Giro

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A giro ( /ˈr, ˈʒɪər/ ), [1] or giro transfer, is a payment transfer from one bank account to another bank account and initiated by the payer, not the payee. [2] The debit card has a similar model. Giros are primarily a European phenomenon; although electronic payment systems such as the Automated Clearing House exist in the United States and Canada, it is not possible to perform third party transfers with them. In the European Union, there is the Single Euro Payments Area (SEPA) which allows electronic giro or debit card payments in Euros to be executed to any Euro bank account in the area.

Bank account collective name for all account types, credit institutions operates for their clients

A bank account is a financial account maintained by a bank for a customer. A bank account can be a deposit account, a credit card account, a current account, or any other type of account offered by a financial institution, and represents the funds that a customer has entrusted to the financial institution and from which the customer can make withdrawals. Alternatively, accounts may be loan accounts in which case the customer owes money to the financial institution.

A debit card is a plastic payment card that can be used instead of cash when making purchases. It is similar to a credit card, but unlike a credit card, the money is immediately transferred directly from the cardholder's bank account when performing a transaction.

European Union Economic and political union of European states

The European Union (EU) is a political and economic union of 28 member states that are located primarily in Europe. It has an area of 4,475,757 km2 (1,728,099 sq mi) and an estimated population of about 513 million. The EU has developed an internal single market through a standardised system of laws that apply in all member states in those matters, and only those matters, where members have agreed to act as one. EU policies aim to ensure the free movement of people, goods, services and capital within the internal market, enact legislation in justice and home affairs and maintain common policies on trade, agriculture, fisheries and regional development. For travel within the Schengen Area, passport controls have been abolished. A monetary union was established in 1999 and came into full force in 2002 and is composed of 19 EU member states which use the euro currency.

Contents

In the United Kingdom and in other countries the term giro may refer to a specific system once operated by the post office. [3] In the UK, the giro service was originally known as National Giro. In due course "giro" was adopted by the public and the press as a shorthand term for the girocheque, which was a cheque and not a credit transfer. Meanwhile, there were Bank Giro Credits , which were instructions to credit a particular bank account: these were not instructions to debit another account, so they had to be accompanied with cash or cheques, and they could be used both for bill payments and as paying-in slips; when used for paying bills they were often free-of-charge to the payer when used at the payer's or payee's bank but with an administration charge at other banks.

United Kingdom Country in Europe

The United Kingdom (UK), officially the United Kingdom of Great Britain and Northern Ireland, and sometimes referred to as Britain, is a sovereign country located off the north-western coast of the European mainland. The United Kingdom includes the island of Great Britain, the north-eastern part of the island of Ireland, and many smaller islands. Northern Ireland is the only part of the United Kingdom that shares a land border with another sovereign state, the Republic of Ireland. Apart from this land border, the United Kingdom is surrounded by the Atlantic Ocean, with the North Sea to the east, the English Channel to the south and the Celtic Sea to the south-west, giving it the 12th-longest coastline in the world. The Irish Sea lies between Great Britain and Ireland. With an area of 242,500 square kilometres (93,600 sq mi), the United Kingdom is the 78th-largest sovereign state in the world. It is also the 22nd-most populous country, with an estimated 66.0 million inhabitants in 2017.

Cheque and Credit Clearing Company

The Cheque and Credit Clearing Company Limited (C&CCC) is a UK membership-based industry body whose 11 members are the UK clearing banks. The company has managed the cheque clearing system in England and Wales since 1985, and in all of Great Britain since 1996 when it took over responsibility for managing the Scottish cheque clearing as well.

The use of cheques and paper giros is now in decline in many countries [4] in favour of electronic payments, which are thought to be faster, cheaper and safer due to the reduced risk of fraud.

The word 'Giro' is also used in Investment Giro, where 'Giro' is used for a non-bank, administrative account on which investments and transactions are registered.

