The U.K.'s Faster Payments Service is steadily nibbling away at the British equivalent of the U.S.'s ACH funds-transfer system, but it's rapidly displacing checks, according to February statistics from the U.K. Payment Council reported by Cash & Treasury Management File.
Total Faster Payments volume rose 13 percent for the 12 months to the end of February, while the total number of checks fell by 12 percent, according to the Cheque & Credit Clearing Company. The Faster Payments system transfers relatively small payments (averaging less than $1,500, with an upper limit of about $150,000) between accounts at different banks in a few hours.
But while traditional paper checks are being shredded by Faster Payments, which were launched by U.K. banks in 2008, the same-day service has also brought growth of the BACS system almost to a halt. BACS (for Bankers' Automated Clearing Services) is the British equivalent of ACH in the U.S., and is also used for relative small payments, but it typically takes three days to move money between banks. Direct debits, for payments such as automatic-payment options for bills, have edged up 4 percent year over year.
But BACS direct credits -- the equivalent of direct deposits in the U.S. -- aren't growing at all. Their growth has almost completely been swallowed by Faster Payments' "single immediate payments," which are growing at the rate of 20 percent a year.
Ironically, at the same time that the U.K.'s Faster Payments are hitting their stride, the speed of actual payments by large U.K. businesses to their smaller suppliers has slowed to a crawl, with some supplier invoices taking as long as four months to be paid. That could lead to regulatory action, and in February Parliament began looking at a bill that would allow regulators to punish companies for paying their suppliers late.
That, in turn, might spur an even larger surge in Faster Payments usage, since businesses could still make payments as late as a regulator would let them, while still keeping the funds in their accounts for as long as possible.