Giro
Encyclopedia
A Giro (ˈdʒaɪroʊ, /ˈdʒɪroʊ/, /ˈʒɪroʊ/, /ˈdʒɪəroʊ/ or /ˈʒɪəroʊ/) or giro transfer is a payment transfer from one bank account to another bank account and instigated by the payer, not the payee. Equivalents in other countries are the United States Automated Clearing House
for direct deposit
and the Australian Direct Entry system.
In the United Kingdom
and in other countries the term Giro may refer to a specific system once operated by the British post office, originally known as National Giro and, confusingly, was adopted by the public and the press as a shorthand term for the Girocheque which was a cheque and not a credit transfer. The commercial banks in the UK operate a paper credit transfer system known as Bank Giro.
The use of both cheques and paper giros is now in decline in developed countries in favour of electronic payments, which are thought to be faster, cheaper and safer due to the reduced risk of fraud.
in the 4th century BC. State granary deposits functioned as an early banking system, in which giro payments were accepted, with a central bank in Alexandria
. Giro was a common method of money transfer
in early banking
.
The first occurrences of book money are not known exactly. The Giro system itself can be traced back to the "bancherii" in Northern Italy, especially on the Rialto
(the Wall Street at the time). Originally these were money changer
s sitting at their desk ("bancus" = table) that customers could turn to. They offered an additional service to keep the money and to allow direct transfer from one money store to another by checking the accounts in their storage books. Literally they opened one book, withdrew an amount, opened another book where the amount was added. This handling was naturally a very regional system but it allowed the money to circulate in the books. This led finally to the foundation of the "Banco del Giro" in 1619 (in Venetian language
Banco del Ziro) which gave the blueprint for similar banking systems. The usage in German language can be seen in the Banco del Giro founded in Vienna in 1703 (to extend the financing business that Samuel Oppenheimer
had brought from Venice in 1670).
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 first postgiro system was established in Austria
on the early 19th century. By the time the British Postgiro was conceived, the Dutch
Postgiro was very well established with virtually every adult having a postgiro account, and very large and well used postgiro operations in most other countries in Europe. Banks also adopted the Giro as a method of direct payment from remitter to receiver.
The term "bank
" was not used initially to describe the service. The banks' main payment instrument was based on the cheque 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 or her bank. The cheque must then be cleared
, a complex process by which cheques are sorted once, posted to a central clearing location, 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.
The rise of electronic cheque clearing
(and debit card
s as preferred instruments of payment) has made this difference less important than it once was. For example in some stores in the United States
checks are scanned at the cash register and handed back to the customer while the funds are withdrawn from the customer's account and deposited in the store's account.
is similar to the use of giro.
Advantages include:
In the United States
, the Automated Clearing House
(ACH), regulated by NACHA-The Electronic Payments Association
and the Federal Reserve Bank
, handles all interbank transfers, including direct deposit
and direct debit
.
In entirely electronic bill payment, the payer receives a bill — either physically by mail or electronically from a website (electronic billing
). Then, the payer reads in the information from the bill, either manually or by using the barcode on the bill, enters it to the form on the bank website, and submits the form. The payment is immediately deducted from the account balance.
the fortnightly
'giro' payment was the normal way of distributing benefit payments. When unemployment peaked in the 1980s large numbers of people would receive their benefit payment on the same day leading the concept of Giro Day, marked by the settlement of small debts and a noticeable increase in drinking, partying and related activities. It was celebrated in the 1996 film Waiting for Giro.
Automated Clearing House
Automated Clearing House is an electronic network for financial transactions in the United States. ACH processes large volumes of credit and debit transactions in batches. ACH credit transfers include direct deposit payroll and vendor payments. ACH direct debit transfers include consumer payments...
for direct deposit
Direct deposit
Direct deposit also known as Direct credit is a banking term used to refer to certain payment systems used to transfer money where a payment is initiated by the payer not the payee, namely:* In Europe, the giro system...
and the Australian Direct Entry system.
In the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
and in other countries the term Giro may refer to a specific system once operated by the British post office, originally known as National Giro and, confusingly, was adopted by the public and the press as a shorthand term for the Girocheque which was a cheque and not a credit transfer. The commercial banks in the UK operate a paper credit transfer system known as Bank Giro.
