The Financial Conduct Authority (FCA) has reached an agreement with seven of the UK's biggest high street banks that will see them use a same day 'retry system' when processing direct debits, standing orders and future dated bill payments.
The new approach - which deals with a dislocation between faster payments processing and legacy back office infrastructure - has been adopted by Barclays, The Co-operative, HSBC, Nationwide, RBS Group, Santander and National Australia Group (which owns Clydesdale and Yorkshire banks).
Currently, the UK's Faster Payments Service means that payments in and out of bank accounts typically take a couple of seconds to process. However, banks generally process incoming and outgoing payments (such as direct debits, credits and standing orders) early in the morning.
This means that when a customer makes a deposit or receives their salary after this process they can be left with an unpaid item fee.
It is estimated that these penalty fees incurred through the old system cost customers as much as £200m a year.
Now, with the retry process in place, if the deposited money is not present when a debit is being taken, the bank will retry the payment in the afternoon before finalising the transaction. This will allow deposits to clear and the outgoing payment to be made.
Among the big banks, only Lloyds Banking Group has yet to put the process into action across all of its transactions. The bank says it is currently updating its systems to accommodate the change, but until this occurs, customers will be able to claim a refund for related late payment charges.
Clive Adamson, the FCA's director of supervision, comments: "We are committed to putting customer interests at the heart of everything the FCA does, and it's encouraging that the banks are also beginning to take this approach. There are no new rules here - this is an agreement with the industry; working together for the benefit of consumers can often be more effective than writing new rules, and it certainly delivers results more quickly."