September 19, 2020

The Editor Speaks: Our local cheques and clearing them

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At my local bank, they have a sign that says cheques drawn on a different local bank will take four business days to clear. Cheques drawn on a foreign bank will take AT LEAST fifteen business days.

When I have asked why I have never been given a straightforward answer. The stock reply is this

With cheques, there is a physical transfer as well as an electronic exchange of funds. Local paper transactions are processed in a four-day cycle. On day one, the cheque is processed and the information is passed electronically through a data exchange network. The next day, the cheque is delivered to a centre where banks exchange customers’ cheques. On the third day, bank staff review the cheque presented for payment and make decisions about whether to pay or return it. Settlement between the members, for the net values of the cheques exchanged between them, takes place over their settlement accounts on day four.

I expect they are also studying the biographies of all the banks’ Board of Directors as well!

In the UK, where there are more banks, more customers and more cheques written the process takes three days. In the USA which is even bigger the USA cheques are cleared usually in two days, although some States say three (maximum).

With electronic cheques now fast taking the place (not available here) of paper ones the process TAKES THE SAME AMOUNT OF TIME!

On a foreign paper cheque the astonishing fifteen day period is even more staggering, especially when I know when I have presented a personal cheque here, but drawn on my UK bank, the funds are withdrawn from my account there in THREE days.

In the UK, the Federation of Small Businesses has accused banks of stalling the process to gain extra profits, and the Consumers’ Association estimates that banks there make more than £30m a year in interest from investing money sent by electronic transfer.

I, of course, would not suggest the Banks are stalling, but it is hardly surprising they are not going to go all out in speeding up the process in this electronic age. But it is your business that is suffering thanks to this outmoded and inefficient system. It is bad for all of us with tight margins and/or cash flow.

The banks are very quick to give us the figures of all the bad cheques they have lost money on but never have they disclosed how much they make from interest by investing the money they have received from us from our cheques. In this day and age, it does not take longer to process a local cheque from a different bank. If I am wrong prove it to me. And then explain why your system is so antiquated?

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