Who pays who for bank transactions?

john1488786

Thanks Ballard. And in your example, how would (for the sake of argument) a bank transfer from UK (GBP) to Mongolia (tögrög) work? Whilst I realise we are living in the digital age but surely behind those bank account balances, physical cash has to exist somewhere in the universe in order to represent those numbers?

Ballard

The customer's account would be debited in GBP, a foreign exchange trade would take place and then the Nostro account would be credited and messages sent to Mongolia, so much the same really.

RG2015

john1488786 said:

Thanks Ballard. And in your example, how would (for the sake of argument) a bank transfer from UK (GBP) to Mongolia (tögrög) work? Whilst I realise we are living in the digital age but surely behind those bank account balances, physical cash has to exist somewhere in the universe in order to represent those numbers?

There is no need to have physical cash it will never be needed. Banks will hold about 10% of their customers' bank balances to satisfy expected cash requirements of their customers.

This was true even before the digital age. All that has changed is the records are held digitally instead of written in ledger books.

eskbanker

john1488786 said:

But if someone won 10 million notes on the lottery, how would the bank give that out in cash notes if the winner decided (as would be their right) they wanted to keep it under their mattress/floorboards instead of the bank? Ok chances are practically nil of that ever happening in real life but curious to know in such a case where the bank would get hard cash from if most money is kept as digital?

£10m is obviously a lot of money to an average individual, but according to the BoE figures at https://www.bankofengland.co.uk/statistics/banknote, it's a drop in the ocean in the context of the £80bn in circulation....

Ballard

john1488786 said:

Thanks Ballard. And in your example, how would (for the sake of argument) a bank transfer from UK (GBP) to Mongolia (tögrög) work? Whilst I realise we are living in the digital age but surely behind those bank account balances, physical cash has to exist somewhere in the universe in order to represent those numbers?

Sorry but I missed the second part of your question although RG2015 has amply answered it. I work for a bank which neither has a cash desk nor cash in the vault. We are under no obligation to provide customers with cash.

RG2015

Ballard said:

john1488786 said:

Thanks Ballard. And in your example, how would (for the sake of argument) a bank transfer from UK (GBP) to Mongolia (tögrög) work? Whilst I realise we are living in the digital age but surely behind those bank account balances, physical cash has to exist somewhere in the universe in order to represent those numbers?

Sorry but I missed the second part of your question although RG2015 has amply answered it. I work for a bank which neither has a cash desk nor cash in the vault. We are under no obligation to provide customers with cash.

Good point. I should have said high street retail banks.

MDMD

flo22 said:

With Bacs the Service User pays for the transactions processed (they pay a file processed charge and volume of transactions processed charged).  The scheme sends the charges to the Service Users bank monthly and these are applied by the bank to their commission.

For FPS the banks are charged for the volumes sent/received.

FPS fees are here on page 24.

https://www.fasterpayments.org.uk/sites/default/files/FPS%20Service%20Principles.pdf

A plethora of different fees but there’s a per transaction fee of  £0.01257 (c1.3p) per transaction plus a service management fee of £0.00947 (less than 1p) per transaction

Nebulous2

This all goes to remind me what an astonishing deal free banking is.

I get £150 or so to join a bank, transfer in and out money every month at their expense, pay my bills from it, take money from an atm at their expense, get preferential rates on small amounts in a regular saver that beat anything else on the market, and in some cases get cashback on my regular monthly bills. 

It is unsurprising that they send me emails begging me to consider accepting £30 or so off their home insurance.