Banks introduce same-day settlement for weekend trade

Retail and hospitality businesses relying on weekend trade look set for quicker access to their funds, with two of the major banks moving to same-day settlement, seven days a week.

Traders who accept debit or credit payments on the weekend, and whose banks do not offer same-day settlement every day, have to wait until Monday or Tuesday to access those funds.

Until recently, very few financial institutions offered same-day settlement on weekends. But last month, the Commonwealth Bank began offering same-day settlement, seven days a week.

CBA estimates that on average, about $332 million goes through its merchant customers’ terminals every weekend, which translates into approximately 4.7 million transactions.

“Traditionally, the funds from a weekend’s taking could not be accessed until the following Tuesday,” the bank said in a statement.

Lack of access to those funds meant small businesses were losing out on interest, paying down debt or suppliers, and other benefits of improved cash flow.

To combat this problem, CBA introduced Everyday Settlement for its merchant customers, allowing businesses to access funds from their merchant terminals seven days a week.

Currently being rolled out to its 160,000 merchant customers, fast turnaround for late-trading businesses covers transactions processed as late as 10pm Australian Eastern Standard Time.

The funds are settled into a customer’s account by midnight the same day, with the initiative expected to be completed by the first quarter of 2012.

Canstar research manager Chris Groth described CBA’s move as an “excellent” development, particularly for small business.

“It’s a good thing for small business owners, particularly those that do a big part of their trade on the weekends as they get credit for the transaction in their account that night,” Groth says.

Meanwhile, NAB has outlined its own plans to introduce same-day settlement on weekends.

Currently, NAB provides same-day settlement on business days provided the transaction is processed by around 9.45pm. Funds from weekend transactions are unavailable until Tuesday.

“We do intend to have Saturday and Sunday settlement. We will announce that shortly,” a NAB spokesperson says.

The news comes on the back of DBM’s Business Financial Services Monitor, which shows business banking satisfaction reached a record high in October, driven by CBA and Westpac.

The monitor, which provides insight into the performance of Australian banks across various business markets, recorded an increase in whole-of-market satisfaction with the major banks.

Whole-of-market satisfaction rose from an average of 7.1 points (out of a possible 10) in September to a record 7.2 points in October.

Westpac continued its reign as the one of the two clear leaders in business satisfaction. Its whole-of-market satisfaction rating improved from 7.4 points to an all-time high of 7.5 points.

CBA also recorded its best-ever result in the survey’s history, suggesting its Everyday Settlement initiative is paying off, lifting from 7.2 points to 7.3 points.

ANZ and NAB were unchanged at 7.0 points and 6.9 points respectively.

DBM managing director Dhruba Gupta says the October result capped an impressive year for Westpac, despite CBA “challenging strongly” and attaining record satisfaction levels of its own.

“With ANZ drifting downwards in recent months, the Sydney-based major banks have opened up a significant and widening gap over their Melbourne-based peers,” Gupta says.

Gupta says the results by market segment reveal a more complex picture behind the whole-of-market figures, but the Sydney-based banks are strong across all markets.

“The micro segment, which accounts for almost 90% of all businesses, is the foundation of the record whole-of-market satisfaction results for Westpac and CBA,” he says.

“But the Sydney-based major banks are mostly achieving solid to above average results in all the segments.”