The Family that paid the price for a Banking Blunder on Completion Day

The CHAPS payment system can only guarantee that money from buyers will arrive on a specific day. If banks experience even minor delays, it can cause problems for multiple buyers and sellers involved in the chain. One way for buyers to avoid potential delays in their funds being received by their solicitor is for them to send their payment by Faster Payment rather than CHAPS.

In most cases, payments sent through the Faster Payments system arrive instantly, eliminating the risk of delays whilst payments are in transfer limbo. Clients can initiate Faster Payments to their law firm using Open Banking, a secure mechanism by which payments can be initiated securely from one bank account directly to another. This not only speeds up the payment process but also reduces the risk of fraud or errors.

Open Banking continues to grow in popularity as a secure payment solution for businesses to capture payments from their customers. Working within current Open Banking payment limits, consumers today will likely be able to transfer their property deposit within a couple of payments to the firm, and these limits will continue to increase as banks, businesses and consumers become more familiar and confident with the use of Open Banking.

According to Open Banking Limited, 68.2 million Open Banking payments were made in 2022, up from 25.2 million in 2021, with month-on-month growth running at around 10%. The current limit for a Faster Payment transaction is £1 million, and whilst the main high street banks are currently setting Open Banking limits at around £20,000 - £25,000, as usage continues to build, so will we see the payment limits increase.

Although receiving a property deposit in several payments may require more reconciliations and postings on your client account, there are several significant benefits that make it worthwhile:

1. The correct reference every time

The reference for any payments from your client is included automatically when the payment is made, so no more trying to reconcile payments with references like “House Purchase”, or “Property Deposit”

2. The correct payment amount each time

You set the amount you want to receive from your client, and they are unable to send you a penny more than that. No more surplus funds accumulating in your client account.

3. See where the payment came from

The latest Open Banking standards enable consumers to provide their account details as part of the transaction, enabling firms to both identify the account that monies have come from as well as return any funds easily if it becomes necessary later - for example, if the transaction falls through or there is a residual balance.

4. Protect your clients from fraud

Because payments through Open Banking have the destination account number and sort code populated automatically, you can ensure your clients' funds always go to your account and nowhere else.

5. Receive funds instantly

Because payments are sent directly from one bank account to another, they are received instantly. If your bank statement is linked live to your accounts package, then payments can be allocated to files almost instantly, and could even be automatically reconciled by your accounts system (because the correct reference is used each time).

In summary, Open Banking payments offer significant advantages to buyers when compared with CHAPS payments. By using Open Banking, firms can ensure payment amounts and references are always correct, help protect their clients from payment fraud and benefit from near-instant access to client funds once payment has been initiated.

Safe Capital provides a secure platform to request payments along with bank account information from your clients. To find out how we can help your law firm get in touch today.