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 the NATIONAL GIRO but went through several
name changes, becoming NATIONAL GIROBANK, then GIROBANK PLC (latterly
Alliance & Leicester
* 1 The concept * 2 Reason for establishment in the UK * 3 Planning for the National Giro * 4 Uncertainty and the "Green Light" * 5 Banking for the masses * 6 Girocheque as a derogatory term * 7 Competition * 8 Privatisation * 9 Campaign for re-establishment * 10 See also * 11 References
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 Money could be paid in or withdrawn from the system at any post office, and later connections to the commercial banking systems were established, often by the convenience of the local bank opening its own account at the Postgiro.
By the middle of the 20th century, most countries in continental
The term "bank " was not used initially to describe the service. The banks' main payment instrument was based on the "cheque" ("check" in American English) which has a totally different remittance model from the "Giro".
In the BANKING MODEL, CHEQUES are written by the remitter and then handed or posted to the payee who must then visit a bank or post the cheque to his bank. The cheque must then be cleared , a complex process by which cheques are sorted once, posted to a central clearing, sorted again, and then posted back to the paying branch where the cheque is finally checked and then paid.
In the POSTAL GIRO MODEL GIRO TRANSFERS are sent through the post by the remitter to the Giro Centre. On receipt, the transfer is checked and the account transfer takes place. If the transfer is successful, the transfer document is sent to the recipient, together with an updated statement of account being credited. The remitter is also sent an updated statement. In the case of large utilities receiving thousands of transactions per day, statements would be sent electronically and incorporate a reference number uniquely identifying the remittance for reconciliation purposes.
REASON FOR ESTABLISHMENT IN THE UK
In 1959 a Committee set up to investigate the "Working of the Monetary System in the United Kingdom" recommended the introduction of a Giro System, and if the main banks did not do this, the possibility of the Post Office introducing it should be investigated.
In the 1960s, although most towns had one or more bank branches, smaller communities very often had no bank branch at all. Post Offices, on the other hand were just about in every community. There used to be about 22,000 Post Offices in the UK compared to about 3,000 bank branches. The Post Office was ideally placed to establish a viable mass banking system.
The banks also were rather secretive about their tariff structures which were never published. The Post Office would publish a tariff of charges, the key one being that transfers between accounts would be free of charge, thus encouraging the adoption of the system. At a stroke the NATIONAL GIRO, as the service would be called, would, it was hoped, revolutionise banking in the UK.
PLANNING FOR THE NATIONAL GIRO
In 1965 a White Paper "A Post Office Giro" was published, which outlined the system including a computerised central system for processing transactions.
Computerisation, it was argued, would transform the profitability of the new system, and it was estimated that a payment between two National Giro accounts could be made in 24 hours if there was a central accounting office located at a good communications hub. This would also speed up the national bank payment clearing system based on local bank branches and centralised cheque exchange requiring cheques to be returned to local branches. This had (and to this day still has) a 3-5 day clearing cycle.
The Wilson government placed an Act before Parliament and the Post Office's central planning department and its new Computer Division began business and technical planning for the new service.
By 20 September 1965 a central site was chosen at
Giro was the first financial institution in
UNCERTAINTY AND THE "GREEN LIGHT"
The early years of National
Giro were unprofitable. This was hardly a
surprise given that a huge amount had been invested in establishing a
service infrastructure that began with zero customers. Similar types
of enterprise such as the credit card operator,
The Post Office made a strong case for adding new services that could transform the financial viability of the operation. Essentially, it proposed that it tackle both the income and expenditure side of the business.
* On the expenditure side, it would limit the growth in staff by
limiting the plans for expanding the personal customer base. As this
grew, transaction costs grew (including the cost of remitting all
those daily movement statements).
