How come nothing ever goes through on like a balance sheet when online banking over the weekend? It always updates on Monday it seems like. What’s that all about?
In: Economics
Banks are reliant on the Federal Reserve to process most interbank transactions. The Federal Reserve processes transactions once daily Monday through Friday. Traditionally the Fed was closed weekends because it was a government entity and the government is closed on weekends.
More modernly it would be possible to automate all of this to update in real time. However, banking regulations are written in such a way that they wouldn’t really work if transactions were processed in real time/over the weekend.
Essentially, banks needs to maintain a minimum amount of capital or they get declared insolvent and that declaration has a really big impact on their ability to function. Banks are also encouraged to only maintain that absolute bare minimum amount of capital and most do. This means that throughout the day they are constantly popping above and below their minimum requirements, but that’s ok as long as they are above it at 8am every weekday. So if a bank accidentally goes below its minimum capital requirements during the nightly transaction process it has a few hours to borrow money from someone else to get back above insolvency and this basically allows the system to work.
Typically Friday’s transaction batch is much larger than the other days, which means that banks might be substantially below their capital requirements Friday night, but this also isn’t a big deal because they have all weekend to fix it.
The banking regulations could be completely rewritten to account for real time processing, but frankly there’s no point in doing that when the current system works fine and if money really needs to be transferred in real time its possible to do that, you just have to pay more.
Banking hours are generally only Monday through Friday, they open out of “courtesy” and not wanting to lose out on the business. But the staff that checks and manages the transactions don’t show up until Monday.
Because they rely on the Fed. And even though the fed isn’t a government agency, but it really is, they don’t work real normal people hours.
Mostly tradition from when physical banks were closed on weekends, it’s also a good time for them to do system maintenance.
Real-time payments are coming, but they are huge projects to implement.
It’s important to note that your question does not apply to every jurisdiction, or every bank. In the UK my online bank account updates in real time (more or less) all day, every day.
they do know right away. they have to. them taking their time is all for show. its a song and dance gimmick. gotta try and justify the fees
I work with it systems in a bank in Denmark. I have not worked directly with the issue but coworkers have. I cant speak for other countries as this area is highly regulated and i think there is many differences between countries.
One answer is that in “old” days there were not much computing power and you were reliant on the weekend to “batch run” alot of numbers and reports. When all systems are not doing anything it is easier to sum up accounts and stuff when there is not constantly being changes to the data. That also removed complexity in the code. Also in the weekend everything was closed so why would you make transactions ?
Fast forewared to 6-7 years ago. The Bank suddenly got the project of removing this constraint. It is not needed anymore and the customers dont want the batch days where they cant get a correct amount on their account.
The job here was to clean up in old legacy systems and remove the batch jobs that run in the weekend, to run continuesly. This was easier today with improved technology, better programmers with increased architecture understanding and ofcourse the improved processing power of todays computers.
The main issue was that this is the code incore of the bank you need to change. So every system built on top of it has to be retested and often changed. I think this last step was what took the most time, not the actual change in the “core” code.
Why have we not removed this constraint before ?.
Its a massive project and the implications are hard to foresee. Sometimes we get caught in the “this is how we always do”
Tl:DR
Because of missing computing power and for the simplicity we have used batch jobs in weekends.
With improved technology and knowledge we can remove this constraint.
I work at a bank and I have the answer! There are days we call business days and non business days, this dates way back to when everything closed on Sunday for the lords day. Business days are the days of the week when businesses are open and operational, Monday- Friday, non business day are days when the businesses are not open, Saturday & Sunday. So, companies like banks, that have non business days on the weekend, are literally closed. Which means not a single person goes in on Sunday, so no one can do the math thing to your bank numbers.
The other answers are better than mine, but essentially that’s just when the bank has chosen to do their own accounting – and it’s easier when you don’t have to deal with things happening while you’re counting up, so they either get processed pre-friday night or counted the next week post-monday morning even though they happen on sat/sun
My guess for why they don’t change that, is stability. A lot of banks are running on old (sometimes obsolete) operating systems too, same reason
Sadly because you live in america and america has weird system that even adults cant defend
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