Faster bank transfers under way

The new scheme has been delayed for six months

A banking scheme for one-day cash transfers over the telephone or on the internet has started without any major problems, High Street banks say.

The new scheme will speed up the process which previously meant that it took up to four days to transfer money between banks.

Banks made an estimated £30m in interest from the delay last year.

By 7am on the first day, 898 payments totalling £461,383 were made successfully under the new scheme.

The £300m Faster Payments Service, developed by 13 banks, starts on 27 May, although only a fraction of payments will be quicker from day one.

Slow start

Customers can make one-off payments up to a maximum value of £10,000 over the telephone or via the internet, which will leave their account and arrive at the destination account on the same day.

Given we have been waiting for years, if not decades, for the industry to invest in decent systems, if the price of embedding it properly is a delay of a few months, then that is sensible Philip Cullum National Consumer Council Your questions answered See the big five banks' timetable

For many consumers the frustration has been most common when money disappeared for a few days when they transferred cash from a current account to their own savings accounts with a different bank.

The same-day project will be extended to standing orders from 6 June.

In 2007, there were 124 million internet and phone payments made at an average value of £303. The number of payments is expected to rise to 300 million in 10 years.

Some 347 million standing order payments were made in 2007, expected to rise to 422 million in a decade, at an average value of £321.

The banking industry says it does not want to flood the new system from day one, and various banks will phase in the system at different times.

"Given we have been waiting for years, if not decades, for the industry to invest in decent systems, if the price of embedding it properly is a delay of a few months, then that is sensible," said Philip Cullum of the National Consumer Council.

'Complex project'

The banks have been preparing for the scheme by testing the service with hundreds of penny payments.

One of the main things that you need with any payments system is total reliability Paul Smee Apacs chief executive Q&A on faster clearing times Changes in the way we pay

"The final part of this enormously complex project has been to test the new system in a live environment," said Paul Smee, chief executive of UK payments association Apacs.

"After such substantial investment by the industry we would like, in time, to see the new Faster Payments Service being used for all of the UK's internet, phone and standing order payments."

One of the first payments made on 27 May under the new system was a £10,000 donation to charity Oxfam by the participating banks to help victims of the cyclone in Burma.

Some concerns have been raised about security under the faster scheme, with banks having less time to check payments.

But Apacs said that although no system could promise 100% security, the issue had been at the heart of developing the system.

Who's involved?

The 13 banks included in the scheme are: Abbey, Alliance and Leicester, Barclays, Citi, Clydesdale and Yorkshire Banks (National Australia Group), Co-operative Bank, HBOS, HSBC, Lloyds TSB, Nationwide Building Society, Northern Bank (Danske Bank), Northern Rock, and Royal Bank of Scotland Group (including NatWest and Ulster Bank).

Cheques are not covered under the Faster Payments Service

The system was set up after the Office of Fair Trading, acting on consumers' complaints, told the banks in 2005 to make the system faster. An original deadline of last November was extended.

The new system updates technology set up about 25 years ago to deal with cheques, since when internet and telephone banking has been introduced widely and surged in popularity.

A website has been set up at www.canipayfaster.co.uk to allow people to check, using the receiving account's sort code, whether a bank is set up to receive faster payments.

Cheques are not covered under the new system. A recent report suggested they were in "irreversible decline" and new clearing rules were introduced last year.

Since November, interest must be credited no more than two days after a cheque has been paid in and the money must be available to be drawn out after no more than four days.

After six days, a cheque is deemed to have cleared absolutely and so banks cannot recoup money from a customer's account if they discovered the original cheque payment was fraudulent.

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