Why ACH Bank-To-Bank Transfers Take So Long

Ken Tumin
  |     |   6,089 posts since 2009

If you initiate an ACH bank-to-bank transfer when you're logged into your internet bank, that ACH transfer will often take 2 to 5 business days to complete. Why can't it be done in one day?

Many of us have speculated that it's due to the profits banks make from the float. The blog Bankwatch which tracks financial services makes this claim in this blog post:

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.

Bankwatch also highlighted a new electronic transfer service provided by Dwolla called FiSync. As described in this Dwolla blog post, it offers real-time transfers.

This Dwolla service would be great for consumers, but according to this Bankwatch post, it's unlikely to be accepted. There's an interesting table in that post showing how much profits there are in the float.

  |     |   2,298 posts since 2010
Other institutions must hate that Alliant Credit Union doesn't go along with this scheme.  I have always been impressed with their next-day transfer capability and excellent customer service.
  |     |   137 posts since 2010
Wisconsin's Coulee Bank also has a next-day ACH transfer policy.
  |     |   991 posts since 2010
This is an issue that I have not have with any bank or CU. Mine have always gone overnight -- maybe I've just been lucky. Seems to me that if there is a delay, it must be the sending bank that is causing the delay. I have been told by a couple banks previously that the federal government requires that they process all incoming overnight ACH transfers before they open that day. With that requirement, any delay would have to be due to the sending bank.

Re Alliant, that actually is one issue I have with them. I see their "speedy" overnight ACH policy as actually a smoke screen for a delay. They have a fairly early deadline by which you must initiate the ACH transaction -- noon (and on the West Coast, that would be about 9 a.m., unless they use Chicago time, in which case it is 10 a.m.). If it is not initiated by the deadline, they will not send it into the ACH until the next day. I see no reason why they can't get it into the ACH that night if I don't iinitiiate it until, say, 5 p.m., or at least 4 p.m.

I don't find this good service by Alliant, as other places from whom I have sent via the ACH get it into the ACH same day as long as I get it in by the end of their day, rather that in the morning like Alliant.
  |     |   2,298 posts since 2010
I don't doubt that banks are making money on the overnight float. 

But I think we are forgetting that if money is not moving money semi-instantly (for example a wire transfer), then it has to go through a more elaborate clearing and settlement process of inter-bank transactions.  This takes time and the process has its own cutoffs for transactions (call it "cutoff#1").   After the clearing and settlement process runs (which takes time of its own), the banks then have to receive those cleared and settled transactions, process them internally and update their systems within a tight window so as to have them available to their customers by a specific time each day.  They can't wait indefinitely for every last transaction to start their own batch processing.  The only way they can do this is to cut off (call it "cutoff#2") receipt of transactions from the clearinghouse by a certain time,  and any transfers that aren't received by then are processed the following day.    

That would suggest that delays can be caused by either the sending bank or the receiving bank. 

Imagine you are a commuter and ride a train to your office each day.  If you leave the house at 6 ("cutoff #1"), you can make it to the station in time to park and catch the 7:00 train which you know gets you to your office by 8am.  However, if you are delayed because of heavy traffic or leave too late because you hit the snooze alarm once too often or there are so many people at the train station that you cannot make it through the crowds to get to the 7:00 train in time, you are out of luck.  That 7:00 train will not wait for you; it has its own schedule to meet ("cutoff #2"), and you will not make the start of the workday. 

  |     |   30 posts since 2011
Just how is this related to the same day CU-CU money transfers thru the Shared Branching group of CUs? I move money between my 2 CUs almost instantly with 1 toll free call. I think I can even do it by text  with their Sprig Online Shared Branching. Unfortunately, not all CUs are a member of the Shared Branching Network, my local CU is not, so I use 2 that are. It's a great service.
  |     |   991 posts since 2010
jep1960 -- the CU to CU transfers through the shared banking group would be handled by the rules of that system, regardless of when funds are actually transmitted via the ACH. Practice tells the rules are that the actual transfer through the ACH is not relevant to the account holder's access as the transaction is considered no different than if done at your CU, and funds are accessible immediately.

Just FYI: Alliant is one that is not part of the shared branch system.
Matthew Grubb
  |     |   1 posts since 2013
This is a computer system that is a bunch of connected servers. There is no reason for it to run in batch proccessing. I am certain that there was good reason for it to run that way maybe 20 years ago because CPU time and memory was expensive and it would probably have been more cost effective. But today with the speeds and memory capacities, the super computers can handle all of worlds incoming and outgoing bank to bank transactions in realtime. Not to mention that only about 20% of 7 billion people that is about 1.4 billion people have bank accounts. Those that have accounts are not using them for ACH transfers 24/7 this ACH gets used for many and some of these things are automated but that doesn't all occur at the same time. The rest of the time a person probably uses this about max 10 times a month. So lets round this out to 5 bills and 10 transactions for 15 per person per month * 1.4 billion and you get 27 billion transactions. Look at youtube stats https://www.youtube.com/yt/press/statistics.html A constant stream of 100 hours video per hour is uploaded, thats approx 72 thousand hours of video per month. Every hour probably averages to about 2 gb of data, about 144 terabytes of data per month. Videos are huge in comparsion to the information in a financial transaction. Im certain this is less than 144 terabytes of data over a month. Given that Youtube can handle all of these uploads in realtime I am certain that there are servers that the ACH can use that could handle all the worlds daily financial transactions in realtime. They really have no excuses for holding onto our money other than profit.

  |     |   117 posts since 2012
About five years ago the UK introduced FPS - Faster Payment Service - and you can now make transfers  there in about two hours. There are no charges for using it.  Why can't we do the same here?
  |     |   1,854 posts since 2010
About five years ago the UK introduced FPS - Faster Payment Service - and you can now make transfers  there in about two hours. There are no charges for using it.  Why can't we do the same here?

You mean those banks can no longer get the free interest from ACH delay/hold?  :D

Question answered:-)

  |     |   202 posts since 2012
This has been an issue that has been bothering me for awhile an I have had to go back and update my bill pay process through my provider. Before I wanted my bill payments to arrive the day before the first of the month to avoid any possible fees that could be charged on additional principal payments ref my mortgage. To make this happen my bill pay provider (which my re-search on financial institutions in my area offers the fastest service) requires 3 business days. That means send on day1 and arrive day3. The kicker is if the send on day is Fri the paid on date becomes Tues. That now equals 5 days float instead of 3 days. Solution was to schedule all bill pays for process during the week and make adjustments for holidays. Yea it's a minor in-convenience for me but manageable. Now for the year up-coming only 1 payment is scheduled to arrive on the 1st of a month and I will be awaiting to see if I get hit with a reduction in my additional principal paid amount as it did not get there "by the 1st". As a follow-up I know about grace periods etc, I just don't trust anybody as to what they say or write vs what actually occurs. Overall my opinion is that in this day and age the tech. is there that this should be instant. Something to consider, and I don't know for sure, but....Does the Fed government send your money for retirement to the bank 3-5 days prior to you seeing your automatic deposit on account? My opinion again.....I don't think so.

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