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34/09 25 March 2009
The time it takes for electronic bank payments and cheques to clear for consumers has speeded up but further improvements are needed, the OFT announced today in its Review of the Payments Council.
The Review has been carried out to look at how the Council is measuring up in making the payments industry work for consumers and businesses.
Download Review of the operations of the Payments Council (pdf 268 kb).
The OFT found that there is much more effective strategic direction of the industry since the Payments Council was set up in 2006. Key improvements the Council has overseen include the speeding up of slow cheque clearers as well as the implementation of the Faster Payments Service, which allows consumers to make and receive payments within a matter of hours rather than previously having to wait for up to three working days.
However, the OFT also found that the Council's progress has been disappointing in some areas. It is still too slow in driving improved payments for customers, with the Faster Payments Service only operating at 69 per cent capacity across member banks. Also, more attention needs to be given to the Council's integrity objective, which includes putting plans in place to ensure that if one payment system fails, the others can take the strain. The Council should also be more proactive in establishing where improvements are necessary, rather than reacting to external pressures.
Cavendish Elithorn, OFT Senior Director of Services, said:
'The Payments Council is a real improvement over the previous governance arrangements of the payments industry. But more work is needed to sharpen the Council's focus on the flexibility and efficiency of its systems and to make sure benefits are passed on to the end-user.
'This is why we have recommended measures to ensure the Council delivers transparently and fully on its objectives to make the payments industry work well for both consumers and business.'
Main recommendations coming out of this Review are that the Payments Council should:
1. The Payments Council was set up in 2006, resulting from a recommendation of the Payment Systems Task Force. The speeding up of cheques and the Faster Payments Service was agreed by the OFT-chaired Task Force and the Payments Council oversaw their implementation. Download Final report of the Payment Systems Task Force (pdf 225 kb).
2. The Task Force agreed the OFT would review the work of the Council after two years to score its performance against its three main objectives, look at its broader success in facilitating progress in payments systems within its remit and look at its effectiveness to provide lasting change in the payments industry and to set a development plan for any areas of concern.
3. The Payments Council first met in March 2007 and assumed responsibility for setting the strategy for UK payment systems and ensuring that that they meet the needs of users, payment services providers and the wider economy.
QUESTIONS AND ANSWERS FOR THE PAYMENTS COUNCIL REVIEW
1. What is the Payments Council?
The Payments Council is the organisation that sets strategy for UK payments. It was established to ensure that UK payment systems and services meet the need of users, payment service providers and the wider economy.
2. Who is on the Payments Council Board?
The Payments Council Board is made up of 11 directors from the banking and payments industry, and five independent directors, one of whom is a non-voting Chairman. See Payments Council Board.
3. Who does it report to?
It doesn't report to anyone. It is responsible for the strategic direction of the payments industry. However, one of the OFT's recommendations is that it carries out a consultation on how well it has met its objectives every two years. In that sense, it will have to answer to all stakeholders in payments, which includes consumers and businesses.
4. Who does it represent?
It represents its members, which are all payment service providers. See Payments Council Members.
5. Why did we carry out this review?
The Payment Systems Task Force dissolved itself in November 2006, when the Payments Council was announced. As part of the process ofsetting up the Payments Council it was agreed that the OFT would carry out a Review of the Operations of the Payments Council two years after its first meeting. This is to make sure that the Payments Council is meeting the objectives set for it by the Task Force. These objectives are to
6. How long did the review take?
Six months, from October to March.
7. What are the report's key findings?
The report found that:
8. What are our main recommendations?
Our main recommendations are that:
9. What happens to our recommendations now?
We've made our recommendations to the Payments Council; it's now for them to take forward. We'll be keeping an eye of the Payments Council to make sure that they are implemented.
10. What is the National Payments Plan?
The National Payments Plan sets out a 10-year vision for UK payments together with the practical steps needed to put the vision into practice.
11. What is the Faster Payments Service?
The Faster Payments Service allows those consumers whose banks offer the service to make internet and telephone payments within a matter of hours, 24 hours a day, seven days a week. The Faster Payments Service was introduced as a result of a recommendation of the OFT chaired Payment Systems Task Force. Previously payments took 3 working days to reach the recipient.
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