All internet funds transfers should be real time.

**The following blog has been updated. Please see comments below for more detail.**

We love a good personal crusade here at Mozo HQ. So when we recently received a passionate plea from a concerned citizen questioning why internet fund transfers aren’t in real time, we thought it was worth publishing and doing some number crunching to figure out what the delay adds up to.

Here is the full article:

All internet funds transfers should be in real time.

The Banks have a privileged position in the economy being a necessity for the flow of funds through the market. Their privilege is not matched by their overweighted focus on results for the shareholders as opposed to the better good of the country. Their protests that margins have to rise to keep the banks strong and therefore benefit the community are difficult to accept when there is likely greater benefit to the economy by their measured increases in rates similar to the RBA. The out of order rise from the CBA is more an indicator that that Bank got it wrong with their risk management and we are paying for it.

There is much comment lately about how the Banks need to treat the customer fairly. There are different ways this could be addressed. My crusade for fairness is to enable all electronic transactions to be real time. For example when you make a funds transfer on the internet to pay a bill or a BPay transaction to pay a bill it should not take 1, 2 or 3 days to arrive at the destination.

Let the Banks try that trick at the supermarket checkout! It could take several days to complete the shop because we would have to wait for the funds to arrive at the Woolies or Coles account. That is not going to happen.

The Banks have the systems to achieve this now. The real time gross settlement system will allow this. Oh I forgot, you can go to your bank and request such a transfer to another person’s account if you want to pay a fee of about $35.

EFTPOS transactions are immediate. The transfer is completed while we wait. Money has moved from my account to another account because I authorised it. Why does that not happen with internet banking for individuals and business? I know there are businesses large enough that they have systems through the Bank that allow this but this must be made available to all.

Why, because the Bank has taken the funds from my account and only once they have finished investing it overnight or for three days to squeeze every last earning out it will the Bank allow it to continue on its journey. Why do I wait for three days for my funds to arrive? That is costing me interest if it is paying a credit card. If the debit is from an overdraft then it is costing me at both ends.

If the Banks are the conduit, the pipe is blocked and needs a clean out. Regulate that if there are clear funds in an account that a funds transfer to another account should be real time.
– ends –

And what about the numbers?

Let’s take UBank as an example. It recently announced that it has $5 billion in deposits. It seems common for UBank to have a 3 day delay coming in or out. All $5 billion had to get in there, and will come out again at some point, and so it loses up to 6 days of interest. At UBank’s 6.51%, that’s over $5 million [edit: $2.5 million – see comments below] windfall to the banks – and that’s just on the money in UBank.

Does that sound fair?

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All internet funds transfers should be real time. was last modified: June 29, 2015 by Mozo

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9 Comments - Write a Comment

  1. It’s quite clear that you’ve not done your research here… Perhaps 10 minutes on Google and you would be less likely to mislead consumers!

    To correct a few of your statements:

    1. Customers do not lose interest on bank transfers (they are dated the same day at the destination account as they are sent)

    2. EFTPOS transactions place a hold/debit on funds real-time and do not settle real-time with the merchant – this is “batch” overnight

    3. Direct Debit system mandates that the source of the funds have a period of ~3 business days to bounce/decline the transaction – it is a trust based system

    Australia has one of the most advanced payment systems in the developed world, consumers can generally pay consumers free-of-charge next business day – have a look at the UK, HK & USA for a real complex framework…

  2. Mozo

    Sorry, we got a little over-excited in putting some numbers to this. But while Monty is right is saying that your money doesn’t miss any days of interest, it does still miss out on interest. Our mystery-customer-blogger’s point is that the delay in settling the transfer means that you need to pull it out of your online account a few days before you actually need it. If everyone has to pull their money out 3 days earlier than they really want to, and assuming their transaction account pays next-to-no-interest, then customers collectively miss out on $2.5 million in interest on a total of $5 billion in deposits (not $5 million as we originally wrote; there is no ‘delay’ on the way into the online account). But the real issue is this: in this technological age, is it really too much to ask that we be able to move money down a wire faster than Australia Post can move snail mail?