British banks enter the 21st century

At last. Shovelled a grand or two across from my business to personal bank account today, and the transaction took just seconds. In the time it took me to open up my personal banking web pages the payment had arrived. Wow!

I’d known this was on the cards for some time; same-day payment processing has been planned by UK banks for years. But the cynic in me hadn’t really believed it would ever happen.

I mean, follow the money: until now British banks have taken 3-5 working days to pass a payment between them electronically, a hangover from the days of cheque-based pen-and-paper banking. During that week of limbo the money wasn’t in the payer’s account, but hadn’t arrived in the payee’s account; it was in the temporary care of … the banks. Who made millions (about £30m a year between the main High St ones) from adding it to their investment float. As with any other area of business, everyone will talk about customer service and business ethics, but in the end nothing happens until the financial case makes sense, and providing faster payment processing, in this minds of the British banks, didn’t.

But finally the numbers must have worked out: either the cost of the new technology has fallen £30m below the cost of maintaining the old system, or the price of not competing with incoming foreign banks is now above £30m. I bet this change was driven by regulatory updates a few years ago that let competitors like Santander (of Spain) enter the British retail banking market, and it’s all good. Once again, it shows competition from outside isn’t to be feared, but welcomed.

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