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 Post Office Giro but went through
several name changes, becoming National Giro then National
Girobank Plc (latterly trading as Alliance &
Leicester Giro), before merging into Alliance & Leicester
Bank (now part of Santander Corporate Banking) in 2003.
The organisation chalked up notable firsts. It was the first bank
designed with computerised operations in mind; the first bank in
Europe to adopt OCR (optical character recognition) technology; the
first bank to offer interest-bearing current accounts, and the
first bank in
Europe to offer telephone banking, operating several
years prior to the start of Midland Bank's
First Direct service. It is
widely credited for shaking up the UK banking market, forcing
competitors to innovate and respond to the needs of the mass market.
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
9 Campaign for re-establishment
10 See also
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 Money could be paid in or withdrawn from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
Europe had a postal giro service. The world's first post office giro
banking system was established in
Austria in the late 19th century by
the Österreichische Postsparkasse. By the time the British Postgiro
was conceived, the Dutch Postgiro was very well established with
virtually every adult having a postgiro account with very large and
well used postgiro operations in most other countries in
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
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 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.
Politics played a part in the development of the National
Giro as the
British Postgiro was named. It reflected a general feeling in the
Labour Movement that the banks were not meeting the mass banking needs
of the British population. In the early 1960s, the majority of adults
United Kingdom did not have a bank account and the banks did
not court business from the working classes, which they regarded as
unprofitable. If you were working class, you would be paid weekly and
in cash. If middle class, you were more likely to be salaried and paid
with a bank cheque at the end of the month. If you could afford to
have a bank account, you could pay the cheque into the account—but
even among the middle class, many had no bank account. It was common
practice for cheques to be endorsed to local traders (and especially
the milkman) who would know the customer and be prepared to exchange
the cheque for cash.
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
Computerisation, it was argued, would transform the profitability of
the new system, and it was estimated that a payment between two
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
Lancashire. The Post Office bought land on the site of sidings of
North Mersey Branch
North Mersey Branch railway. It also built a large, purpose built
office and data processing complex for the site, completed in March
Giro was the first financial institution in
possibly the world, to be established from the outset to be fully
computerised. What's more, it broke new ground in
Europe when it
adopted optical character recognition for its transfer, inpayment and
outpayment transaction documents, making it possible for the first
time for utility companies and mail order companies to print their own
personalised remittance slips and automate at least part of the
complex accounting processes.
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, Barclaycard, would
also take many years to begin to build a base from which to begin
recouping both capital and labour costs. Nevertheless, the largely
middle class press led by the
Daily Telegraph and the
Daily Mail were
hostile to the creation of the National
Giro as were the banks, which
saw it as a long term threat. When a Conservative government came to
power in 1970, there were pressures on the government to close the
still loss making operation.
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
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).
Advertising ceased and charges were
introduced that would discourage further growth in the personal giro
It also proposed that the government itself should start using the
Giro by making social security payments through the service. As most
people still did not have bank accounts, this led to the birth of the
girocheque, a payment instrument exchangeable at the Post Office for
cash, but equally capable of being paid into any bank account.
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
Bank notes and coin had to be obtained from the banks which
charged a fee for this service. The banks were also charging the
depositors of these notes and coin, all of which needed to be counted
before being passed on to the Post Office (which itself then had extra
costs in counting the money provided by the banks. The new system was
brilliantly simple. Large depositors of cash (supermarkets, petrol
(gas) stations etc.) would be encouraged through pricing to pay their
cash into the Post Office. Post Offices are more convenient and open
longer hours so there was a natural case for choosing the Post Office.
