Seriously why does it take “3 to 5” business days to take the money from my account when it’s all handled electronically?
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OK, this is one of those things that can’t really be explained to a 5 year old, because it gets as much into philosophy as it does into technology.
Fundamentally, the essential concept in any financial system is trust (that all actors will do the right thing, every time).
In order to ensure that trust, there is a LOT of magic that goes on behind the scenes to make sure that every transaction is legal (defeating fraud), orderly (in that it’s processed in the correct sequence, and that money flows from A to B to C to D correctly), and auditable (allowing the interested parties on both ends of a transaction to see that the right thing was done from their perspective).
The ACH system (which is how almost all money in the world is moved around) is old, fairly cumbersome, and not particularly fast, but everyone in the world trusts it.
Old is not necessarily a bad thing – old means it’s well known, well understood, well studied, and has been corrected, adapted, and streamlined over time.
One of the biggest issues facing the “instant transfer” systems today is fraud – look at all the financial fraud around cryptocurrencies, Venmo, CashApp, etc.
When fraud is a major concern, trust is eroded.
For an individual, when I don’t trust something, I simply abstain from using it.
But if I’m a bank, I have to use *something.* Refusing to participate in the financial system means that I won’t be a bank for long.
As a result, I use what I trust the most, so that my customers will likewise trust the system.
The US banking system does operate an instant transfer system themselves, Zelle. But, generally, companies don’t like using Zelle, because they have to pay fees that are significantly higher than the ACH system charges, and those fees add up.
If the Zelle alliance would drop those fees to be on-par with ACH, you’d see more adoption. BUT, the Zelle alliance can’t afford to drop their fees, because their expenses are quite a bit higher on a per-transaction basis than the ACH system is (remember, when you’ve had 40+ years of optimization, you get pretty good at doing what you do as inexpensively as possible).
To your question, the reason it takes 3-5 days is because the ACH system isn’t instant, and they don’t process things on weekends and US federal holidays. Almost all ACH transactions clear in 1-2 days, but by combining a holiday with a weekend, you get an extra 3 days in there, so they quote that into the range as buffer.
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