The use of both cheques and paper giros is now in decline in developed countries in favour of electronic payments, which are thought to be faster, cheaper and safer due to the reduced risk of fraud.
Etymology
The term is borrowed from German, which in turn borrowed it from Italian, in the sense of "circulation of money"; the Italian term comes from the Greek gyros ("circle").History and concept
Giro systems date back at least to Ptolemaic EgyptPtolemaic Egypt
Ptolemaic Egypt began when Ptolemy I Soter invaded Egypt and declared himself Pharaoh of Egypt in 305 BC and ended with the death of queen Cleopatra VII of Egypt and the Roman conquest in 30 BC. The Ptolemaic Kingdom was a powerful Hellenistic state, extending from southern Syria in the east, to...
in the 4th century BC. State granary deposits functioned as an early banking system, in which giro payments were accepted, with a central bank in Alexandria
Alexandria
Alexandria is the second-largest city of Egypt, with a population of 4.1 million, extending about along the coast of the Mediterranean Sea in the north central part of the country; it is also the largest city lying directly on the Mediterranean coast. It is Egypt's largest seaport, serving...
. Giro was a common method of money transfer
Payment
A payment is the transfer of wealth from one party to another. A payment is usually made in exchange for the provision of goods, services or both, or to fulfill a legal obligation....
in early banking
History of banking
The first banks were the merchants of the ancient world that made loans to farmers and traders that carried goods between cities. The first records of such activity dates back to around 2000 BC in Assyria and Babylonia...
.
The first occurrences of book money are not known exactly. The Giro system itself can be traced back to the "bancherii" in Northern Italy, especially on the Rialto
Rialto
The Rialto is and has been for many centuries the financial and commercial centre of Venice. It is an area of the San Polo sestiere of Venice, Italy, also known for its markets and for the Rialto Bridge across the Grand Canal....
(the Wall Street at the time). Originally these were money changer
Money changer
A money changer is a person who exchanges the coins or currency of one country for that of another. This trade is thought generally to be the origin of modern banking in Europe....
s sitting at their desk ("bancus" = table) that customers could turn to. They offered an additional service to keep the money and to allow direct transfer from one money store to another by checking the accounts in their storage books. Literally they opened one book, withdrew an amount, opened another book where the amount was added. This handling was naturally a very regional system but it allowed the money to circulate in the books. This led finally to the foundation of the "Banco del Giro" in 1619 (in Venetian language
Venetian language
Venetian or Venetan is a Romance language spoken as a native language by over two million people, mostly in the Veneto region of Italy, where of five million inhabitants almost all can understand it. It is sometimes spoken and often well understood outside Veneto, in Trentino, Friuli, Venezia...
Banco del Ziro) which gave the blueprint for similar banking systems. The usage in German language can be seen in the Banco del Giro founded in Vienna in 1703 (to extend the financing business that Samuel Oppenheimer
Samuel Oppenheimer
Samuel Oppenheimer was a Jewish banker, imperial court diplomat, factor, and military supplier for the Holy Roman Emperor. He enjoyed special favor of Emperor Leopold I, to whom he advanced considerable sums of money for the Great Turkish War...
had brought from Venice in 1670).
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 first postgiro system was established in Austria
Austria
Austria , officially the Republic of Austria , is a landlocked country of roughly 8.4 million people in Central Europe. It is bordered by the Czech Republic and Germany to the north, Slovakia and Hungary to the east, Slovenia and Italy to the south, and Switzerland and Liechtenstein to the...
on the early 19th century. By the time the British Postgiro was conceived, the Dutch
Netherlands
The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders...
Postgiro was very well established with virtually every adult having a postgiro account, and very large and well used postgiro operations in most other countries in Europe. Banks also adopted the Giro as a method of direct payment from remitter to receiver.
The term "bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
" was not used initially to describe the service. The banks' main payment instrument was based on the cheque 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 or her bank. The cheque must then be cleared
Clearing (finance)
In banking and finance, clearing denotes all activities from the time a commitment is made for a transaction until it is settled. Clearing is necessary because the speed of trades is much faster than the cycle time for completing the underlying transaction....
