4 ms·

I have always wondered, what combination of manual vs. automatic processes are happening when one makes a bank wire (actual gross settlement / instant wire tran

I have always wondered, what combination of manual vs. automatic processes are happening when one makes a bank wire (actual gross settlement / instant wire transfers, not ACH for example in the US)? Because whenever I have done wires, in addition to the bank/IBAN/account numbers, there are all these manual fields like "for further credit to", "for benefit of", etc. that are clearly having to be interpreted by someone. And very often errors come up and the funds are held or in limbo on one end or another. Does anyone have a good explanation of what happens both on the initiating bank side and receiving bank side when a wire is done? Does someone have to manually review an outgoing wire to allow it to proceed? Does the receiving bank have someone to review it inbound and route it correctly? I imagine that this is why it still costs $25-40 to handle them.

atdrummond 5y ago
Are you talking domestic US wires or international wires?
- supernova87a 5y ago
  Oh, not too sure how different they are, but definitely even with domestic wires, many custom/human-review-required fields seem to exist. With international wires, I am sure that even more complications exist with which currency it's to be settled in, etc. And I have no idea/am curious whether the information about ownership of the account is transmitted with the transaction, to track whether the same person owns both accounts, etc?
  - atdrummond 5y ago
    Domestic US wires are (with the exception of flagged or manual telephone Fedwire placements) automatic through the Fedwire system, which is a RTGS (real time gross settlement) system. Most Euro denominated payments (not sure I'd call them wires anymore) are also automatic, cheap and easy thanks to SEPA's wide proliferation. Most of the time the extra info not actually required for automatic processing is in case the payment doesn't go through as intended, as well as for compliance reasons. As Elric notes above, international payments (outside a common currency zone with a system like Fedwire/SEPA) is where things get tricky/manual processing often comes into play.
vianneychevalie 5y ago
I can't imagine it has a lot of manual work involved, exactly for the same reason you do: I haven't paid a cent for international or domestic wires in years. I'm in the EU, but I've done wires to Swiss or Lebanese accounts as well and no fees anywhere. Maybe it's local regulations defining whether a human should be part of the loop?
- atdrummond 5y ago
  Sadly that's very much a European thing. I never pay much or anything from my European accounts but even our very large, corporate client account stateside we pay I want to say $15 for domestic, $40 for international?
- elric 5y ago
  (International) payments frequently involve dozens of systems. Some steps are manual, even if you're not being charged for it. This is especially true if somewhere along the way the transaction is flagged as being suspicious (which can happen for any number of reasons, including innocuous ones).
- spiralx 5y ago
  Never underestimate how antiquated US infrastructure can seem lol. But to be fair European banks were always motivated to develop robust protocols for international bank operations due to the number of countries in Europe, even more so with the advent of the EU. US banks could talk to US banks, and I'd guess Canadian and Mexican banks would have just had to put the effort in to being compatible with the US system.
3np 5y ago
My armchair guess would be that for most banks and transfers, the happy path involved no manual human interaction but that there are various arbitrary situation where a human gets looped in. One of my banks seems super paranoid and have contacted me asking for supporting documents for each and every incoming international transfer >~800 USD (despite most of them being from the same account, held in my name).
rowls66 5y ago
I have worked in this business for 20 years at some of the largest banks, so know something about this. In short, yes, at the big banks, most wire processing is automated. Straight through processing rates are > 90%. An explanation of what happens is at initiating and receiving banks is beyond the scope of anything I want to type. At banks with high volumes, more processing is automated (see above) for low volume banks, not so much. Payments may fall out of automated processing for several reasons like poor instructions quality (unknown account number), complex correspondent/routing requirements, sanctions screening (OFAC in the US). For high volume banks, even with high STP rates, this can mean 1,000's of payments per day. As for why wires cost so much, the answer depends on who is paying. The most frequent users of wires often pay very little for them because bank's provide wire services as a package in exchange for holding balances with the bank. Only retail customers and small businesses pay full price ($25-40) for wire payments, and bank's charge this much because they can. Retail is such a small part of the wire payments business that if you take you business elsewhere the bank does not really care. One last note on pricing. Most wire originate from the same set of bank customers on a regular basis, so their processing is highly automated and the bank's risk and fraud systems are trained to expect these payments. Occasional payments from retail customers probably do require manual processing more often, so a higher price is probably warranted to some extent.
immibis 5y ago
Have a look at Ukraine's military crowdfunding instructions, because it demonstrates a non-seamless transfer of money. As a user outside of Ukraine you cannot send money directly to accounts in Ukraine (unless your bank handles it specially). However, what you can do is send money directly to the Ukraine central bank (!!!) and in the memo field, specify which account should be credited. That is how I assume all interbank transfers would operate without SWIFT. Couldn't tell you why Ukraine uses this system since they're not banned from it.
jsmith45 5y ago
I'm not an expert in this area, but from what I have gathered with respect to domestic Fedwire based wire transfers: Fedwire is arguably the main settlement system used in the US between banks that participate in the federal reserve, when correspondence accounts are not in use. (Even other systems that claim to be settlement systems seem to often end up using FedWire for final settlement). The actual settlement is simply a debit and credit in the bank's accounts with the Fed. But while that does technically settle payment, in practice more information is needed, as the bank's accountants need to know what this was for, so they can keep their accounts up to date. Therefore metadata can be attached to the transfer. Without that it would be more complicated to figure out what exactly just got settled. But when one is trying to send money not just between banks, but between customers of banks, even more metadata is generally needed. You are correct that at least in theory, the field for the target account would clearly who is getting paid. (Obviously the org receiving the wire will often generally need some additional metadata about what the payment is for, in much the same way banks do, hence the use of fields like 4320.) I suspect that the receiving bank's handling is usually mostly automated (especially with larger banks), but that there are some safeguards that sometimes stop things for manual review both for correctness concerns (like making sure the name of beneficiary is even remotely close to the name associated with that account number) and for security considerations (flagging suspicious transactions to have further verification). And of course, if things are incorrect and things are not caught by the safeguards, it requires human effort to fix. The receiving organization's steps seems to often be at least somewhat manual. (But this can vary, orgs that receiving thousands of transfers a day likely automate more than those that receive just a few.) I get the feeling some organizations with the capability of automatically processing most incoming wires simply don't, because having a person look at the incoming wire, and review what the automated processing will do before clicking an "approve processing" button can catch other mistakes, some of which could be a pain to unwind manually.

