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Bank transfers take days to complete because of liquidity management, not due to IT system delays. When you do a big enough transfer, the bank has to have a bal
by nvm0n2 3y ago
Bank transfers take days to complete because of liquidity management, not due to IT system delays. When you do a big enough transfer, the bank has to have a balance with the central bank that can be moved to the target bank's CB account, but, your bank doesn't actually have the money you deposited. It's out on loan instead. So the bank has to go into the market and sell some assets to raise that money. It may not be possible to do this immediately, and even if it is, they want to be able to time their sales to reduce capital inefficiencies.
This is also why they're often so very expensive. That $25 or whatever isn't being spent on the cost of updating the ledger. It's the cost the bank incurs because of the need to sell assets (loans) before they intended to.
- mrkeen 3y agoThat's not a sufficient explanation for non-instantaneous transfers of $50.
- nvm0n2 3y agoIt is, because in some older payment systems all payments go via the same "rails" as they call it. Specifically, the reason that payments are still tied to the nightly cycle is because orders submitted to the central bank aren't executed immediately. At night they suspend submission of new orders and do something called netout or payment compression on the transfer graph, the goal of which is to reduce the amount of money banks need to hold at the central bank. Every payment no matter how small can contribute to the netout, reducing liquidity needs at the CB.