UK Faster Payment Service to Launch on May 27

The service will also enable same day clearing for regular standing order payments made on bank working days, reducing the current clearing timescale of three days.

Each participating financial institution will be confirming their own plans for introducing their competitive services to their customers and explaining what this means for them. At present there is no need for customers to do anything or to make any changes to existing payments. Any payment that is not processed through the new service will continue to be made using the existing Bacs three-day service.

To ensure a smooth rollout of this new service, volumes on launch day are being carefully managed. This means on day one it is expected that only 5% of members' internet and phone payments will be processed as faster payments. As an additional introductory measure some financial institutions will place lower initial limits** on the value of phone and internet payments that can be sent or alternatively they may choose to phase rollout across their customer accounts. Standing orders are scheduled to start being processed through the Faster Payments Service from 6th June. Over the summer the overall volumes are expected to increase to over 50% of anticipated peak-day processing volumes.

The development of this brand new payments infrastructure has been on an unprecedented scale. It has been a massively complex project for all involved and it is estimated that the cost across the sector could reach several hundred million pounds. It will deliver a level of service for UK customers second-to-none in the world.

Paul Smee, APACS Chief Executive says, "The UK banking industry has pulled together to deliver this new payment infrastructure to a demanding timescale. The challenge of achieving this cannot be underestimated. As with any payment system there is no room for error as it will be an integral part of the UK's economic infrastructure. A phased rollout will best help us ensure customers get the safety, integrity and efficiency they have come to expect when making payments here in the UK."

* The thirteen founding members are: Abbey, Alliance & Leicester, Barclays, Citi, Clydesdale and Yorkshire Banks (National Australia Group), Co-operative Bank, HBOS, HSBC, Lloyds TSB, Nationwide Building Society, Northern Bank (Danske Bank), Northern Rock, Royal Bank of Scotland Group (including NatWest and Ulster Bank). VocaLink, a separate service company, is to provide the infrastructure for the Faster Payments Service.

There will be a maximum limit placed on the value of each payment sent through the Faster Payments Service, with the maximum value for internet and phone payments set at £10,000 and standing orders to £100,000. At launch some banks will adopt lower limits than those figures.

Currently internet and phone payments account for just 2% of interbank automated payment volumes, but these are growing rapidly as customers increasingly turn to them instead of more traditional payment methods such as cheques. Standing orders account for 6% of interbank automated payments. The new system is being built to cater for the large volume increases projected for the future. The remaining 92% of interbank automated payments are 'bulk' transactions generated by organisations and businesses both large and small and are: Direct Debits, used to pay utility bills, life and general insurance premiums and various subscriptions; Bacs Direct Credits, used for salary payments, pensions, and state benefits; and CHAPS payments.