The word Giro in this context has its origin in the Netherlands. Giro is used in names like: Investment Giro, Investor Giro, Securities Giro, and in Dutch for Beleggers giro, Beleggingsgiro and is used as synonymous for Investments or Investors administrations,Transfer Agents Services or for the Dutch 'Bewaarinstelling'. Read More Investment Giro

Etymology

The word "giro" is borrowed from Dutch "giro" and/or German "giro", which are both from Italian "giro" meaning "circulation of money". [5] The Italian term comes via Latin "gyrus" meaning "gyre" [6] from the Greek "gyros" meaning "circle". [7]

Dutch language West Germanic language

Dutch(Nederlands ) is a West Germanic language spoken by around 23 million people as a first language and 5 million people as a second language, constituting the majority of people in the Netherlands and Belgium. It is the third most widely spoken Germanic language, after its close relatives English and German.

German language West Germanic language

German is a West Germanic language that is mainly spoken in Central Europe. It is the most widely spoken and official or co-official language in Germany, Austria, Switzerland, South Tyrol (Italy), the German-speaking Community of Belgium, and Liechtenstein. It is also one of the three official languages of Luxembourg and a co-official language in the Opole Voivodeship in Poland. The languages which are most similar to German are the other members of the West Germanic language branch: Afrikaans, Dutch, English, the Frisian languages, Low German/Low Saxon, Luxembourgish, and Yiddish. There are also strong similarities in vocabulary with Danish, Norwegian and Swedish, although those belong to the North Germanic group. German is the second most widely spoken Germanic language, after English.

Italian language Romance language

Italian is a Romance language of the Indo-European language family. Italian, together with Sardinian, is by most measures the closest language to Vulgar Latin of the Romance languages. Italian is an official language in Italy, Switzerland, San Marino and Vatican City. It has an official minority status in western Istria. It formerly had official status in Albania, Malta, Monaco, Montenegro (Kotor) and Greece, and is generally understood in Corsica and Savoie. It also used to be an official language in the former Italian East Africa and Italian North Africa, where it plays a significant role in various sectors. Italian is also spoken by large expatriate communities in the Americas and Australia. Many speakers of Italian are native bilinguals of both Italian and other regional languages.

History and concept

Giro systems date back at least to Ptolemaic Egypt in the 4th century BC. State granary deposits functioned as an early banking system, in which giro payments were accepted, with a central bank in Alexandria. [8] Giro was a common method of money transfer in early banking.

Alexandria Metropolis in Egypt

Alexandria is the second-largest city in Egypt and a major economic centre, extending about 32 km (20 mi) along the coast of the Mediterranean Sea in the north central part of the country. Its low elevation on the Nile delta makes it highly vulnerable to rising sea levels. Alexandria is an important industrial center because of its natural gas and oil pipelines from Suez. Alexandria is also a popular tourist destination.

A payment is the trade of value from one party to another for goods, or services, or to fulfill a legal obligation.

The history of banking began with the first prototype banks which were the merchants of the world, who made grain loans to farmers and traders who carried goods between cities. This was around 2000 BC in Assyria, India and Sumeria. Later, in ancient Greece and during the Roman Empire, lenders based in temples made loans, while accepting deposits and performing the change of money. Archaeology from this period in ancient China and India also shows evidence of money lending.

The first occurrences of book money are not known exactly. The giro system itself can be traced back to the "bancherii" in Northern Italy, especially on the Rialto (a financial center, resembling the modern day Wall Street). Originally these were money changers sitting at their desk ("bancus" = bench) that customers could turn to. They offered an additional service to keep the money and to allow direct transfer from one money store to another by checking the accounts in their storage books. Literally they opened one book, withdrew an amount, opened another book where the amount was added. This handling was naturally a very regional system but it allowed the money to circulate in the books. This led finally to the foundation of the "Banco del Giro" in 1619 [9] (in Venetian language, Banco del Ziro) which gave the blueprint for similar banking systems. The usage in German language can be seen in the Banco del Giro founded in Vienna in 1703 (to extend the financing business that Samuel Oppenheimer had brought from Venice in 1670).

Postal giro or postgiro systems have a long history in European financial services. The basic concept is that of a banking system not based on cheques, but rather by direct transfer between accounts. If the accounting office is centralised, then transfers between accounts can happen simultaneously. Money could be paid in or withdrawn from the system at any post office, and later connections to the commercial banking systems were established, often simply by the local bank opening its own postgiro account.

