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The government, with the advice of consultants [[PricewaterhouseCoopers|Cooper Brothers]], gave its approval to the continuation plan. However charges were doubled for the majority of customers, the 'same day' service was changed to a 'next day' service, and staffing was reduced from 3,500 to 3,000.<ref name=aim25-GB0813/><ref name="na-GIRO/NG"/>
The government, with the advice of consultants [[PricewaterhouseCoopers|Cooper Brothers]], gave its approval to the continuation plan. However charges were doubled for the majority of customers, the 'same day' service was changed to a 'next day' service, and staffing was reduced from 3,500 to 3,000.<ref name=aim25-GB0813/><ref name="na-GIRO/NG"/>


By the late 1980s, Girobank was Britain's sixth largest bank.<ref name=parliament-20090623/>
=== 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 further capitalisation.

In 1978, National Giro renamed itself National Girobank to 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).<ref name=telegraph-20030707/> This included free postage for the remittance of documents to the 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 known as 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.<ref name=parliament-20090623/> The main reasons are given in the next two sections.


=== Privatisation and beyond ===
=== Privatisation and beyond ===

Revision as of 23:09, 16 February 2024

For GiroBank (Denmark 1991-1995), see Danske Bank.

National Girobank
Company typeStatutory corporation (1968)
Public limited company (1988)
IndustryFinancial services
Founded1968; 56 years ago (1968)
Defunct2003
FatePrivatised
SuccessorAlliance & Leicester Commercial Bank
HeadquartersBootle, Merseyside
ProductsPostal giro, retail banking

National Girobank was a British public sector financial institution run by the General Post Office that opened for business in October 1968.[1] It started life as National Giro [2][3] then National Girobank and finally Girobank plc before being absorbed into Alliance & Leicester in 2003.[4]

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;[5] the first bank to offer interest-bearing current accounts,[4] 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.

History

Reason for establishment in the UK

In 1959 the Radcliffe 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.[6][7]

Politics played a part in the development of the National Giro. 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. Working-class employees would be paid weekly in cash, while those in the middle class were more likely to be salaried and paid with a bank cheque at the end of the month. Those who could afford to have a bank account 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.[citation needed] 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, outlining a system which would use post offices as its business outlets, with automated central processing of transactions.[6]

Computerisation, it was argued, would transform the profitability of the new system, and it was estimated that a payment between two National Giro accounts could be made in 24 hours if there was a central accounting office at a good communications hub; this would be faster than the existing national cheque clearing system.

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 Bootle in Lancashire.[6] The Post Office bought land on the site of sidings of the North Mersey Branch railway. It also built a large, purpose built office and data processing complex for the site, completed in March 1968.[6]

The National Giro was the first financial institution in Europe, and probably the world, to be established from the outset to be fully computerised.[8] It broke new ground in Europe when it adopted optical character recognition for its transfer, in-payment and out-payment 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.[7]

In 1969 National Giro partnered with the Mercantile Loan Company to provide loans to account holders, which was a significant stimulation of account growth.[8][9]

When a Conservative government came to power in 1970, there were pressures on the government to close the still loss-making operation.[8][9]

The government, with the advice of consultants Cooper Brothers, gave its approval to the continuation plan. However charges were doubled for the majority of customers, the 'same day' service was changed to a 'next day' service, and staffing was reduced from 3,500 to 3,000.[8][9]

By the late 1980s, Girobank was Britain's sixth largest bank.[1]

Privatisation and beyond

The Bootle office after privatisation, bearing the Alliance & Leicester logo

The Alliance & Leicester won a bidding process for the Girobank operation in 1989 after the government decided to privatise it. The transaction was completed in 1990 and by this time the bank was essentially indistinguishable from its competitors, apart from its use of 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. After privatisation, the bank expanded and opened a £9.5 million operations centre in Wigan.[10]

The personal banking business of Girobank became part of the Alliance & Leicester Building Society. The Business Banking arm continued to use the Girobank name as a wholly owned subsidiary of the Alliance and Leicester, repositioned as a cash handler and credit card processor for retailers and other banks.[11][4] In 2003 the Girobank brand was dropped, with the business renamed Alliance & Leicester Commercial Bank[4] 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.

The name "Girobank" continued in use on some giro credits intended for paying bills, along with the Alliance & Leicester "plus" logo. Some councils were continuing to use the original name "Post Office Giro" in 2011.[12][13][14]

On 17 March 2009, a campaign was launched to bring back Girobank. Backers included MPs, trade unions and small businesses.[15]

Successors

Nowadays, the Post Office provides cash services to many banks on a commercial basis. In April 2013 the Post Office announced it would be launching a retail banking service accessible through Post Office branches under the Post Office Money brand,[16] now run by the private bank, the Bank of Ireland

See also

References

  1. ^ a b Business and Enterprise Committee (23 June 2009). "Post Offices - Securing their Future: Annex A - The development of the post office network". UK Parliament. Retrieved 13 April 2014. {{cite web}}: |author= has generic name (help)
  2. ^ Post Office (Giro System). Parliamentary Debates (Hansard) (Report). Vol. 673. 4 March 1963. pp. 165–74. Retrieved 25 June 2016.
  3. ^ National Giro Service. Parliamentary Debates (Hansard) (Report). Vol. 770. 17 October 1968. p. 163.
  4. ^ a b c d Collinson, Patrick (7 July 2003). "Girobank brand laid to rest after 25 years". The Guardian.
  5. ^ Glyn Davies with foreword by James Callaghan (1973). National Giro: modern money transfer. London: Allen and Unwin. ISBN 0-04-332054-6.
  6. ^ a b c d "The National Giro". National Archives. 2060 - Santander Group Archives. Retrieved 27 November 2020.
  7. ^ a b Billings, Mark; Booth, Alan (26 August 2010). The business of Britain's National Giro, 1968-78: "Socialist euphoria and self-deception"? (PDF) (Report). European Business History Association. Retrieved 27 November 2020.
  8. ^ a b c d Ball, Barbara (June 2011). "Post Office: Girobank, Girobank Sale and Privatisation". AIM25. GB 0813 POST 112 Series. Retrieved 5 October 2020.
  9. ^ a b c Hardman, N. "National Giro the first years". National Archives. GIRO/NG. Retrieved 5 October 2020.
  10. ^ "18 May 90 UK: Contract – Wigan. Monk to build operations centre for Girobank". Construction News. 17 May 1990.
  11. ^ Andrew Cave (7 July 2003). "Girobank disappears in A&L brand makeover". The Daily Telegraph. Retrieved 12 January 2015.
  12. ^ "Paying by Post Office Giro". Archived from the original on 15 June 2011. Retrieved 1 October 2010.
  13. ^ "Paying by cheque/postal order/cash/post office giro". Archived from the original on 21 July 2011. Retrieved 1 October 2010.
  14. ^ "Post Office Giro". South Hams District Council. Archived from the original on 16 July 2011. Retrieved 1 October 2010.
  15. ^ "Post Bank Campaign". Federation of Small Businesses. Archived from the original on 8 November 2010. Retrieved 1 October 2010.
  16. ^ Hilary Osborne (13 April 2013). "Post Office to launch 'value for money' current account". The Guardian. Retrieved 25 June 2016.
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