This notice, when I log on to Internet banking:
One-off online payments that you make from your current account will now, where possible, be sent quicker. In most cases your payment will reach the receiving bank almost immediately and show in the recipient’s account in a couple of hours.
At last! Its a bug-bear that everyone seems to hold. Banks holding onto your money for days at a time for no apparent reason. Now thankfully going the way of the dodo.
Banks holding onto your money for days at a time for no apparent reason.
There is a reason! They make a few pence from the interest, and annually that adds up to millions in aggregate.
There is indeed a reason.
Online transfers aren’t actually online transfers (or they haven’t been and won’t be until this change is in place). They are – to all intents and purposes – essentially instructions to your bank to create a “one off” standing order on your behalf.
You will note that the standing order instruction is processed by the recipient of funds, with instructions to get money from your account. It’s not processed by the bank sending the funds.
They are processed in exactly the same way by the back end. Recipient bank has to process via clearing (which takes a few days) and your bank then has to ensure you have cleared funds at that point.
Basically, direct transfers in online banking were bolted onto the existing infrastructure when online banking became prevalent. There were enough problems to solve (remember RBS’s original fat client system?) without creating a completely new clearing system amongst all the banks that are part of the retail clearing system.