UK bank payments system is still too slow

This article from Dear Anna in the Guardian a couple of weeks ago illustrates something that has been frustrating me for a very long time.

The banks in the UK have dragged their feet for years in implementing a system for ensuring that bank payments (standing orders, direct debits, online transfers etc.) are paid within a reasonable amount of time - e.g. a few hours.

I have been following this for a number of years. I remember listening to Money Box on Radio 4 several years ago and hearing a report from Sweden about how they had a system back as long ago as 2002 implemented whereby payments were processed the same day. I have found an article relating to that Money Box programme here and I can still remember how frustrated I was with the response of the APACS spokesman Paul Rider who was trying to claim that there was very little demand for this sort of thing in the UK. I recall thinking at the time that's because in the UK there was no alternative and all banks used the same system - how were the consumers supposed to express their displeasure? I remember one day a few years ago I needed to make a transfer of about £5000 from my account to my wife's and it needed to be in within a couple of days. I went into my branch with all sorts of ID and was bluntly told that they could not do what I wanted unless I was willing to pay £25. Otherwise it would take up to 5 working days. The advice I was then given was to withdraw the money in cash and go to a branch of my wife's bank to deposit it there. I expressed my incredulity at this (not least due to the security implications of being advised to carry several thousands pounds around in person) and demanded that they make a note of my complaint about the system. The teller looked at me as if I was from another planet. I am certain that many if not most people in this country at one time or another have been caught short by the UK system's inflexibility in this regard.

Anyway, last year I heard the news that a new fast payment system was being introduced in the UK. "Hurrah!" I thought. Finally a solution to my money transfer woes. This report from the BBC website shows the sort of timescales they were talking about which seemed a bit long and vague, but hey-ho at least there would be a comprehensive soultion by the end of 2008.

Of course it didn't happen. According to the most recent edition of Money Box and the responses on this thread on their website the system is still a complete mess. Some payments go through quickly but many do not and there is as of yet no real indication of when it will all be sorted out.

The problem with a partial solution (as Paul Lewis pointed out on Money Box this week) is that if the customer cannot be confident that their payment will go through quickly then they have to assume it will not, erring on the side of caution and ensure they have 4 or 5 days leeway - exactly the same as it used to be. Basically a partial solution is next to useless. This is illustrated by the Dear Anna article I linked to at the start.

The banks need to pull their collective fingers out. I am sure they feel they have higher (self inflicted) priorities but they have had years to do this. I am sure that if there was a financial incentive for them to do it, they would have done but it is in fact the opposite. They actually make money out of the current confused system (through late payment charges and fines).