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"Fed delays have cost consumers hundreds of billions in overdraft fees, check-cashing fees and late fees, said Aaron Klein, a senior fellow at the Brookings Ins

"Fed delays have cost consumers hundreds of billions in overdraft fees, check-cashing fees and late fees, said Aaron Klein, a senior fellow at the Brookings Institution." Why would banks be incentivized to speed up this process? They make money off the delay and get to blame the Federal government. Its the same reason a purchase can be done instantly but then it takes up-to (10) business days to be refunded. Banks and retailers make interest off the money they hold onto. Being able to make money off the refund is a probable reason why they are even offered. Otherwise it would be all-sales-final.

lxgr 3y ago
> Being able to make money off the refund is a probable reason why they are even offered. I think you vastly overestimate the amount of interest a retailer can make on that money vs. the cost of processing the refund, potentially not being able to resell already unpacked goods etc. Purchases and refunds are also cleared and settled exactly as quickly, i.e. usually on the next business day.
- charcircuit 3y ago
  It would be less about gaining interest and more about having extra liquidity.
- ZeroSolstice 3y ago
  I don't know many businesses that would perform processes that don't make them money. Even if we use your example of next business day what happens on a Friday where the refund isn't processed until Monday or Tuesday? Is customer satisfaction really increased if you get their refund back to them in 3, 7 or 10 days? In instances where you have to ship the defective product back. They don't send you an over-night, next day label to get the product back to them as soon as possible. They send it ground. So you paid for a product, you then wait for the product, you then call to get a refund, you ship it back, they receive and process and then you get refunded your original amount. That could be two weeks, even though your refund was settled next business day. I'd be surprised if any retailer takes a loss with a refund that they can't send back to the manufacturer or write off. It also seems that there isn't any set refund time limit and varies per state in the US.[1] [1] https://www.freeprivacypolicy.com/blog/return-refund-us-laws/ https://www.freeprivacypolicy.com/blog/return-refund-us-laws...
  - lxgr 3y ago
    > Even if we use your example of next business day what happens on a Friday where the refund isn't processed until Monday or Tuesday? The same thing that happens when you make a purchase on a Friday: It most likely gets posted to your account the following Monday. No clearing (or at least settlement) on the weekend goes both ways.
    - ZeroSolstice 3y ago
      I'm specifically talking about refunds not purchases as in US only a few states have laws relating to returns and refunds.[1] Otherwise its left up to the retailer to set the policy. Most purchasers are not making large amounts of interest on their checking accounts compared to the balance amounts a business would carry. If no settlement happens on the weekends I can see a large advantage to a business holding one million dollars in refunds for two extra days before you complete or run the batch job of refunds. When I make a purchase I don't get to decide when to run the batch job for it to post/settle. Retailers however can determine when they want to actually process refunds. What can a customer complain about when the posted refund shows up on the following Monday, Tuesday, Friday, two weeks later? To further my point of retailers not being incentivized to process your refund quickly there was a small study done that delaying refunds had customers "re-spending" the refund before it had fulled settled.[2] [1] https://www.freeprivacypolicy.com/blog/return-refund-us-laws/ https://www.freeprivacypolicy.com/blog/return-refund-us-laws... [2] https://hbr.org/2023/06/how-retailers-can-capitalize-on-the-refund-effect https://hbr.org/2023/06/how-retailers-can-capitalize-on-the-...
ttymck 3y ago
Retailers make a significant return on interest? Can you help me identify what keywords I would look for in a P&L to see this?
- loxias 3y ago
  I always heard it as "float management", or "managing your float".
- ZeroSolstice 3y ago
  "Large companies and financial institutions also often "play the float" with larger sums for-profit—namely, the interest income they earn on an amount by speeding up its deposit into their accounts or slowing down a presentation for payment[1]." IMF eLibrary with some example scenarios[2]. Granted they speak of most of the float data being analyzed with checks, it doesn't seem unreasonable to replace "check" with "credit card" transaction. [1] https://www.investopedia.com/terms/f/float.asp https://www.investopedia.com/terms/f/float.asp [2] https://www.elibrary.imf.org/display/book/9781557753861/ch10.xml https://www.elibrary.imf.org/display/book/9781557753861/ch10...
deleted 3y ago
[deleted]
mcfedr 3y ago
Wow thats crazy most refunds here (UK) take 1-2 days max
- mcfedr 3y ago
  Amazon online, normal minutes

