Why do money transfers between bank accounts take many days?
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Depends on your bank and your country. The USA’s banking system is an antiquated joke to most of the rest of the world – seriously, it is… here in the UK I can transfer money between accounts pretty much instantaneously. None of which answers your question directly, except to say that the US still does things in ways the rest of us left behind decades ago.
Many transactions regardless of the amount need to run through anti-money laundering checks. These checks are administered by humans. These are to avoid funding nefarious activities.
For transactions involving different currencies across boarders :-
(1) – If the Bank where your account is held is a local branch, they will pass on the request to the international head office. If you’re using an on-line method, it still gets passed on electronically to the international head office.
(2) – The Bank making the transfer must purchase the the currency you are transferring into, if they do not posess that currency in reserve. They do so via their international FOREX traders and depending on the type of client you are to them (business or personal account or high net worth) they may put your request at the back of a priority list.
(3) – Once the transaction is processed, the international branch of the receiving Bank gets the notification and it is up to that Bank to then notify the branch where the receiving account resides. This doesn’t happen immediately and can take one business day. Finally, the receiving branch may not credit / release the funds until close of business on the day of receipt. Depending on the amount transferred (over $10,000 USD), the bank may be required by policy or in some countries, law, to hold the funds for 5 business days to facilitate due diligence ( money laundering checks, etc. )
For transfer in the same currency and within the same country and under $10,000 USD, one business day should be the norm however the banks often advise that it could take up to three, just in the event that they need to perform checks. For large amounts, I was also informed that the branches should be notified in advance (not sure why seeing that no physical currency needs to be deposited on site however that can add a day to the time it takes if they aren’t notified before).
It seems that at the end of the day, the delay is down to the Bank’s due diligence policies and not a limitation of computerization.
They don’t unless you are in the US.
The US banking system’s way of processing transfers is very old (paper check old) but because it works and people are used to it there hasn’t been enough pressure to replace it.
There are some kinds of money transfers that do process near-instantly (for example between bank accounts inside the banks that are part of the Zelle network) but this is the exception, not the rule.
Here in Canada, using the electronic transfer system is almost instantaneous. I can transfer funds to my bother in Ottawa, from my home in Toronto in under one minute. My account to his account, with no fees using my Canadian Imperial Bank of Commerce ordinary account. My monthly Canada Pension and Old Age Pension payments are electronically deposited into my account on the 28th of each month.
JimB.
Here is an episode explaining the US system: https://www.npr.org/sections/money/2013/10/04/229224964/episode-489-the-invisible-plumbing-of-our-economy
The only reason a transfer between two accounts of the same bank might take time is to allow fraud checks to be done. The bank may have policy or a legal obligation to make some checks. This may be instant or take a few days case by case, but the bank may choose to delay all transfers a set amount so customers don’t complain about “extra checking time” when for someone else it’s faster.
As I understand it, For transfers between banks, basically one bank will have to pay the other the money somehow. In simplest terms they could hand deliver the cash to the other branch or head office. In practice, all the banks will have agreements with each other to basically use IOUs. To make things easy, this may be done only once a day, at an agreed time, in done systems and countries. Huge values of IOUs will be exchanged, a lot of the money will cancel out, and anything that doesn’t will be corrected at a later date either with cash, shares, bonds or other assets. Once the daily transfer had been done, there will be an agreed time between banks to verify the recipients bank account has been updated to reflect the new funds. At this point, the transaction is complete and generally can’t be reversed.
Here in Canada we have an instantaneous E-Transfer system I assumed the US also had. I can easily send money in the form of an email or SMS text and the recipiant will have it near immediately. I transfer money this way to and from my accounts with various banks on a near daily basis. Never takes more than 60 seconds.
In Asia different bank accounts take 2 days for a different bank to another bank… But different accounts within the same bank takes 10 seconds.
It depends on how you do the transfer. ACH “Automated Clearing House” are old style transactions. They take a couple days. If you transfer the money directly, it’s much quicker. Almost instant.
ACH uses aggregation to make it cheaper to transfer funds. They’re done typically at close of business but sometimes throughout the day.
I find that most ACH is next business day these days. You can also do a wire which is instant but there is a charge. If you’re transferring $20-30k, you probably should do a wire so that you verify everything. There are no questions with a wire. If you’re transferring $200, just use one of the many direct transfer services. They are instant.
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