheme is due to be implemented in May 2008.
There are, however, some additional aspects of the scheme that are worth outlining. Firstly, the scheme will only apply to payments amounts up to a certain limit. The initial scheme limit is 10,000 although banks may set their own limits and vary them depending upon various factors such as fraud concerns. (Note: There is an existing CHAPS process for transferring larger sums same-day, which for example is often used when mortgages are being drawndown.)
Secondly, the scheme is due to be introduced in a phased manner. This means that some banks will go live with it earlier than others. Initially, therefore, you may find that some payments are going fast’ and some of going through the old 3 day BACS route, depending on whether the receiving bank has implemented the new scheme.
There are several benefits to consumers of the new scheme. First of all, there’s the obvious convenience of being able to effect a near instantaneous payment to a credit card or biller, etc. For those of us who sometimes leave it to the last minute to arrange such payments, it may help us avoid late payment letters and charges.
It also simplifies things and should help with budgeting. If all, or most, payments go through in near-real time, I don’t need to worry about the fact that my account balance is currently 100 but I’ve got 2 payments going out and 1 coming in and needing to work out what my balance will be once they’ve all gone through.
Customers who hold their current account and their savings account with different providers will also benefit. At the moment it would take 3 days for me to transfer money from my current account to my savings account and I wouldn’t earn interest during that time. In future, the payment will go straight into my savings account and immediately start earning interest.
Many will say that near-real time payments are long overdue, particularly in this modern age of sophisticated computer systems. It will though be a big step forward for the banking payments industry and hopefully we will all find that it is really beneficial.