Why does a bank payment takes a long time to be received, especially if there is a weekend in the middle?
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Counter party risk.
Imagine party-A banking at bank-A sending money to party-B who is banking at bank-B.
How does bank-B know party-A has enough money?
Assume bank-B hands over the money to party-B, then realizes party-A never had the money they wanted to send.
Bank-A must provide confirmation to bank-B that party-A has enough money and party-B can paid.
And this example only talks about 2 parties and 2 banks.
What if there are millions of customers and thousands of banks? What if each customer has more than one account?
As you can imagine, it can get tricky very soon and we are talking about real money here. Fraud is everywhere. So after several decades of trial and error, systems like SWIFT were setup to make these verifications efficient but not real-time yet.
Fraud prevention teams don’t like real-time transactions as it’s impossible to react soon enough. AI-based fraud detection systems may change that in near future.
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