Forum Brief: Cheque clearance

The FSB has written to the governor of the Bank of England asking him for his support in tackling the problem of cheque clearance.

Forum Response: Federation of Small Businesses

Carol Undy, FSB national chairman, wrote: "The UK is now taking longer to clear payments than almost any other G10 country.

"It should, given today's technology, not take three days for a customer to clear a cheque or receive an electronic payment.

"Given the obvious decline in the number of manual cheques tendered through the clearing system and the increase in electronic payments, you may wish to support us in urging the banks to speed up the electronic transfers of payments as a first step."

Forum Response: Consumers' Association

A spokesman for the Consumers' Association said: "The Consumers' Association welcomes the Bank of England's call on the banking industry to speed up payment clearances.

"We would like the industry to agree to a standardised clearing time for cheques and electronic transfers. Ideally we would like to see same-day electronic and two day cheque clearing for interest and withdrawals.

"However failing any agreement being reached on standardisation, we support the view held by the OFT that interest on funds held by banks during BACs payments should be paid back to the customer."

Forum Response: Association for Payment Clearing Services

A spokesman for APACS said: "Cheque use is declining by approximately six per cent per annum. APACS forecasts indicate that over the next 10 years the reduction will be 40 per cent. Given these declining numbers, we do not believe that a business case exists for speeding up cheque clearing cycles. The use of cheques has declined even more rapidly in other EU states, but in terms of end-to-end processing times (i.e. when the customer gets value) we believe the UK compares favourably with other G10 countries where cheque use is still dominant.  We believe the solution lies in banks advising small business customers of the other options available to meet their needs.

Regarding electronic payments, APACS and the three clearing companies are all represented on the Payment Systems Task Force, and are fully supportive of the need to find a constructive solution to this issue. We would like to make the following points:

"We’ve received little evidence from our market research so far to indicate significant customer demand for faster payments.

" Payment systems must above all be reliable. Clearing banks take great care through their rules, guarantee mechanisms and risk controls that the customer proposition is safeguarded. 

"Change is not free.  Before the industry invests heavily in change it needs to be clear exactly what is required and for what benefit."