The biggest change, however, took place behind the scenes. Instead of
focusing on the needs of the utilities (which had by this time already
adopted the Giro) and the personal banking market, National
aim to capture the cash deposit business then dominated by the
commercial clearing banks . The Post Office itself was a major
customer of the commercial banks. It had a constant need for cash in
order for it to pay out social security payments (welfare payments and
The government accepted the plan, and after a great deal of uncertainty National Giro got its long awaited "Green Light".
The new plan was a great success and provided a firm financial foundation for its operations, although at some cost to the great plan to move the country over to using the Giro for remittances instead of the banks.
BANKING FOR THE MASSES
By the late 1970s, one pound in every four pounds deposited in cash at a bank in the UK was deposited with the National Giro at the Post Office. This would later rise to one pound in every three. The organisation was again profitable and repaying its capital costs. Indeed, its rate of return on capital was higher than that of the commercial banks, and this allowed the government to relax the constraints it had placed on the National Giro and even allow for further capitalisation.
In 1978, National
Giro renamed itself National
The new campaign was a great success and at first the bank had trouble keeping up with the flow of new business it generated.
Later the bank dropped the word National from its title, simply being
Although the bank gained a large number of new accounts it never
reached the level of penetration achieved by the European Postgiros to
enable it to become the main payment clearing system in the UK as was
the dream of its creators. By the late 1980s,
GIROCHEQUE AS A DEROGATORY TERM
The term Girocheque quickly became associated with welfare dependence. Worse still, the name was often associated with Girobank in the public psyche, making little distinction between the welfare cheque and the business. Having a giro account meant writing one's own girocheques and although recipients of girocheques did not need to have (and most did not have) a giro account, girocheques issued by personal customers were sometimes viewed with suspicion by the recipient. They also carried the name and address of the issuer, making them very noticeably different from the cheques issued by other banks and noticeably similar to welfare girocheques.
This issue was rectified in the 1978 relaunch. The term GIROCHEQUE was dropped in favour of the more neutral CHEQUE. Nevertheless the media continued to refer to Girocheques as Giros.
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The commercial banks had not been slow to respond to the challenge of
competing with National
Giro and had developed their own credit
transfer service known as
The banks had also responded to the criticism that they were secretive about their tariffs and for the first time published a standard tariff for personal customers. They also began heavy advertising to the personal banking sector in order to capture the customers that National Giro had been forced to give up on during the period between the Green Light and the relaunch of Free Banking some seven years later. They had also adopted new services such as credit cards, personal loans and revolving credit accounts which Girobank could not easily do until it had a significant base.
Giro did offer personal loans through a third party, it
did not offer many of these main services on its own behalf until
after the relaunch in 1978. It added savings accounts, overdrafts ,
revolving credit accounts, credit and debit cards, and was
instrumental in the formation of the LINK ATM consortium of smaller
banks and building societies which led the commercial clearing banks
to begin linking their own networks which they had hitherto refused to
do. It was also quick to establish
Alliance & Leicester
The personal banking business of
While the name "Girobank" is no longer used, the organisation lived on within the Alliance white-space:nowrap;"> The name "Girobank" is, however, still used on some Giro Credits intended for paying bills, along with the Alliance white-space:nowrap;"> Some councils were continuing to use the original name "Post Office Giro" in 2011.
CAMPAIGN FOR RE-ESTABLISHMENT
On 17 March 2009, a campaign was launched to bring back Girobank. Backers include some MPs, trade unions and small businesses. In April 2013 the Post Office announced it would be relaunching a banking service accessible through Post Office branches under the Post Office Money brand.
* ^ A B Business and Enterprise Committee (23 June 2009). "Post
Offices - Securing their Future: Annex A - The development of the post
office network". UK Parliament. Retrieved 13 April 2014.
* ^ Post Office (
Giro System) (Report). 673. Hansard. 4 March 1963.
pp. 165–74. Retrieved 25 June 2016.
* ^ National
Giro Service (Report). 770. Hansard. 17 October 1968.
* ^ A B C D Collinson, Patrick (7 July 2003). "