Faster bank payments prompt cashflow warning

ANZ bank has told its customers that electronic payments will now be processed from 4am in the morning instead of after 10pm at night. Photo/Steven McNicholl.

Bank customers are being urged to set up electronic payments for the day after they get paid in the wake of moves by banks to speed up processing times.

Previously banks have processed bill payments, automatic payments and money transfers called direct credits to other banks through an overnight clearing system.

But from Monday a new clearing system came into force bringing all banks into line with an hourly clearing system and a much faster settlement process.

The move is good news for those waiting to receive money as it could mean they have access to payments like their salary or wages or other fund transfers within hours rather than having to wait until that night or the next day.

The change does not affect cheque payments with most banks taking between one and three business days to clear cheques.

But people who have payments set up to come out on the same day as their pay could be caught short if their bill payment or automatic payment goes out before their pay comes in.

ANZ, the country's largest bank, told its customers that from November 14 it was processing electronic payments from 4am in the morning.

Previously it sent future dated payments overnight from 10pm.

Direct debits will also come out during the day when the bank receives a request from the business - typically a utility company.

ASB bank has told its customers that direct debits on its accounts will also be processed during the day now rather than at the end of the day.

In a statement on its website the bank said: "Customers should ensure their accounts have adequate funds to cover any expected debits and be aware the debit may be applied earlier on the scheduled day for payment than it has previously.

"We encourage customers to only make and schedule payments using available funds to avoid unexpected fees and interest."

But not all banks are the same.

Kiwibank is still processing direct debits at the end of the day.

A spokesman for Kiwibank said it had changed the frequency of its automatic payments a few months ago.

Its automatic payments go out at 10am and if there is insufficient funds the bank will try again at 10pm and at 10am and 10pm on the following day.

Only after four failed attempts did it charge a customer a fee, he said.

Jamie Wood, manager clearing systems at Payments New Zealand, which sets the rules for payments across the industry, said the number of attempts and the time of day a bank started doing transfers would differ between each bank so it paid for customers to check with their bank what time they will start attempting transfers.

If multiple attempts to transfer money fail because there is insufficient funds in their account a customer can be charged a fee.

Wood said those concerned about insufficient funds should push out automatic payments to the day after pay day.

"If the debit comes out before you get paid - you perhaps will want to push it out to the following day."

The Banking Ombudsman has released a guide to help people better understand how payments are made.

It says bank customers must make sure there is enough money in their accounts when payments are due, otherwise they may incur a fee if the payment fails.

One of the biggest gripes the ombudsman receives is about funds not being cleared on the weekend or public holidays.

Wood said it expected to decide in the next six to nine months whether it would move to a system where banks cleared funds seven days a week.

Bank electronic payments

ANZ - will make four attempts on the day the payment is due starting at 4am and one attempt at the start of the following day (4am) - a total of five attempts before charging a fee for insufficient funds.

Westpac - If an automatic payment fails at 7.30am it will try again at 10pm the same day, if this fails it will try a further time at 7.30am the following business day. If all three tries fail the customer will see failed AP advice on their statement.

Kiwibank - The bank will try at 10am and then at 10pm on the day the payment is due to go out. If those fail it will try again at 10am and 10pm the next day before charging a fee.

BNZ - processes electronic payments at 5.30am on the due date. If there is insufficient funds the bank will re-try every hour between 7am and 11pm on the day the payment is due and again at 11:45pm on the day that the payment is due and then at 4.30am on the morning of the next day.