Why It Takes So Long in the U.S. to Transfer Money


Last week Logan was in the office and she said, “I transferred money from one bank account I have to another one a few days ago and the money still hasn’t shown up yet. Where is the money right now? Why does it take so long for that money to show up?”

The team at Planet Money answered this question over the weekend: Why does it take so long for Logan to electronically transfer money from one bank account to another bank account? It turns out that when we transfer money, that money transfer goes from one bank to a clearing house like the ACH where it’s then sorted and picked up by another bank (its intended destination). This process takes a few days—sort of like a postal delivery service—and is a system that was put in place in the 1970s. Basically, the reason why it takes so long is because we use an old system with old pipes.

The U.K. also used an old system with old pipes, but after years of complaints, moved to a new banking initiative known as the Faster Payments Service, which made money transfers from banks in the U.K. instantaneous. In the U.K., you can even transfer money on Christmas Day and see it ASAP.

So: Why doesn’t the U.S. do like our British counterparts and move to a faster system? According to Planet Money, the banking community in the U.S. came together to vote for a plan that would provide same-day service (though still not instantaneous service!), and the vote was no (the vote needed a supermajority of 75 percent yeses, and though more than half voted yes, the banks failed to reach a supermajority). The banks were hesitant because it would mean a major overhaul of the U.S. banking system as well as a greater chance of fraud occurring, which means we’re stuck with what we have for now.

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