What's more, the depositor would count the money once and seal it
discrete envelopes of say, units of £100, £500 or £1000. The Post
Office would take the money on trust, but commit to counting it not on
receipt, but within a fixed period, of say 5 days. Thus within the
Post Office, money could be handled very easily and its source was
clearly marked. The money would be counted at the time it was needed
(i.e. when the envelope needed to be opened). Discrepancies were
reported to the Giro, so that any attempt at systematic fraud could be
easily identified. And the
Giro could charge both the depositor for
the deposit and the Post Office as an internal charge for the
provision of the cash. As these charges were lower than those being
charged by the commercial banks, everybody was happy. The Post Office
internal handling of cash also became much simplified by the handling
of fixed value envelopes.
The government accepted the plan, and after a great deal of
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
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
In 1978, National
Giro renamed itself National
re-establish itself in the minds of the public as a bank, rather than
some quasi non-bank. Its status as a bank had been fixed in law, but
it had until now been reluctant to use the term. It also re-launched
its ambition to be the People's Bank, and was the first bank to offer
free banking to UK personal customers (provided the account was in
credit. This included free postage for the remittance of documents
Giro Centre as well as free cheques and deposits (the terms
inpayments and outpayments were dropped).
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
Girobank plc as a prelude to privatisation.
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,
Girobank was Britain's
sixth largest bank. The main reasons are given in the next two
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
Bank Giro, primarily aimed at the same
utilities that the
Giro had attracted. It still mainly required a
visit to a bank branch and there was no free postage for the remitter.
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
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
Internet banking and mass market it
to its customers. So although the
Girobank ended up
looking much like any other bank, it was clearly nothing like the type
of bank it originally expected to be, but it had also been
instrumental in changing the competitive nature of the banking market
in the UK and had been a great innovator.
Bootle office after privatisation
The Alliance & Leicester Group won a bidding process for the
Girobank operation in 1989 when the government decided to privatise
it. The transaction was completed in 1990. By the time of the
privatisation, the bank was essentially indistinguishable from its
competitors apart from the fact that it used Post Offices to transact
cash business. The contract with the Post Office was to continue to be
an exclusive one for a fixed period after privatisation. Nowadays, the
Post Office provides cash services to many banks on a commercial
The personal banking business of
Girobank became part of the Alliance
& Leicester Building Society. The Business Banking arm continued
trading under the name of
Girobank as a wholly owned subsidiary of the
Alliance and Leicester, being repositioning as a cash handler and
credit card processor for retailers and other banks. In 2003 the
Girobank brand was dropped, with the business renamed as Alliance
& Leicester Commercial Bank following further consolidation in
the Alliance & Leicester Group. In May 2010 Alliance &
Leicester was acquired by Grupo Santander, and the name Alliance &
Leicester was replaced by Santander UK.
While the name "Girobank" is no longer used, the organisation lived on
within the Alliance & Leicester Group.[needs update] The name
"Girobank" is, however, still used on some
Giro Credits intended for
paying bills, along with the Alliance & Leicester "plus"
logo.[needs update] 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
Current account (banking)
Alliance & Leicester Commercial Bank
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- 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.
Giro Service (Report). 770. Hansard. 17 October 1968.
^ a b c d Collinson, Patrick (7 July 2003). "
Girobank brand laid to
rest after 25 years". The Guardian.
^ Glyn Davies with foreword by James Callaghan (1973). National Giro:
modern money transfer. London: Allen and Unwin.
^ a b c d "The National Giro". National Archives. Retrieved 13 April
^ a b Andrew Cave (7 July 2003). "
Girobank disappears in A&L brand
makeover". Daily Telegraph. Retrieved 12 January 2015.
^ "Paying by Post Office Giro". Archived from the original on 15 June
2011. Retrieved 1 October 2010.
^ "Paying by cheque/postal order/cash/post office giro". Archived from
the original on 21 July 2011. Retrieved 1 October 2010.
^ "Archived copy". Archived from the original on 16 July 2011.
Retrieved 1 October 2010.
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the original on 8 November 2010. Retrieved 1 October 2010.
^ Hilary Osborne (13 April 2013). "Post Office to launch 'value for
money' current account". The Guardian. Retrieved 2