atdrummond 5y ago

Are you talking domestic US wires or international wires?

supernova87a 5y ago
Oh, not too sure how different they are, but definitely even with domestic wires, many custom/human-review-required fields seem to exist. With international wires, I am sure that even more complications exist with which currency it's to be settled in, etc. And I have no idea/am curious whether the information about ownership of the account is transmitted with the transaction, to track whether the same person owns both accounts, etc?
- atdrummond 5y ago
  Domestic US wires are (with the exception of flagged or manual telephone Fedwire placements) automatic through the Fedwire system, which is a RTGS (real time gross settlement) system. Most Euro denominated payments (not sure I'd call them wires anymore) are also automatic, cheap and easy thanks to SEPA's wide proliferation. Most of the time the extra info not actually required for automatic processing is in case the payment doesn't go through as intended, as well as for compliance reasons. As Elric notes above, international payments (outside a common currency zone with a system like Fedwire/SEPA) is where things get tricky/manual processing often comes into play.

vianneychevalie 5y ago

I can't imagine it has a lot of manual work involved, exactly for the same reason you do: I haven't paid a cent for international or domestic wires in years. I'm in the EU, but I've done wires to Swiss or Lebanese accounts as well and no fees anywhere. Maybe it's local regulations defining whether a human should be part of the loop?

atdrummond 5y ago
Sadly that's very much a European thing. I never pay much or anything from my European accounts but even our very large, corporate client account stateside we pay I want to say $15 for domestic, $40 for international?
elric 5y ago
(International) payments frequently involve dozens of systems. Some steps are manual, even if you're not being charged for it. This is especially true if somewhere along the way the transaction is flagged as being suspicious (which can happen for any number of reasons, including innocuous ones).
spiralx 5y ago
Never underestimate how antiquated US infrastructure can seem lol. But to be fair European banks were always motivated to develop robust protocols for international bank operations due to the number of countries in Europe, even more so with the advent of the EU. US banks could talk to US banks, and I'd guess Canadian and Mexican banks would have just had to put the effort in to being compatible with the US system.

