Girobank - The Concept

The Concept

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 Money could be paid in or withdrawn from the system at any post office, and later connections to the commercial banking systems were established, often by the convenience of the local bank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 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 Europe and Scandinavia.

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.