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Press releases 2005 -

Payment Systems Task Force announces faster payments service

Issued by the Payment Systems Task Force, chaired by the Office of Fair Trading

94/05    24 May 2005

Agreement to reduce clearing times on electronic payments between banks following telephone or internet instructions from customers, as well as standing orders, has been reached, the Payment Systems Task Force, chaired by the Office of Fair Trading, announced today.

The new clearing service will provide at least same day or next day clearing depending on the time of day the payment is initiated.

The Task Force, which includes representatives of banks, building societies, consumer and business groups, H M Treasury and the Bank of England, has today published a report outlining the benefits to personal and business customers of faster clearing times for electronic payments. (See note 2 for a full list of those involved in producing the report.)

Download First annual progress report of the Payment Systems Task Force(pdf 325 kb).
Download BPSL Innovation Working Group report (pdf 478 kb).
Download appendices (pdf 1,688 kb) 

Following this agreement, APACS, the banking industry association for payments, has today established an 'implementation group' to consider how the new service would work in practice (see note 3 for details). The implementation group will report back to the Task Force within six months; the industry expects to introduce the new service within two years of that date.

Jonathan May, OFT Director of Markets and Policy Initiatives and Chairman of the Task Force, said:

'This is good news for bank customers, both personal and business. Telephone and Internet payments and standing orders should all be speeded up and the money could be available to the recipient on the same day.

'I am very pleased with the way the banking industry, the consumer and business organisations, HM Treasury and the Bank of England and the OFT have all been able to work together to secure this important change. It proves that the Task Force approach can work effectively to deal with longstanding concerns. There is a further agenda for it to tackle.'

The Task Force has also published a progress report today on its first year's work and setting out the next phase. The Task Force expects to set up a working group to examine issues relating to cheques, starting in October 2005. Other payment methods that the Task Force will look at include LINK (the UK's ATM network), MasterCard and Visa and Maestro/Switch (the UK's payment cards networks), and the CHAPS clearing scheme, as well as generic issues such as pricing, transparency and innovation.

Printed copies of the BPSL Innovation Working Group report and the Task Force progress report are available from the OFT on 0800 389 3158


1. The Payment Systems Task Force was established in 2004, to identify, consider and seek to resolve competition, efficiency and incentive issues relating to payment systems over four years, particularly looking at network effects of the existing payment mechanisms. The Task Force meets not less than four times a year, and reports on its work and findings annually. Working groups have been established to take forward work on various issues. The Task Force publishes a report at the conclusion of each working group. See Payment Systems Task Force area of this website.

2. The members of the BPSL Innovation Working Group are: Office of Fair Trading (Chair), APACS (Association for Payment Clearing Services), BACS Payment Schemes Limited, Barclays Bank, British Bankers' Association, British Retail Consortium, Building Societies Association, CHAPS, Clearing Company Limited, Cheque and Credit Clearing Company, The Co-operative Bank, Federation of Small Businesses, HSBC, Lloyds TSB, National Consumer Council, The Royal Bank of Scotland Group, Which? (formerly Consumers' Association), Bank of England (sitting as observers), HM Treasury (sitting as observers).

3. In addition to fraud prevention, the factors the industry implementation group will take into account include:

  • access: that all banks and building societies which presently use BACS should have access, if they so wish.  If, exceptionally, they do not wish to have access, there would be no obligation to offer the new services
  • coverage: if a bank or building society has decided to offer the new service, its coverage of the scheme should be such that it is available on all those accounts on which it currently offers BACS clearing
  • payment channels at a generic level (that is, in relation to telephone and Internet payments): for each such account, the new service must be available via existing channels for the account which can be used to make BACS credits
  • standing orders: for banks and building societies participating in the new service, standing orders will be routed through a faster payments service, or, if it proves impracticable to include regular payments in the faster payments solution, the industry will, within the same time frame, eliminate 'float' from standing orders (the interest accruing to banks when the money has left the payee's account but hasn't yet reached the recipient's), will address information issues, and will seek to resolve timing issues relating to availability of funds for customers. (The payer needs to have money in his or her account two working days before funds are paid to the beneficiary. If funds are not available at that time the standing order might be rejected, or any resulting overdraft might be subject to a charge.)
  • continuity of service: if a bank or building society does not elect to join the new service, the industry will ensure that transfers via telephone, Internet or standing order will still be able to reach accounts at those institutions, as a minimum, on the same basis as currently
  • other functionality: whether there is scope for payments to be revoked and recalled
  • capacity: that the scheme should have the capacity for further expansion at any stage in the future, if required.

4. A payment initiated by telephone or Internet leaves the final customer account at the paying clearing bank before settlement occurs, and the paying bank, rather than the final customer, earns interest ('float') on the money for the period before settlement.  Introduction of the new service will eliminate this 'float' interest.

5. The principal aims of the Working Group were:

to identify the scope for, and costs and benefits of, innovation to current clearing arrangements for high volume, low value electronic payments (inter-bank telephone and Internet banking payments, and standing orders where, in most cases, value transfer does not take place on the same day; transfers within the same bank group usually take place on the same day already)

  • to identify, and set out for the Task Force the drivers and options for change to current arrangements; and
  • for the Task Force then to decide its recommendations in the light of those options.

6. Competition concerns about United Kingdom payment schemes were raised in the Cruickshank report of 2000. It found economic characteristics of United Kingdom payment schemes that did not appear to deliver price transparency, good governance, non-discriminatory access, efficient wholesale pricing or innovation. The report suggested that a new framework for competition, including licensing and regulation, was necessary to deal with the problems identified.

7. In preparation for proposed legislative changes that were to provide the OFT with powers as a specialist regulator of payment schemes, the OFT examined and reviewed the payment systems market in 2003 in relation to open access, innovation and efficient and transparent charges. The OFT report 'UK payment systems' (OFT 658, May 2003) noted that the industry had undertaken a number of self-regulatory reforms in addressing some of the concerns raised by the Cruickshank report - for example, the system changes to BACS and governance changes to APACS. The OFT reported, however, that a number of competition concerns remained. The proposed legislation was suspended by H M Treasury in favour of the Task Force and the payment systems industry therefore currently remains essentially self-regulatory. Download UK payment systems

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