CHAPS

Last updated
Clearing House Automated Payment System
Type Private
Industry Payment system
FoundedFebruary 1984
Headquarters London, United Kingdom
Website Website

The Clearing House Automated Payment System (CHAPS) is a real-time gross settlement payment system used for sterling transactions in the United Kingdom.

Contents

CHAPS was originally established in London by the Bankers Clearing House in February 1984, transferring to the CHAPS and Town Clearing Company Limited in December 1985. [1] This company also operated the 'town clearing', where cheques cleared the same day between the 'town' bank branches in central London. [2] Town clearing had been the forerunner of the CHAPS system, and was finally closed in 1995.

With the closure of the town clearing, the operating company was renamed to CHAPS Clearing Company Limited (informally CHAPS Co). Responsibility for the CHAPS system transferred from it to the Bank of England in November 2017. On 20 August 2018, the first non-bank institution, ipagoo LLP, joined the CHAPS scheme.

Description

A CHAPS transfer is initiated by the sender to move money to the recipient's account (at another banking institution), where the funds need to be available (cleared) the same working day. Unlike with a bank giro credit, no pre-printed slip specifying the details of the recipient is required. Unlike cheques, the transfer is performed in real time, removing the issue of float or the potential for payments to be purposely stopped by the sender or returned due to insufficient funds, even after they appear to have arrived in the destination account.

CHAPS is used by twenty direct participants, including the Bank of England, and over 4,500 indirect participants (who process transactions via agency arrangements with direct participants). In its first year of operation, average daily transactions numbered 7,000, with a total annual value of £5 billion.[ citation needed ] In 2004, twenty years later, average daily transactions numbered 130,000, with an annual value of £300 billion. In 2010 there were 32 million CHAPS transactions, totalling over £61 trillion, [3] down from £73 trillion in 2008. [4]

CHAPS used to offer euro fund transfers as a member of the EU-area settlement system TARGET, but this service closed on 16 May 2008. [3] The total value of these in 2007 was £57 trillion. [4]

As well as making transfers originated by banks themselves, CHAPS is frequently used by businesses for high-value payments to suppliers, by mortgage lenders issuing advances, and by solicitors and conveyancers on behalf of individuals buying houses. [5]

Costs and problems

CHAPS transfers are relatively expensive, with banks typically charging as much as £35 for a transfer. The cost of fast transfers and the low speed of free transfers (such as BACS) was a subject of controversy in the UK, [6] until immediate transactions became available from the Faster Payments service. [7]

Problems can arise from delays, such as when an exceptional workload at a bank results in the money being cleared too late in a working day to complete related transactions, or inadequate instructions, when a bank is not given sufficient information to know where to credit the money, or a human delay in operating the machines. [5]

Participants

As of July 2021 the CHAPS participants are: [8]

CHAPS clearing information relating to UK banks may be found in the Industry Sorting Code Directory.

See also

Related Research Articles

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Cheque clearing or bank clearance is the process of moving cash from the bank on which a cheque is drawn to the bank in which it was deposited, usually accompanied by the movement of the cheque to the paying bank, either in the traditional physical paper form or digitally under a cheque truncation system. This process is called the clearing cycle and normally results in a credit to the account at the bank of deposit, and an equivalent debit to the account at the bank on which it was drawn, with a corresponding adjustment of accounts of the banks themselves. If there are not enough funds in the account when the cheque arrived at the issuing bank, the cheque would be returned as a dishonoured cheque marked as non-sufficient funds.

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Faster Payments

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The Clearing House Automated Transfer System, or CHATS, is a real-time gross settlement (RTGS) system for the transfer of funds in Hong Kong. It is operated by Hong Kong Interbank Clearing Limited, a private company jointly owned by the Hong Kong Monetary Authority (HKMA) and the Hong Kong Association of Banks. Transactions in four currency denominations may be settled using CHATS: Hong Kong dollar, renminbi, euro, and US dollar. In 2005, the value of Hong Kong dollar CHATS transactions averaged HK$467 billion per day, which amounted to a third of Hong Kong's annual Gross Domestic Product (GDP); the total value of transactions that year was 84 times the GDP of Hong Kong.

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References

  1. ↑ "Recent developments in UK payment clearing systems". www.bankofengland.co.uk. Retrieved 20 June 2021.
  2. ↑ "The clearings: Early days | Cheque & Credit Clearing Company". www.chequeandcredit.co.uk. Retrieved 20 June 2021.
  3. 1 2 CHAPS Facts and Figures Archived 2010-01-12 at the Wayback Machine , UKPA. Retrieved 24 October 2011.
  4. 1 2 "CHAPS Facts and Figures". UKPA. 2009. Archived from the original on 12 January 2010. Retrieved 24 October 2011.
  5. 1 2 "Banking: Automated payments: CHAPS". ombudsman news. Financial Ombudsman Service. December 2004. Retrieved 24 October 2011.
  6. ↑ "'This technology is easily available. There is no reason we can't have it'". Daily Telegraph. 16 March 2005. Archived from the original on 13 June 2010. Retrieved 24 October 2011.
  7. ↑ Faster Payments Archived 2011-08-19 at the Wayback Machine , UK Payments Administration, 2010. Retrieved 24 October 2011.
  8. ↑ "CHAPS". Bank of England. 2021. Retrieved 4 March 2021.
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