Payment revamp? Just small change

By Gillian Lacey-Solymar
Business reporter, BBC Working Lunch

Money still moves in mysterious ways between bank accounts

Introduced more than a year ago with a big fanfare, the Faster Payments Service (FPS) was supposed to revolutionise the way in which we can make transfers.

The old system, which took three days or more to move money between bank accounts, was to be swept away.

Up to £10,000 would be transferable from one account to another (even at another bank) in a blink of an eye.

Well, maybe not the blink of an eye, but certainly within a day. The system would also operate seven days a week.

So has it been successful? Well, on one level, yes.

The UK Payments authorities proudly declared on the anniversary of the scheme in May that 13 banks had signed up to it.

More than 180 million payments have been processed, with a total value of just under £70bn.

But when we contacted the banks in question, the story was not quite so simple.

Patchy participation

Only four of the 13 banks which offer the service have chosen to allow customers transfers up to the system limit of £10,000. They are Barclays, HSBC, Northern Bank and RBS/NatWest.

"Although the agreed industry limit is £10,000 for phone and internet faster payments, each bank has every right to set its own limits beneath this," says Paul Smee, the chief executive of the industry body, UK Payments Council.

FPS: HIGHEST LIMITS

Barclays: £10,000

HSBC: £10,000

Northern Bank: £10,000

RBS/NatWest: £10,000

Source: UK Payments Council

"It's entirely a competitive issue. This is why our advice continues to be that if you are a customer who wants to make fast, higher-value payments, you should make sure you are with a bank and have an account that best suits your needs."

Beyond those four banks, participation is more patchy.

Egg and Abbey will only allow you to receive funds and not send them. Northern Rock will permit standing orders through the system, but no one-off payments at all.

For others, both sending and receiving are unproblematic in principle, but the limits are far lower, from £1,000 for Halifax and Bank of Scotland right down to an arguably useless £10 ceiling for Nationwide. Who on earth makes a bank transfer for £9.99?

Admittedly, the Nationwide is still at the pilot stage, with not all customers having access. But why, after the FPS system has been up and running for over a year, has it not rolled out more fully?

Nationwide justified their position saying: "We are being prudent to test the system."

Secret limits

A sum of £10 may be low, but at least it's transparent. Clydesdale Bank says it is proud to be the first bank to have made a payment by the Faster Payment Service when it was launched. However, until now, it has seemed to shy away from transparency.

I myself have an account at the Clydesdale and when we recently tried to transfer £1,000, only £50 went through.

FPS: LOWER LIMITS

HBOS: £1,000

Lloyds: £500

Alliance & Leicester: £250

Clydesdale: £250

Co-op: £100

Nationwide: £10

Source: UK Payments Council

The bank would not tell us what the limits on a transfer are, admitting only that they can change day to day.

Enigmatically, it said that "Clydesdale Bank operates a variable ceiling for Faster Payment Ceilings for a number of reasons, including fraud protection".

I put it to bank officials that variable limits are no good at all, as the customer does not know how long it will take for any given payment to be processed.

They dismissed this by saying they were following the industry practice. They were simply doing what everyone else does.

Having rung round all 13 of the banks in the scheme and talked in depth to the industry body, the UK Payments Administration, I was able to tell them that it certainly wasn't industry practice to hide the limits. Everyone else had declared them.

Fraud fears

To its credit, Clydesdale went away for a rethink. On Thursday afternoon, it changed its policy from variable undisclosed limits to a clear fixed limit.

Admittedly the limit is still low - £250 - but it's a significant change. At least customers know where they stand now.

Clydesdale told us: "Our standard payment ceiling is now £250 and this ceiling will increase in the coming months."

Several of the banks we spoke to echoed this wish to increase limits, but concerns remain about fraud. The higher the limit, the greater the opportunity for criminals.

It is understandable that banks should do everything to avoid fraud, but it is difficult to argue that the system is working properly when eight of the 13 banks in the system have a limit of £250 or less.

The average FPS transfer is apparently £570, but it seems not many banks will allow it.