Banks are encouraging customers to move away from expensive paper-based transactions and towards electronic forms of payment. New technology should provide consumers with instantaneous and inexpensive banking exchanges. Unfortunately, this is not the case with some transactions as financial institutions have been slow to pass the benefits of technology to their retail customers.

This situation causes significant difficulty for those trying to send funds abroad or domestically. Last week, callers to radio show Today with Pat Kenny highlighted the problem. The debate began with an electric bicycle. A listener contacted the programme to say this unusual item was delivered to his door a few days after he ordered it. Amazed callers said it was incredible that a bulky two-wheeled item could be shipped across the Atlantic Ocean in less time than it takes for an Irish bank to process an international money transfer or local cheque. (See accompanying story.)

Dublin computer programmer Mr C had e-mailed the show and agreed to talk with Family Money regarding a large credit transfer he attempted to send to the United States with AIB three weeks ago. Despite being told the funds would arrive in two days for a £20 (€25.39) fee they went missing. He contacted AIB and was told a trace would take another three days. As a result, he was forced to cancel four stock transactions and says he has lost between $300 and $500 (€310E516).

The computer programmer demanded that AIB return the funds and the £20 fee. "Then I drove to the airport and gave it to DHL. I was able to track it to Omaha over the Internet and it arrived in two days. It cost me £36," he said.

Mr C claims the bank eventually admitted that a staff member had forgotten to put the number of the clearing house on the form. The bank says such situations are unusual and most transactions usually arrive within the specified time frame.

In the new e-commerce world, consumers like Mr C assume that funds are transferred immediately from one institution's computer to another. After all, money transfers are just numbers exchanged in cyberspace, surely?

In reality, many transactions still require manual work because banks have been slow to change their retail systems.

Although each state in Europe has its own clearing system making retail fund transfers very slow, large institutional transactions take minutes to clear through the TARGET settlement system. This service is not currently available for retail transactions and smaller sums are sent through correspondent banks using the slower Swift messaging system.

The difficulty with retail transactions is that "straight-through processing" is not in place because it requires international bank account numbers (IBAN).

However, the European Commission is putting pressure on the banks to develop a standardised retail payment transfer system in advance of the euro. At the end of January, the EC issued a strongly-worded communication on Retail Payments in the Internal Market. The missive says the principal reason cross-border retail credit transfers are more expensive and less efficient than their institutional counterparts is because manual intervention is still required at nearly every stage in the banks' internal processing procedures.

Spokesmen for both the Central Bank and Irish Payments System Organisation say that a number of years ago banks in the Republic made a commercial decision not to develop new retail payments systems.

Member-states' banks and central banks have been told by the European Commission in no uncertain terms that the system must improve by January 1st, 2002.

The first step was the Cross-Border Credit Transfers Directive which was due for implementation in all member-states by August 14th, 1999.

It says customers must be given an easy-to-understand fee in advance of the transaction, a definite timescale for completion of the transaction and a moneyback guarantee if the transfer goes astray. Unless otherwise stated, the originator pays all the costs. An intermediary or receiving bank may not make any further charges to either the originator or the beneficiary.

Domestically, consumers are also frustrated by the length of time it takes for them to get value for their funds. Cheques and some other forms of payment deposited at a bank take between three and five days to hit a person's account.

On the first day the funds are transferred from the person's bank. They arrive at the destination bank or clearing house on day two which is when they have value. By the third day the funds should be placed in the specified account.

On the fifth day the customer is allowed access to the funds although waiting times vary from bank to bank.

AIB says its new branch banking system (NBBS) means AIB's paper transaction can have sameday value between branches.

Until the banks fully computerise their international retail transactions, consumers may be better off sending money abroad the old-fashioned way - using a bank draft and a mail delivery service. One of the fastest ways to see value for domestic funds is by using cash or a Laser card.