Banks, Computers, and Delays: A rant.

[taurusowner]

So this is 2010.  Not 1952.  Everything is run by computers and networked together.  Why is it that banks still have delays and wait times to process transactions, especially online? If I log into my USAA bank account online,and transfer some money from another one of my accounts with another bank, why do they say it needs 3 business days to complete?  It's not like they need to read wait for an employee to show up and 9am to read a paper deposit slip.  They're not sending a messenger from one physical bank to another to carrying paper money from  one vault to the next.  There is not physical transaction taking place.  It's one mainframe in  some basement server room communicating to another mainframe in another server room.  There's no reason why it should take more than 2 seconds to transfer and finalize the whole deal.  It's all packets of virtual information.  Nothing needs to take multiple days.  And nothing especially needs to take multiple business days, like they shut down the bank mainframe at 5pm on a Friday and don't turn it back on until 9am on Monday.

I just don't get why in 2010, when I can transfer entire gigabytes of data to the other side of the world in hours or even  minutes, a few kilobytes of bank data takes entire weeks to process.

[KD5NRH]

I just don't get why in 2010, when I can transfer entire gigabytes of data to the other side of the world in hours or even  minutes, a few kilobytes of bank data takes entire weeks to process.

The simplest answer is most likely; they don't have to do it any faster.

It is funny that I can use my debit card to transfer money to someone else in seconds, but not to move a few bucks from one account in my name to another account in my name at a different bank.

[Perd Hapley]

I had that problem with a Bank of America, so I tried National City.  NC's website simply didn't work, so I tried First Community Credit Union.  Their service is blazing fast. 

[AJ Dual]

It's intentional.

By delaying the transactions, they can collect more overdraft penalties etc. when people try to fund low accounts etc. and the money does not get there in time.

The bank also collects the micro-interest for themselves on all the money that's in "limbo".

[never_retreat]

It's intentional.

By delaying the transactions, they can collect more overdraft penalties etc. when people try to fund low accounts etc. and the money does not get there in time.

The bank also collects the micro-interest for themselves on all the money that's in "limbo".

Ding Ding Ding, we have a winner.

Its all about the interest.

[Brad Johnson]

There's also a REAL reason for it, not just a "we hate Big Bank" reason. 

Bank-to-Bank transaction don't just go directly from your account in Bank A to your account in Bank B.  The request triggers a cascade of transfers -your account to the bank's electronic transfers department, the department to an intermediary (if necessary), the intermediary to the other bank's electronic transfers dept, the dept to your account there.  At each step the transaction must be received, verified, posted, and reconciled before it is allowed to proceed.  They risk losing all kinds of insurance protections (both federal and private) if they don't do so.  It's also part of the mountain of federal regulations with which they must comply.

The fact that they can jump through all those regulatory hoops and still have your transfer complete in one to three business days is pretty amazing actually.

Brad

[taurusowner]

There's also a REAL reason for it, not just a "we hate Big Bank" reason. 

Bank-to-Bank transaction don't just go directly from your account in Bank A to your account in Bank B.  The request triggers a cascade of transfers -your account to the bank's electronic transfers department, the department to an intermediary (if necessary), the intermediary to the other bank's electronic transfers dept, the dept to your account there.  At each step the transaction must be received, verified, posted, and reconciled before it is allowed to proceed.  They risk losing all kinds of insurance protections (both federal and private) if they don't do so.  It's also part of the mountain of federal regulations with which they must comply.

The fact that they can jump through all those regulatory hoops and still have your transfer complete in one to three business days is pretty amazing actually.

Brad

But all of that is done with computers right?  There is no human sitting at a desk looking at each transaction and verifying it right?  Doesn't one computer just query another to see if there are available funds, make the transfer,update the system, and so forth?  I get that there may be a ton of different steps involved.  But since everything is done virtually, I can't see why even 300 different verifications and transfers steps should take more than a minute or so.

[Brad Johnson]

But all of that is done with computers right?  There is no human sitting at a desk looking at each transaction and verifying it right?  Doesn't one computer just query another to see if there are available funds, make the transfer,update the system, and so forth?  I get that there may be a ton of different steps involved.  But since everything is done virtually, I can't see why even 300 different verifications and transfers steps should take more than a minute or so.

The transfer is accomplished by computer but there are these things called humans that must sign off on and finalize everything.

BRad

[taurusowner]

The transfer is accomplished by computer but there are these things called humans that must sign off on and finalize everything.

BRad

That's stupid.  If I can swipe my debit card, and have funds transferred immediately from my account to a merchant, there is no reason I shouldn't have some mechanism to transfer funds from me to me just as fast.

[Declaration Day]

Not exactly the same issue, but Chase bank pissed me off last week.

I sold my nearly new minivan on June 9th.  I had automatic payments set up to debit out of my checking account on the 25th of each month.  I assumed that, after the loan was closed, the payments would cancel.  Wrong.  $337.15 came out of my account on June 25, for a car I no longer own or owe any money on.

So I called Chase to fix the problem, and asked for the money to be returned immediately to my checking account.  Right now, with my current predicament, I need to hold on to every penny I can.  Nope.  A paper check will be sent in ten business days.  WTF?  The money was taken from me instantly.  There's no dispute that it's owed back to me, but it takes ten days by snail mail? 

[kgbsquirrel]

.....but it takes ten days by snail mail? 

And then however many days the bank you cash it at wishes to hold it for, at mine they keep it for five days. They even put holds on electronic deposits just to "make sure they clear." 

