Electronic Money Transfer Black Hole

Fruitcake

I recently paid £200 into my local Natwest Bank Account. Five minutes later I got home and logged on to the same account using internet banking. There's the £200 I've just payed in, along with other money previously deposited.

So far so good. Then I did an electronic transfer of £200 to my Woolwich Bank Account to save me having to drive to the nearest branch which is in the next town. The money dissappeared from my NatWest account at the speed of light. I then accessed my Woolwich account, no sign of the money.
It took three working days for it to arrive. On a previous occassion it took five.

What I want to know is where does this money go between leaving one bank and arriving at another? Who has got MY money and earning interest on it when it should be in my account working for me?

If I transfer money from one NatWest Account to another it is instant. If I went to a hole in the wall machine, I could have drawn the same £200 straight out again. When you exchange contracts during house buying/selling, a whole string of money transfers take place instantly. So why does it take days for money to go between different banks? What's the difference?

If I had uncleared cheques I could understand. If it arrived the following day after close of business on the day of transfer I could accept it. I can't understand why the transfer of cleared funds is not instant.

Fruitcake

You Only Listen To Me When I'm Wrong

Darksun

When transferring money between accounts in the same bank, it's instant because the computer can transfer it automatically. Now, obviously Natwest doesn't have access to the Woolwich computer systems, so automatic transfer isn't possible.

executiverocker

there was also something in financial news where the watchdog wants these type of transfers done quicker because its exactly stuff like that that earns banks interest

Fruitcake

Darksun,

I disagree. The computers do talk to each other otherwise electronic transfers would not be possible, ever. You would not even be able access your account from another bank's ATM.

Millions of people get payed by electronic money transfer. Some employer's banks makes hundreds if not thousands of electronic money transfers in one go. You don't have to tell your bank anything in advance. You only have to tell the bank sending the payment where you want it to go. This is the same for Standing Order payments. It's no different to what I instructed NatWest to do using internet banking.

If NatWest couldn't access the Woolwich computer, why didn't the money stay in my Natwest account until it could? It's gone somewhere, it's my money but I have been deprived of its use.

So I ask again. If money can be instantly transferred electronically hundreds of miles by Standing Order or Direct Debit mandate or during a house purchase, why does it take up to five days to move cleared funds to another bank using the internet?

Fruitcake

You Only Listen To Me When I'm Wrong

IvanOpinion

In a way both of you are correct - however you have to accept that currently it can take up to 6 working days for a transfer to clear. Internally bank transfers are very quick simply because it is moving from one account to another (as Darksun says) however to transfer money between banks (and sometimes branches) the BACS system is used (I last worked on this in 1992 so my understanding may be out of date - this is also a very simplified version of what happens .. the BACS manuals run to hundreds of pages).

Basically much of the processing done during the day at banks is nothing more than data collection and entry .. the bulk of the work is done overnight in what is called a 'batch run'. At the end of the business day data to be transferred to another bank gets extracted from the source system and put in a holding area (file). This file is then uploaded to BACS that carries out various verification processes on the data to make sure it goes to the correct bank etc. and makes it available to the target bank. The target bank then downloads the information to its computers and puts it in a holding area (file) and then it loads it to the relevant accounts etc. This is basically known as 'loose coupling' within the computer world (the computers do not talk directly but instead send files overnight).

How long it actually takes depends on several different things including at what time the source bank generates the file and what time the target bank retrieves the file from BACS. If the source bank processing is delayed then it may not have extracted the transaction therefore when it tries to send the information to BACS the transfer is not listed (it will happen the follwonig night). If the target bank tries to get informaiton from BACS too early then BACS may not have finished its processing and therefore the transaction will not appear until the following night etc.

Having said this there is of course the fact that banks try to make use of your money for as long as possible - so they basically put it in holding funds that earn interest for a day or so (does not sound like much but when you are dealing with the interest on several million pounds it can add up to a significant amount of money - possibly the bubbly for the directors Christmas do).

As I said, the above is very much over simplified but it might explain what is going on.

Ivan

deary65

Have a read here:http://forums.moneysavingexpert.com/showthread.html?t=127771

ethank

I do payroll as part of my job. A bacs transfer takes two days. We do our BACS run Weds AM for payments into staff bank accounts on a friday

With online banking - making interbank transfers they are often processed at the end of the following business day. So it would take three days to transfer, meaning cash would be available on day 4 sometime between 2-4am