Real-Time Money Transfers

Coming to a bank near you in… 2023?

It appears the U.S. banking system has finally decided to enter the 21st century. On Monday, the Federal Reserve announced its plan to develop a real-time, 24/7/365 money movement system that will be available to all U.S. banks by 2023-2024. This new system will provide banks the ability to process transactions such as check deposits, bill payments, and peer-to-peer money transfers in a matter of seconds—as opposed to the current wait time of 1-3 business days (or longer).
Imagine a world where an email won’t send or Amazon won’t process an order just because it’s Saturday.
Federal Reserve Bank
The Federal Reserve Bank in Washington, D.C.

If you’re a customer of a major bank such as Chase, Capital One, Bank of America, or Wells Fargo, etc. you’ve already had a taste of 21st century banking, with apps such as Venmo and Zelle that let users send money to friends and family instantaneously with the click of a button. These services are only available to customers of banks that willing to pay for the technology, however. Customers of smaller banks, such as regional and community banks – which represent a large swath of the American financial system – are still stuck in the dark ages.

Pardon the cynicism, but this would be breaking news if it were 2005, not 2019.  What took so long???

In a world where we’ve had instant access to information, shopping, and social connectivity for over two decades, why does it still take multiple business days to cash a check or pay a bill online? And why can’t money be transferred on weekends and holidays? Imagine a world where an email won’t send or Amazon won’t process an order just because it’s Saturday. It is simply baffling that, despite being fully run by computers, our nation’s payment processing system takes weekends and holidays off like a regular 9-5 employee.

The idea of instantaneous money transfers is not the stuff of science fiction. England has been doing it for over a decade. China and India adopted real-time payments in 2010. South Korea has been doing it since 2001 for Pete’s sake!

What hopefully won’t get lost in the shuffle is who 24/7/365 money transfers will arguably benefit the most: people living on a tight budget. While the current system is more just a nuisance for those of financial means, having to wait days on end for a check to clear could mean overdraft and late fees, or reliance on costly checking cashing services and predatory pay-day lending for those living paycheck-to-paycheck.

Simply put, it is great news the U.S. is finally embracing this technology. It’s better late than never!

 

P.S. check out this fascinating podcast from NPR’s “Planet Money” if you are interested in learning more about the inner workings of the U.S. financial system.

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