lxgr 3y ago

> Being able to make money off the refund is a probable reason why they are even offered. I think you vastly overestimate the amount of interest a retailer can make on that money vs. the cost of processing the refund, potentially not being able to resell already unpacked goods etc. Purchases and refunds are also cleared and settled exactly as quickly, i.e. usually on the next business day.

charcircuit 3y ago
It would be less about gaining interest and more about having extra liquidity.
ZeroSolstice 3y ago
I don't know many businesses that would perform processes that don't make them money. Even if we use your example of next business day what happens on a Friday where the refund isn't processed until Monday or Tuesday? Is customer satisfaction really increased if you get their refund back to them in 3, 7 or 10 days? In instances where you have to ship the defective product back. They don't send you an over-night, next day label to get the product back to them as soon as possible. They send it ground. So you paid for a product, you then wait for the product, you then call to get a refund, you ship it back, they receive and process and then you get refunded your original amount. That could be two weeks, even though your refund was settled next business day. I'd be surprised if any retailer takes a loss with a refund that they can't send back to the manufacturer or write off. It also seems that there isn't any set refund time limit and varies per state in the US.[1] [1] https://www.freeprivacypolicy.com/blog/return-refund-us-laws/ https://www.freeprivacypolicy.com/blog/return-refund-us-laws...
- lxgr 3y ago
  > Even if we use your example of next business day what happens on a Friday where the refund isn't processed until Monday or Tuesday? The same thing that happens when you make a purchase on a Friday: It most likely gets posted to your account the following Monday. No clearing (or at least settlement) on the weekend goes both ways.
  - ZeroSolstice 3y ago
    I'm specifically talking about refunds not purchases as in US only a few states have laws relating to returns and refunds.[1] Otherwise its left up to the retailer to set the policy. Most purchasers are not making large amounts of interest on their checking accounts compared to the balance amounts a business would carry. If no settlement happens on the weekends I can see a large advantage to a business holding one million dollars in refunds for two extra days before you complete or run the batch job of refunds. When I make a purchase I don't get to decide when to run the batch job for it to post/settle. Retailers however can determine when they want to actually process refunds. What can a customer complain about when the posted refund shows up on the following Monday, Tuesday, Friday, two weeks later? To further my point of retailers not being incentivized to process your refund quickly there was a small study done that delaying refunds had customers "re-spending" the refund before it had fulled settled.[2] [1] https://www.freeprivacypolicy.com/blog/return-refund-us-laws/ https://www.freeprivacypolicy.com/blog/return-refund-us-laws... [2] https://hbr.org/2023/06/how-retailers-can-capitalize-on-the-refund-effect https://hbr.org/2023/06/how-retailers-can-capitalize-on-the-...

ttymck 3y ago

Retailers make a significant return on interest? Can you help me identify what keywords I would look for in a P&L to see this?

loxias 3y ago
I always heard it as "float management", or "managing your float".
ZeroSolstice 3y ago
"Large companies and financial institutions also often "play the float" with larger sums for-profit—namely, the interest income they earn on an amount by speeding up its deposit into their accounts or slowing down a presentation for payment[1]." IMF eLibrary with some example scenarios[2]. Granted they speak of most of the float data being analyzed with checks, it doesn't seem unreasonable to replace "check" with "credit card" transaction. [1] https://www.investopedia.com/terms/f/float.asp https://www.investopedia.com/terms/f/float.asp [2] https://www.elibrary.imf.org/display/book/9781557753861/ch10.xml https://www.elibrary.imf.org/display/book/9781557753861/ch10...

deleted 3y ago

[deleted]

mcfedr 3y ago

Wow thats crazy most refunds here (UK) take 1-2 days max

mcfedr 3y ago
Amazon online, normal minutes