Girobank - Reason For Establishment in The UK

Reason For Establishment in The UK

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 in the 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 structure 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.