Banks – Why can we not have same day money transfer?
FSA managing director Martin Wheatley spoke at the Chartered Institute of Bankers May 4th, 2012 and it is something of a clarion call to the financial services industry everywhere. He raises gaps in bank service levels based on complaints received at the FSA.
But there is nothing new here and the example of sending money for receipt by next day exemplifies his speech.
Rebuilding trust and confidence in banks and bankers | FSA Martin Wheatley
Even where we have brought issues to the attention of industry, such as the requirement to ensure payments reach the payee’s account by the end of the following business day, some firms failed to engage early enough to ensure that they were compliant. I cannot understand why something as straightforward and helpful to the customer as this, is so hard to do.
Before electronic banking and electronic payments such as SWIFT between banks there were clearing houses to manage interbank cheque clearing with physical cheques. That was 40 years ago and earlier. The time taken to move the cheques back to the drawer bank took up to 3 – 5 days depending on the size of our country and the number of banks.
Fast forward to today. We have electronic networks that are instant. When I post this blog post, it will be on the internet immediately. Same with email. And it could be the same with money.
Bank choose to hold on to money that is ‘wired’ because that float as it is known in the industry is very lucrative. The funds are invested overnight(s) and so long as all the banks co-operate by not unwinding that practise they retain that unearned profit. Sure all the excuses are rolled out (ensure funds are cleared, reduce potential for fraud, allow for funds recall) but it is a smoke screen. The profits generated by float need to be replaced by exemplary service that warrants a suitable fee.
Instant funds transfer could be here today, as with many of the other points Wheatley makes. In time these areas that reflect 40 year old thinking are where we can expect to see transformational innovative start ups change the face of financial services.