Brokers revive Switch card plan for share dealings

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The Independent Online
STOCKBROKERS are planning to enable small investors to pay for shares using the Switch debit card network.

ShareLink, the telephone share-dealing service, looked at using Switch some time ago but the debit card's own rules prohibited cardholders from using it to pay for financial services. These rules were scrapped at the beginning of the year and ShareLink is keen to resurrect its plans.

The share-dealing subsidiaries of the clearing banks are also understood to be examining Switch. No firm decisions have yet been taken.

Switch could also play a key part in the new automated share-settlement system, Crest, being developed by the Bank of England. It would be useful in the change-over to five-day rolling settlement next year, the precursor to Crest.

The existing two-week account system will disappear on 18 July, when 10-day rolling settlement will be introduced. From then on institutions will be seeking faster ways to settle share deals than paper-based postal systems.

Using Switch would guarantee payments to brokers the day after the transaction, a day earlier than the present system which is dominated by cheques. Switch would also reduce the banks' paperwork.

Sue Concannon, director for special projects at ShareLink, said: 'We looked at Switch some time ago, but it was against the rules. We welcome the rule change and would like to look at Switch again.'

Other brokers are also examining Switch, but there are still problems with using it. There is the question, for instance, of when the cards' guarantee of payment begins and ends on a share deal. This causes difficulties as the price of the shares could rise or fall during the guarantee period.

Banks are very happy using direct debits, which enable brokers to take money out of investors' accounts electronically. But direct debits are far more difficult for investors doing one-off deals, another factor in favour of Switch.