It’s essential for growing businesses to always be aligned with payments that are supposed to be made to vendors. Timely payments are the key to positive vendor relationships, which can, in turn, attract more favorable terms for future trades. To streamline the payment processes for businesses, financial institutions and regulatory authorities in Singapore have contributed to the development of GIRO and FAST.
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What is GIRO?
The Interbank GIRO (General Interbank Recurring Order) system was introduced in Singapore in 1984 as an affordable electronic direct debit mechanism for billing organizations to collect payments. GIRO involves billing organizations, consumers, and banks in a three-way relationship. Consumers or businesses authorize direct debit instructions to billing organizations, while banks facilitate the authorized GIRO deductions. Today, GIRO is widely utilized by government agencies and private companies for consumers to pay regular and fixed bills conveniently.
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What is FAST?
The FAST (Fast and Secure Transfers) system has been available in Singapore since 2014. It allows quick transfers between participating banks in Singapore dollars. Most major Singapore banks use the FAST network, although participation is voluntary, so the list of members may change with time. Account holders at participating banks can make FAST transfers to recipients with Singapore dollar accounts at other participating banks. Fund transfers can be made up to the limits set by the bank and the $200,000 per transfer limit set by the FAST network. Individual banks may have more restrictive limits and minimums for transfers.
GIRO and FAST have both emerged as two convenient interbank fund transfer methods for businesses in Singapore. But, there are some key differences between the two fund transfer methods.
1. Speed
The FAST system enables convenient local bank transfers in Singapore dollars between account holders at participating banks. FAST lives up to its name, as it facilitates instant fund transfer between bank accounts.
On the other hand, business payments made using GIRO can take days to reach the recipient’s bank accounts. The time-consuming process is usually a result of manual detail verification involved in paper-based GIRO transactions.
2. Accessibility
To make a payment using FAST, a business owner would simply be required to log into their online or net banking portal provided by the bank. FAST payments can be made completely online, making it a suitable choice for making all sorts of transactions, whether recurring or one-off.
Conversely, a business owner would be required to collect a GIRO application form from the billing organization to initiate a GIRO transaction. The application form would then be sent to the bank, where funds would be transferred upon verification. GIRO is usually regarded as the ideal fund transfer method for recurring payments.
3. Transaction Processing
FAST transactions are processed instantly, similar to the real-time gross settlement payment system. This quick payment processing allows businesses to make time-sensitive payments, averting any late payment penalties.
In contrast, payments made using GIRO are processed in batches, which is also a reason why GIRO transactions are slower than FAST fund transfers. Thus, GIRO is ideal for making those payments that don’t demand immediate settlement.
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So, is FAST better than GIRO?
The suitability of either type of interbank fund transfer depends on the use case. The long transaction processing speed of GIRO has been long criticized. As a solution to that, eGIRO was developed.
The introduction of eGIRO can be considered a turning point in the GIRO fund transfer system. eGIRO was launched in Singapore in November 2021 to digitize and streamline the GIRO application process. This joint initiative between the Association of Banks in Singapore (ABS), participating banks, and the Monetary Authority of Singapore (MAS) aims to improve efficiency.
Previously, billing organizations manually processed GIRO forms and banks had to verify account details, taking around three weeks on average to set up a new GIRO arrangement. The eGIRO service digitizes the application process to eliminate this long processing time. With eGIRO, the payment processing time has been reduced from days to just a few seconds.
To conclude, FAST and GIRO or eGIRO are popular interbank fund transfer methods in Singapore. The suitability of either method for making business payments depends on the nature of the payment and each organization’s needs. Speed, accessibility and transaction processing systems are the factors that should be considered when making the decision between FAST and GIRO.
