Business leaders have praised an agreement by banks to reduce clearing times on electronic payments.
The Payment Systems Task Force reached a deal with British banks to reduce clearing times on all electronic payments between banks to same-day or next-day, depending on the time in which the payment is initiated.
The changes are set to come into effect from November 2007 and will apply to electronic payments initiated by telephone or internet instructions and standing orders from customers.
"At present when you press a button on your PC and the money leaves your account you expect it to arrive in the recipient's account on the same day. But it actually takes three days to arrive, or five days if the payment is made over the weekend." said David Bishop, from the Federation of Small Businesses (FSB).
"All bank customers lose out because banks make three day's interest on their money. But small firms are hit particularly hard. Manufacturers can be forced to wait an additional three days for essential components to arrive, and businesses desperate to receive a payment can face cash flow problems."
Bishop said that the current clearing scheme was developed in the days before computers were invented, and introducing a same-day or overnight system will bring the UK in line with other European countries which have had the system for years.
He stressed, however, that the banks must not fall behind autumn 2007 timetable they was allowed to set for themselves.
The agreement will eliminate 'float', or the interest banks accrue when the money has left a payee's account but hasn't yet reached the recipient's, from standing orders and transfers initiated by phone or internet, which business and personal account-holders for years have deemed unfair.
The agreement was brokered by the Payment Systems Task Force, which was chaired by the Office of Fair Trading and included representatives from banks, building societies, consumer and business groups, HM Treasury and the Bank of England.