3np 5y ago

My armchair guess would be that for most banks and transfers, the happy path involved no manual human interaction but that there are various arbitrary situation where a human gets looped in. One of my banks seems super paranoid and have contacted me asking for supporting documents for each and every incoming international transfer >~800 USD (despite most of them being from the same account, held in my name).

rowls66 5y ago

I have worked in this business for 20 years at some of the largest banks, so know something about this. In short, yes, at the big banks, most wire processing is automated. Straight through processing rates are > 90%. An explanation of what happens is at initiating and receiving banks is beyond the scope of anything I want to type. At banks with high volumes, more processing is automated (see above) for low volume banks, not so much. Payments may fall out of automated processing for several reasons like poor instructions quality (unknown account number), complex correspondent/routing requirements, sanctions screening (OFAC in the US). For high volume banks, even with high STP rates, this can mean 1,000's of payments per day. As for why wires cost so much, the answer depends on who is paying. The most frequent users of wires often pay very little for them because bank's provide wire services as a package in exchange for holding balances with the bank. Only retail customers and small businesses pay full price ($25-40) for wire payments, and bank's charge this much because they can. Retail is such a small part of the wire payments business that if you take you business elsewhere the bank does not really care. One last note on pricing. Most wire originate from the same set of bank customers on a regular basis, so their processing is highly automated and the bank's risk and fraud systems are trained to expect these payments. Occasional payments from retail customers probably do require manual processing more often, so a higher price is probably warranted to some extent.

immibis 5y ago

Have a look at Ukraine's military crowdfunding instructions, because it demonstrates a non-seamless transfer of money. As a user outside of Ukraine you cannot send money directly to accounts in Ukraine (unless your bank handles it specially). However, what you can do is send money directly to the Ukraine central bank (!!!) and in the memo field, specify which account should be credited. That is how I assume all interbank transfers would operate without SWIFT. Couldn't tell you why Ukraine uses this system since they're not banned from it.

jsmith45 5y ago

I'm not an expert in this area, but from what I have gathered with respect to domestic Fedwire based wire transfers: Fedwire is arguably the main settlement system used in the US between banks that participate in the federal reserve, when correspondence accounts are not in use. (Even other systems that claim to be settlement systems seem to often end up using FedWire for final settlement). The actual settlement is simply a debit and credit in the bank's accounts with the Fed. But while that does technically settle payment, in practice more information is needed, as the bank's accountants need to know what this was for, so they can keep their accounts up to date. Therefore metadata can be attached to the transfer. Without that it would be more complicated to figure out what exactly just got settled. But when one is trying to send money not just between banks, but between customers of banks, even more metadata is generally needed. You are correct that at least in theory, the field for the target account would clearly who is getting paid. (Obviously the org receiving the wire will often generally need some additional metadata about what the payment is for, in much the same way banks do, hence the use of fields like 4320.) I suspect that the receiving bank's handling is usually mostly automated (especially with larger banks), but that there are some safeguards that sometimes stop things for manual review both for correctness concerns (like making sure the name of beneficiary is even remotely close to the name associated with that account number) and for security considerations (flagging suspicious transactions to have further verification). And of course, if things are incorrect and things are not caught by the safeguards, it requires human effort to fix. The receiving organization's steps seems to often be at least somewhat manual. (But this can vary, orgs that receiving thousands of transfers a day likely automate more than those that receive just a few.) I get the feeling some organizations with the capability of automatically processing most incoming wires simply don't, because having a person look at the incoming wire, and review what the automated processing will do before clicking an "approve processing" button can catch other mistakes, some of which could be a pain to unwind manually.