Giro

A giro, also called a direct deposit, is a banking term for a method of payment. It is almost the opposite of a cheque. A cheque is given to a payee who deposits it in a bank, but a giro is given by the payer to their bank, which transfers funds into the payee's bank account. more...

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Giro is often used by post offices as well.

The difference is one of 'push' versus 'pull'. That is, a cheque is a 'pull'-initiated transaction: the presentation of the cheque by the payee causes the payee's bank to seek the funds from the payer's bank, which then takes the funds from the payer's account if the funds exist. If insufficient funds are available, then the cheque "bounces" (i.e. it is returned to the payee with a message of insufficient funds). By contrast, a giro is a 'push'-initiated transaction: the payer directs a bank to transfer funds from the payer's account to the payee's bank, where the payee can then withdraw the funds. As a result, a giro cannot "bounce", because the bank will only process the order if the payer has sufficient funds to cover the payment. However, this also means that the payer receives no benefit of "float".

Giros are often used in large or periodic (e.g. monthly) money transfers, such as utility bills or taxes. In contrast, daily purchases with small and variable payments are typically paid by other means.

The use of both cheques and 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 UK many large retailers, including leading supermarkets such as Tesco's, Asda and J Sainsbury's, stopped accepting cheques from customers in late 2007 citing reasons of limited cheque usage, shorter checkout queues and increased security. Other smaller retailers have since followed suit.

History and concept

Giro systems date back at least to Ptolemaic Egypt 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.

Postal Giro or Postgiro systems have a long and honourable 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.

Read more at Wikipedia.org