By the middle of the 20th century, most countries in continental Europe had a postal giro service. The first postgiro system was established in Austria on the early 19th century. By the time the British postgiro was conceived, the Dutch postgiro was very well established with virtually every adult having a postgiro account, and very large and well used postgiro operations in most other countries in Europe. Banks also adopted the giro as a method of direct payment from remitter to receiver.

The term "bank" was not used initially to describe the service. The banks' main payment instrument was based on the cheque which has a totally different remittance model than that of a giro.

Model

In the banking model, cheques are written by the paying party and then handed or mailed to the payee, who must then visit a bank or mail the cheque to his or her bank. The cheque must then be cleared, a complex process by which cheques are sorted once, mailed to a central clearing location, sorted again, and then mailed back to the paying branch, which verifies that the funds are available and pays the payee's bank.

In the postal giro model, the paying party sends a request to pay the payee (called a giro transfer) to the giro centre, which verifies that the funds are available, debits the payer's accounts by the amount requested, and credits that amount to the payee's account. The giro centre then sends the giro transfer document to the recipient, and an updated account statement to both the payer and payee. In the case of large utilities receiving thousands of payments per day, statements are sent electronically and incorporate a unique reference number for each payment for reconciliation purposes.

In the United States, the rise of electronic cheque clearing (and debit cards as preferred instruments of payment) has made this difference less important than it once was. In some stores in the United States checks are scanned at the cash register and handed back to the customer. The scanned information is forwarded to a payment processor, which transfers the money using the ACH Network.

Unlike the banking model, the postal giro model allows an individual to transfer money directly into another individual's bank account, provided the sender has the recipient's account details. The recipient is not required to approve or acknowledge the transfer or visit the bank to claim it. As a result, cheques are rarely used in countries with extensive giro networks, such as Germany, the Netherlands, Belgium and the Nordic countries.

Direct deposit systems such as those in common use in North America, by contrast, require the recipient's explicit approval, typically provided by filling out a form. Transferring funds from one personal bank account to another typically requires either a physical check or a wire transfer, which may incur a significant fee and require the paying party to visit the bank.

The credit risk with respect to the actual transfer of physical currency is assumed by the giro operators, such as banks, as interbank credit risk. For the payer and payee, giro does not involve credit, unlike cheques or credit cards. This is both an advantage and a disadvantage. The creditworthiness of the payer doesn't need to be evaluated, as he can initiate the transaction only if he already has sufficient funds. As such, the payer doesn't have the benefit of paying on credit. However, the disadvantage is that the transactions are unsecured. The payer lacks the sort of protections against dishonest payees that come with credit cards. Transactions cannot be recalled or disputed after the fact. Thus, committing fraud in e.g. interpersonal trade is relatively easy, and giro payments should be only made to known and trusted payees. Also, even though intra-bank transfer can be quick, interbank transfers can take several days, and they are often executed only on business days.

Electronic bill payment

Modern electronic bill payment is similar to the use of giro.

Advantages include:

In the United States, the ACH Network, regulated by NACHA and the Federal Reserve Bank, handles all interbank transfers, including direct deposit and direct debit.

In entirely electronic bill payment, the payer receives a bill — either physically by mail or electronically from a website (electronic billing). Then, the payer reads in the information from the bill, either manually or by using the barcode on the bill (ex: EPC QR Code in the European Union), enters it to the form on the bank website, and submits the form. The payment is immediately deducted from the account balance. This is common in Sweden with giro invoices in the standard formats, which can be scanned by a mobile banking app, have their numbers manually typed in to a web form, or physically presented to a bank in the traditional manner.

Cultural significance

Before the use of electronic transfers of payments became the norm in the United Kingdom the fortnightly "giro" payment was the normal way of distributing benefit payments. When unemployment peaked in the 1980s, large numbers of people would receive their benefit payment on the same day leading the concept of Giro Day, marked by the settlement of small debts and a noticeable increase in drinking, partying, and festive activities. It is the focus of the 1996 film Waiting for Giro .

See also

Related Research Articles

In banking, a direct deposit is a deposit of money by a payer directly into a payee's bank account. Direct deposits are most commonly made by businesses in the payment of salaries and wages and for the payment of suppliers' accounts, but the facility can be used for payments for any purpose, such as payment of bills, taxes, and other government charges. Direct deposits are most commonly made by means of electronic funds transfers effected using online, mobile, and telephone banking systems but can also be effected by the physical deposit of money into the payee's bank account.

