Why is there a gap between the time my account is debited and the time the money arrives at the recipient?

Banks and building societies need to assure funds are available in the payer's account prior to crediting a payee. These payments (if they are passing from one bank to another) enter the automated clearing (also known as the Bacs clearing). The payer's bank submits the instruction to the clearing on the first working day (Day 1) when the payer's account is debited. The payment is processed and reaches the destination bank on Day 2, which updates its accounts and makes funds available on the destination customer's account from the start of Day 3.

The UK banking industry is currently putting in place the infrastructure to speed up standing order, Internet and telephone payments and a new, same-day service is expected to be operational by 2008.