why can’t online bills or payments be drafted instantly?


Seriously why does it take “3 to 5” business days to take the money from my account when it’s all handled electronically?

In: 294

That would require that transfers in the banking system to be effectively instant.

That isn’t the case. It typically takes a few days for a transfer to complete.

Well actually they can! Outside of the US there are many countries offering instant domestic or even international payments, such as the UK, Singapore, India and most of the Euro Zone.

The reason it is slow in the US is simply that the system hasn’t kept up with the pace of technology change. Many large companies who rely on ACH have adapted their business processes to it (and are therefore unbothered by the delay) and newer, commercial alternatives like Venmo have emerged for individuals to make instant transfers to each other.

When the US revises the ACH system, we’ll see instant payments there too.

In the US there is daily processing of these payments through ACH. There are a variety of real time or faster payment options, but most banks are hesitant for two reasons. First, faster payments means faster fraud. With an ACH there is a period of time where claw ack may be possible. The second is cost, an ACH cost around $0.003, while an RTP transaction costs around $0.05. At the scale of even a small community bank that adds up.

For one billing system I’ve used, the processor had a rule that the customer needed to be notified of the charge 10 days prior to us running the draft. Charge amounts could vary month to month, so we couldn’t let them know in advance and then run it on the bill date.

While the others are correct about the ACH system, the real reason is different.

Ever noticed how the money is instantly subtracted from you bank account and hangs in the void a few days until it is put on the recipient’s bank account?

During this time the bank can use that money as they wish. Lend it to others, invest it, what ever. In that time they can make profit from your (and others) money. While this seems like an insignificant amount of money and time, if you multiply this by all the transactions happening, the banks have billions available to trade and speculate at every given moment.