A transaction account, also called a checking account, chequing account, current account, demand deposit account, or share draft account at credit unions, is a deposit account held at a bank or other financial institution. It is available to the account owner "on demand" and is available for frequent and immediate access by the account owner or to others as the account owner may direct. Access may be in a variety of ways, such as cash withdrawals, use of debit cards, cheques (checks) and electronic transfer. In economic terms, the funds held in a transaction account are regarded as liquid funds. In accounting terms they are considered as cash.

Money order payment order for a pre-specified amount of money

A money order is a payment order for a pre-specified amount of money. As it is required that the funds be prepaid for the amount shown on it, it is a more trusted method of payment than a check.

Cheque clearing process of exchanging a cheque for its funds

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.

Electronic bill payment is a feature of online, mobile and telephone banking, similar in its effect to a giro, allowing a customer of a financial institution to transfer money from their transaction or credit card account to a creditor or vendor such as a public utility, department store or an individual to be credited against a specific account. These payments are typically executed electronically as a direct deposit through a national payment system, operated by the banks or in conjunction with the government. Payment is typically initiated by the payer but can also be set up as a direct debit.

The Australian financial system consists of the arrangements covering the borrowing and lending of funds and the transfer of ownership of financial claims in Australia, comprising:

In economics, float is duplicate money present in the banking system during the time between a deposit being made in the recipient's account and the money being deducted from the sender's account. It can be used as investable asset, but makes up the smallest part of the money supply. Float affects the amount of currency available to trade and countries can manipulate the worth of their currency by restricting or expanding the amount of float available to trade.

A payment system is any system used to settle financial transactions through the transfer of monetary value. This includes the institutions, instruments, people, rules, procedures, standards, and technologies that make it exchange possible. A common type of payment system is called an operational network that links bank accounts and provides for monetary exchange using bank deposits. Some payment systems also include credit mechanisms, which are essentially a different aspect of payment.

National Girobank was a British public sector financial institution run by the General Post Office that opened for business in October 1968. It started life as Post Office Giro but went through several name changes, becoming National Giro then National Girobank and finally Girobank plc before being absorbed into Alliance & Leicester plc in 2003.

A direct debit or direct withdrawal is a financial transaction in which one person withdraws funds from another person's bank account. Formally, the person who directly draws the funds instructs his or her bank to collect an amount directly from another's bank account designated by the payer and pay those funds into a bank account designated by the payee. Before the payer's banker will allow the transaction to take place, the payer must have advised the bank that he or she has authorized the payee to directly draw the funds. It is also called pre-authorized debit (PAD) or pre-authorized payment (PAP). After the authorities are set up, the direct debit transactions are usually processed electronically.

Electronic funds transfer (EFT) are electronic transfer of money from one bank account to another, either within a single financial institution or across multiple institutions, via computer-based systems, without the direct intervention of bank staff.

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Payment card card that can be used to make a payment

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A standing order is an instruction a bank account holder gives to his or her bank to pay a set amount at regular intervals to another's account. The instruction is sometimes known as a banker's order.

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Alternative payments refers to payment methods that are used as an alternative to credit card payments. Most alternative payment methods address a domestic economy or have been specifically developed for electronic commerce and the payment systems are generally supported and operated by local banks. Each alternative payment method has its own unique application and settlement process, language and currency support, and is subject to domestic rules and regulations.

The National Payments Corporation of India is an umbrella organisation for operating retail payments and settlement systems in India.

References

  1. "Definition of GIRO".
  2. "RBI Committee suggests GIRO based Indian Bill Payment System". Reserve Bank of India. 7 May 2013. Archived from the original on 6 December 2014. Retrieved 29 November 2014.
  3. Oxford English Dictionary (online)
  4. Federal Reserve: Recent payment trends in the United States, 2008. "In 2003 the number of electronic payments in the US exceeded the number of cheque payments for the first time
  5. "Home : Oxford English Dictionary".
  6. "Definition of GIRO".
  7. Glyn Davies, National Giro
  8. A Comparative Chronology of Money, Roy Davies & Glyn Davies, 1996 & 1999.
  9. (ZDF), Zweites Deutsches Fernsehen. "Terra X - ZDF.de".