Customers Claw Back £30m From Banks!

Thanks to the new Faster Payments Service, the interest banks made on uncleared funds will now wing its way to your bank account.

Have you ever felt slightly cheated that the internet banking payment you've just made -- supposedly at the click of a button -- will take three working days to clear? Has it ever rankled that, while you wait for a transfer to appear in your account, you're losing precious interest? If so, you're not alone. Personally, I could never understand the need for such delays. Some of the cash I've transferred over the past few years would have moved faster if I'd put it in a sack and taken it cross-country... On foot. More controversial than clearing delays, however, is the issue of the interest `black hole'. A few years ago, the Office of Fair Trading (OFT) estimated that banks make a staggering £30m a year in interest, which should have been earned by customers. The banks simply let this cash stack up while their customers waited for their money to materialise. However, from today, a new system will allow you to move your money within hours, not days. Not only will it finish the frustration of waiting for your cash to clear -- it should also put an end to banks gobbling up the interest that, by rights, should belong to you. The Faster (Fairer) Payments Service Back in 2004, the OFT's response to the Banking Code Review scathingly stated that banks were "exploiting ... clearing processes for their own benefit". The following year, the OFT demanded that banks come up with a way to make their payments systems more efficient, in order to prevent customers from losing out on interest payments. APACS (the UK payments association) have today introduced the new Faster Payments Service -- the solution we've all been waiting for. Among the most sophisticated payment systems in the world, it will allow super-fast transfers of funds between different accounts and financial institutions. How Will It Work? From today, most banks will begin offering the new Faster Payments Service for internet and telephone payments. Some institutions will phase it in more quickly than others, but your bank should tell you when you're able to start sending faster payments. You can also find out if the destination account for your transfer is able to process faster payments by using the APACS Sort Code Checker. For the first time ever, payments made using the Faster Payments Service will clear within a couple of hours -- and these quick transfers can be made at any time of day, on any day of the week. This means that shifting money between your current and savings accounts, paying your bills and making one-off transfers should be far simpler and quicker than before. Standing orders, which also currently take three days to clear, will start using the Faster Payments Service from 6 June. This will allow payments to be processed on the same day they are made, as long as it's a bank working day. However, APACS has imposed limits on the size of the payments that can be made via the Faster Payments Service. The limit for internet and telephone payments is £10,000, while the limit for standing orders will be £100,000. Individual banks may also impose their own, lower thresholds -- so check with your bank if you think this might affect you. Are There Any Drawbacks? The main drawback of the Faster Payments System is, quite simply, that it isn't fully operational yet. When the OFT originally insisted that a new payments scheme be brought in, it required that the system be in place by November 2007. So, six months behind schedule, banks are only just starting to process faster payments -- and some of them are still dragging their heels. HSBC, for example, won't process standing order payments under the new scheme until the first half of 2009! The gradual start for the system by some banks is, arguably, to ensure that it works properly -- and therefore to prevent problems with customer service. But it means that, while some of us enjoy the benefits of faster payments, others will still find themselves frustrated by the old system. Moreover, they'll still be missing out on valuable credit interest. Questions have also been raised about the security of faster payments. Some critics of the new system are concerned that most banks' security measures are designed around the old three day clearing period, and believe this could put customers at risk. Also, it's vital to remember that there's no room for typos when you're making a fast transfer. Under the new system, a payment cannot be cancelled once it has been made -- so always double check the sort code, account number and amount that you're entering! A Step Forward For Customers Ultimately, the Faster Payments Service should be of benefit to the many thousands of people who use online and telephone banking services. Not only will it make moving money quicker, it also represents something of a triumph for customers over the institutions that were treating them unfairly. Hopefully this should provide Fools with some comfort, especially in the light of the banks' determination to appeal over penalty charges. Despite security fears (which banks say are being addressed) -- and although some banks are still lagging behind -- I think the rollout of Faster Payments is a positive move. It might be a small step, but it is a step towards a fairer, more efficient system for customers. > Why not compare current and savings accounts via The Motley Fool? > Ditch Your Crafty Current Account! | The Classic Current Account Con