, a complex process by which cheques are sorted once, posted to a central clearing location, 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
Public utility
A public utility is an organization that maintains the infrastructure for a public service . Public utilities are subject to forms of public control and regulation ranging from local community-based groups to state-wide government monopolies...
receiving thousands of transactions per day, statements would be sent electronically and incorporate a reference number uniquely identifying the remittance for reconciliation purposes.
The rise of electronic cheque clearing
Check 21 Act
The Check Clearing for the 21st Century Act is a United States federal law, , that was enacted on October 28, 2003 by the 108th Congress. The Check 21 Act took effect one year later on October 28, 2004...
(and debit card
Debit card
A debit card is a plastic card that provides the cardholder electronic access to his or her bank account/s at a financial institution...
s as preferred instruments of payment) has made this difference less important than it once was. For example in some stores in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
checks are scanned at the cash register and handed back to the customer while the funds are withdrawn from the customer's account and deposited in the store's account.
Electronic bill payment
Modern electronic bill paymentElectronic bill payment
Electronic bill payment is a feature of online banking, similar in its effect to a giro, allowing a depositor to send money from their demand account to a creditor or vendor such as a public utility or a department store to be credited against a specific account...
is similar to the use of giro.
Advantages include:
- Instant access to the funds via an ATM, debit cardDebit cardA debit card is a plastic card that provides the cardholder electronic access to his or her bank account/s at a financial institution...
or cheque card. - There is no paper cheque that can be lost, stolen, or forgotten.
- Payments made electronically can be less expensive to the payer; typically electronic payments may cost around 25¢ (US) whereas it could cost up to $2 (US) to generate, print and mail a paper cheque. Banks may not even charge for the service at all; for example in Finland banks charge nothing for electronic payments inside the country.
In the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, the Automated Clearing House
Automated Clearing House
Automated Clearing House is an electronic network for financial transactions in the United States. ACH processes large volumes of credit and debit transactions in batches. ACH credit transfers include direct deposit payroll and vendor payments. ACH direct debit transfers include consumer payments...
(ACH), regulated by NACHA-The Electronic Payments Association
NACHA-The Electronic Payments Association
NACHA – The Electronic Payments Association manages the development, administration, and governance of the ACH Network, the backbone for the electronic movement of money and data in the United States. It is funded by the financial institutions it governs...
and the Federal Reserve Bank
Federal Reserve Bank
The twelve Federal Reserve Banks form a major part of the Federal Reserve System, the central banking system of the United States. The twelve federal reserve banks together divide the nation into twelve Federal Reserve Districts, the twelve banking districts created by the Federal Reserve Act of...
, handles all interbank transfers, including direct deposit
Direct deposit
Direct deposit also known as Direct credit is a banking term used to refer to certain payment systems used to transfer money where a payment is initiated by the payer not the payee, namely:* In Europe, the giro system...
and direct debit
Direct debit
A direct debit or direct withdrawal is an instruction that a bank account holder gives to his or her bank to collect an amount directly from another account. It is similar to a direct deposit but initiated by the beneficiary...
.
In entirely electronic bill payment, the payer receives a bill — either physically by mail or electronically from a website (electronic billing
Electronic billing
Electronic billing is the electronic delivery of invoices and related information by a company to its customers. Electronic billing is referred to by a variety of terms,including the following:*Electronic bill payment...
). Then, the payer reads in the information from the bill, either manually or by using the barcode on the bill, enters it to the form on the bank website, and submits the form. The payment is immediately deducted from the account balance.
Cultural significance
Before the use of electronic transfers of payments became the norm in the United KingdomUnited Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
the fortnightly
Fortnight
The fortnight is a unit of time equal to fourteen days, or two weeks. The word derives from the Old English fēowertyne niht, meaning "fourteen nights"....
'giro' payment was the normal way of distributing benefit payments. When unemployment peaked in the 1980s large numbers of people would receive their benefit payment on the same day leading the concept of Giro Day, marked by the settlement of small debts and a noticeable increase in drinking, partying and related activities. It was celebrated in the 1996 film Waiting for Giro.