An explanation for slow Internet banking

By Murray Bourne, 20 Oct 2007

I have complained before (in Speed of light?) that Internet-based banking transactions are too slow. I am talking about transfers from one bank to a rival bank.

The banks transfer large amounts of money between each other on a daily basis. No delay there. But when it comes to customer's funds, it can take "2 to 3 days". Why?

I challenged two of the larger Singapore banks (DBS and OCBC) on this issue recently. I was particularly bugged because I was charged extra on a credit card bill because the funds took so long to move from one bank to the other.

The replies to my challenge were unsatisfactory. One of them wrote:

The Interbank Funds Transfer service rides on the Clearing & Settlement System of GIRO transactions through the Automated Clearing House, similar to cheques which are also cleared via the Automated Clearing House.

In this instance, InterBank Funds Transfers will not be credited immediately and will take about 2 to 3 days before the funds are received by the receiving bank for crediting to customers' accounts. All participating banks for the InterBank Funds Transfer service will be subjected to the same clearing system.

When customers use the service, the interbank funds transfer screen will explain to customers that the service will take 2 to 3 days.

I can accept that cheque-based (or 'check-based' in America-speak) transactions need time for a human to check that all is well. Fair enough.

But the above letter just describes the process - there is no explanation of why Internet-based fund transfers need to go through the same process as cheque-based transactions.

The bank you are transferring from will ensure the funds are there before you try to transfer. Time taken: less than a second.

The bank you are transferring to does not have to do anything except electronically accept your money. Time taken: less than a second.

After all, wasn't speed one of the main reasons we moved into Internet-based banking? Oh, silly me. It was cost savings on the part of the banks, obviously...

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