There are different types of Bank Transfers i.e. Account-to-Account (A2A) electronic payments. They can take anywhere from real time to 3 business days (or more).
Processing times for a few A2A payment types from across the globe are given below:
- Realtime: Fed (USA), CHAPS (UK), RTGS (Germany, India), IMPS (India), TARGET2 (EU cross border).
- Near Real Time: FPS (UK), IMPS (India), NEFT (India)
- From Few Hours to 3 Business Days (or more): ACH (USA), BACS (UK), SCT (EU cross border), NEFT (India), Bank of America / American Express cross-border payments.
I used to think IMPS happened in real time until I attempted an IMPS payment last week. It took a few minutes for the Sender Bank to even process it. Not sure if this was due to some system outage or whether a longer SLA is admissible by regulation. That’s why I’ve placed IMPS in the first and second category.
NEFT features in the second and third category because, AFAIK, according to the Indian regulator, the SLA for this type of payment is 2 business days. Some recipient banks give credit to the beneficiary as soon as they receive funds from the sender bank via scheme, which happens in near real time, whereas others sit on the money, earn float, and give credit to the beneficiary only after 1–2 business days. You can fault the latter banks for not being customer-centric but their action is perfectly legitimate.
Cross-border fund transfers can sometimes take longer than the 2–3 days mentioned above. They’re subject to “sanctions screening” i.e. making sure the money is not being funneled over to terrorist organizations. Because FATF and some other agencies involved in this activity report terrorist organizations by name, not account number, these payments need to undergo account holder name matching (“entity check”) apart from account number and SWIFT BIC code matching. (For comparison, beneficiary name is not important in the case of domestic payments, most of which work solely on the basis of beneficiary account number). This “entity check” process in cross-border payments can take some time. Before crediting the payment to the beneficiary’s account, the beneficiary bank might ask the beneficiary to submit some KYC documents to prove their name. Then, there’s the issue of discrepancies in the entity name, which is a further cause for delays. I recently went through an experience where an incoming USD payment reached my bank in India in 2 days but my company name was entered by the Payor with “Inc” instead of “Private Limited”. As a result, my bank could not give credit to my account immediately. It had to convey the problem to the Sender Bank, which in turn had to get the Payor to correct the payment instruction. All in all, this snafu cost 5 extra days for the payment to be credited to my company’s account.
PS: Domestic cheques take 2–5 business days and cross-border cheques take 15–30 business days. Although cheque is not an electronic payment, I thought of mentioning it. Sometimes, all other forms of A2A electronic payments may become unavailable and cheque is what eventually makes the payment happen, as I’ve highlighted in my following blog posts:
Cheque – The Unsung Hero Of #CashlessIndia
Why B2B Suppliers Should Accept Credit Cards
(hyperlinks removed to comply with Quora Spam Policy but these posts should appear on top of Google Search results when searched by their respective title)