[Brad Johnson]

That's stupid.  If I can swipe my debit card, and have funds transferred immediately from my account to a merchant, there is no reason I shouldn't have some mechanism to transfer funds from me to me just as fast.

They aren't "immediately transferred".  With the swipe of your credit card the transaction gets logged by host card's computer.  That sets a whole process in motion.  The process can take as little as 24 hours or as long as several days.

1.  The transaction is logged by your credit card's host computer.

2.  The computer places a debit on your card account for the transaction amount.

3.  The amount is set up as a credit to the merchant, issued a control number, and placed in a batch file for processing.  All of which must be reconciled before any funds are released for final processing.

4.  After batch files for that day are reconciled and posted, they are placed in the host card's outbound accounts queue where they will be transmitted as a single mass post to individual banks or financial clearing houses.

5. The bank receives the transaction, which has been marked for a specific account using a control number for your transaction.

6. The bank verifies the validity of the post as part of that day's batch of received transactions.

7.  The money is posted to the merchant's account.

So, no, you do not immediately hand the merchant money by using a credit card.  You simply make it more likely they will get their money eventually.

Brad

[CNYCacher]

That's stupid.  If I can swipe my debit card, and have funds transferred immediately from my account to a merchant, there is no reason I shouldn't have some mechanism to transfer funds from me to me just as fast.

What makes you think that process is immediate?

[Scout26]

The transfer is accomplished by computer but there are these things called humans that must sign off on and finalize everything.

BRad

In order to comply with .gov regulations.  Just keep in mind that if there's something really stupid going on, then the .gov has thrown a wrench in the process/works.

[TF_FH]

What makes you think that process is immediate?

It's pretty immediate with my bank.  I can pay for something with my debit card, log onto my bank site about a minute later, and then the transaction is right there, already out of my account.

[mtnbkr]

Dunno about your bank, but although I see the transaction, it still takes a day or three to process and clear.

Chris

[Brad Johnson]

It's called a memo posted transaction.  It may be on their records, but only because they've been notified of it, not because the transaction has actually been run through all the filters.

Brad

[taurusowner]

So if some transactions can be memo posted, why not all transactions?  Even if a transaction isn't totally completed, why can't every transaction made show up as "pending" on your account and take the appropriate amount out of your available funds?

[RaspberrySurprise]

So if some transactions can be memo posted, why not all transactions?  Even if a transaction isn't totally completed, why can't every transaction made show up as "pending" on your account and take the appropriate amount out of your available funds?

Some banks do this, some don't. I think it simply boils down to what they feel like doing and how much they want to try and get people on overdraft charges.

[Brad Johnson]

Electronic debits, ATM deposits, etc,... anything where an entry has been made but the funds not verified, is usually seen as a memo posted transaction.  The bank has been notified of the transaction but the funds have not actually been transferred, verified, or actually posted to the account.

Example:  You make an ATM deposit.  Yes, the money is in the envelope, the envelope is in the bank's ATM, and the deposit shows up in your account almost immediately.  Problem is they won't collect the deposits from that ATM until tonight, after which they will go through them and verify that the amount you punched in matches the amount in the envelope.  The bank has been notified of the transaction, but won't have verification of your deposit until later.  That's a memo posted transaction.  They have a memo that says you did something, but have yet to verify it.  It is, quite literally, an electronic sticky note saying an amount has been debited/credited pending formal verification and validation.

[taurusowner]

Electronic debits, ATM deposits, etc,... anything where an entry has been made but the funds not verified, is usually seen as a memo posted transaction.  The bank has been notified of the transaction but the funds have not actually been transferred, verified, or actually posted to the account.

Example:  You make an ATM deposit.  Yes, the money is in the envelope, the envelope is in the bank's ATM, and the deposit shows up in your account almost immediately.  Problem is they won't collect the deposits from that ATM until tonight, after which they will go through them and verify that the amount you punched in matches the amount in the envelope.  The bank has been notified of the transaction, but won't have verification of your deposit until later.  That's a memo posted transaction.  They have a memo that says you did something, but have yet to verify it.  It is, quite literally, an electronic sticky note saying an amount has been debited/credited pending formal verification and validation.

Example.  I link my local bank (TCF Bank which has 100+ branches in my state and surrounding states, but it's not national.  So not a purely local bank) account to my USAA account.  It goes through the whole process of making the mico transactions, and making me verify both accounts are mine etc.  So I have the option of transferring my money in my TCF account to one of my USAA accounts.  USAA completes the transfer and the money is immediately available to me.  Yet there is no memo or "pending" transaction in my TCF account for 3-4 days.  The TCF account still shows the original amount like nothing happened.  Why is this?  It's one computer talking to another.  I can't think of any reason why both accounts shouldn't be able to reflect the new balances immediately after a transfer.

[lupinus]

Because it isn't immediate.

[taurusowner]

Back to the source of my question.  Why isn't it immediate?  No human beings are needed to post a pending notice on an account.  That data can't be sent around the world in a few seconds.  It's not immediate because it's not immediate really isn't an answer.

[Doggy Daddy]

My head hurts.

[sanglant]

So if some transactions can be memo posted, why not all transactions?  Even if a transaction isn't totally completed, why can't every transaction made show up as "pending" on your account and take the appropriate amount out of your available funds?

if they did that they wouldn't get to collect 20 to 100 bucks for the overdrafts.