Organic growth in Chaps volumes offsets migration to Faster Payments

Source: Payments Council

As it approaches its 30th anniversary, CHAPS Clearing Company Ltd (also known as CHAPS Co), the UK's same day high value payment system, has today published its first market report.

It reveals increased payment values and a growth in the number of financial institutions who submit payments directly into CHAPS - known as Direct Participants.

Published as part of CHAPS Co's aim to reach a wider audience, the report provides analysis on CHAPS payments in 2012 and the first half of 2013, and forecasts volumes levels and trends until 2022.

Key findings:

• The value of CHAPS payments increased in 2012 by 12.3% to £71.7 trillion.
• The volume of CHAPS payments was just under 34 million, a very slight reduction on 2011 levels. This slight fall was due to the migration of retail payments to Faster Payments, but its extent was moderated by organic growth.
• The average CHAPS payment value was £2.1 million.
• On March 28th 2013, the last working day before Easter and the quarter end, the daily volume peaked at 253,881 - the highest recorded since September 2007, the time of the run on Northern Rock Bank. On the last day of each quarter transactions such as interest rate swaps, structured money transactions and quarterly fixings of money market transactions are settled.
• In 2012, CHAPS represented 93% of the UK total sterling clearing values, but from only 0.5% of the total clearing volumes.
• Most of the daily value processed by CHAPS represents wholesale financial transactions where CHAPS acts as the portal through which international sterling flows take place.
• 20% of this wholesale financial value between banks in CHAPS is for short-term lending. This amounts to £40 billion per day in about 1,000 payments, on top of short-term deposits by corporates and non-bank financials.
• CHAPS payments by individuals, housing specialists, businesses, government and other organisations within the UK accounts for 30-40% of all CHAPS volumes. The report explores why these users continue to use CHAPS.
• The recovering housing market is contributing to CHAPS volume growth.
• The volume of CHAPS payments is forecast to reach 40 million in 2022 as2 as its core markets of cross-border and interbank payments, and corporate treasury continue to recover.

Phil Kenworthy, Managing Director of CHAPS Clearing Company said:
"This, the first CHAPS market report, underlines the continuing core role that CHAPS has to the UK economy. Covering the eighteen months from January 2012, it highlights continuing value growth in CHAPS and a shift in volumes from retail to wholesale. Participation in the Service continued to grow, both in terms of direct and indirect participation with Direct Participants now benefitting from the introduction of the Liquidity Savings Mechanism, known as LSM, earlier this year."

Newly appointed CHAPS independent Chairperson, Herta von Stiegel said:
"I am pleased that this report continues the process of providing wider disclosure of CHAPS' business to its stakeholder community. CHAPS plays a vital role and retains a strong position in the high value UK Retail payments industry, while continuing to expand in the international Wholesale market."

The report is published alongside a series of publications by the Payments Council, the body responsible for the smooth operation of the UK's payment systems.

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