I own accounts at two different Romanian banks.
When I transfer money to another account at the same bank, the money is transferred immediately. However, when I transfer money to an account at a different bank, the transfer is processed the next working day.
Why is it not done instantly?
Because banks still rely on processes and software that were established many decades ago, when constant, semi-instant communication was not technologically possible. Instead, you would have batch processes that run on huge mainframe computers overnight.
Changing these processes is extremely difficult, because there are so many things tying into it - taxes, regulations, all kinds of bookkeeping that ensures money cannot just appear or disappear somewhere.
Actually, its a bit more complicated than the other posts suggest.
Transferring money between two banks is a rather complicated thing, as you are really just transferring information about the value, so you need to address issues of trust and double-spending.
To minimize the necessary transfers it may make sense for a bank to collect some more orders and then do a set off with the other bank against transfers in the other direction.
A fairly comprehensive explanation can be found here
It depends on transfer agreements between banks. SEPA is an initiative providing such agreements, albeit at a European level.
When you transfer money between accounts within the same bank, the bank has complete control and knowledge of the funds and their availability. Therefore, the transaction is instant because the bank can guarantee the availability of the funds, and there is no third party involved.
When transferring between two different banks, unless the banks have agreements guaranteeing the funds availability, there can be transfer delays until the funds from the originating bank are received by the destination bank. Any third-parties in between (typical for international transfers) will likely add to the delays.
They make you wait because they profit of it.
All the time that banks don't make the funds available they can draw interest on those funds.
In the Netherlands and other countries in Europe, where interest at the moment is negative, transfers are instant between banks.
Because obviously the same bank just puts an enry into their ledger.
But when money is transferred between two banks things become more complicated, and may go through systems that do not send the data in real time.
SEPA has an instant mode that is rolled out now,but it does only apply to EUR ;)
Other answers highlight the problems that can be the reasons that not all banks in all countries can handle instantaneous transfers.
The problems are no longer there, though it will take time for all banks in all countries to be able to handle instantaneous transfers.
In Denmark it is possible to transfer money from one account in one bank to an account in a different bank without delay using online banking. The money will often arrive faster than the email you send telling the recipient to expect the payment.
You will have the options of instantaneous payment, same day payment, or payment on a certain date. The latter will withdraw the money on your account on the given date and the money will not arrive until the day after.
The only limitation is that instantaneous payment and same day payment can only be made in the 'opening hours' from 08:00 (I think, not absolutely sure) until 17:30.
In India, we have the IMPS (Immediate Payment Service), which does electronic fund transfer between participating banks in real time.
There's also the UPI (Unified Payments Interface) built on IMPS, which enables real time fund transfer by specifying plaintext IDs (such as maskedman@upi). The plaintext ID can be mapped to bank account of any participating bank.
Hence, the technology to enable real time payments certainly exists and is in successful use. Some countries adopt it sooner than others based on their priorities.
It is cheaper for banks to collect all transfer orders in intervals and only send net money to other bank or transfer authority. In principal, only doing one transfer for all orders in an interval is enough for clearing. So this is how CHIPS system works. In our country electronic money transfers between banks is done by central bank and it has 2 hours delay max.
Wikipedia page of Clearing House Interbank Payments System (CHIPS) has a good explanation.
The money transferring between banks each day is huge. Wiki page says it is $1.5 trillion a day in US in 2015 for CHIPS system only. There are EFT, FedWire systems as well for US.
Of course there are faster systems(like FedWire i guess) but they are more expensive.
Also money transfers between banks are heavily regulated. I guess for that reason generally it is done by central banks. Banks have strict responsibilities to pay net transfers and in very exceptional cases they can not and you have a banking crisis.
I regulary transfer money between accounts in two different banks in the same country (UK) and sometimes it takes a few seconds, sometimes much longer. The banks say
Payments to another person, business or account with another bank
Usually, Faster Payments will be received by the payee almost immediately after leaving your account, but can sometimes take up to 2 hours
and
Faster Payments Service (FPS) is a UK banking initiative to reduce payment times between different banks' customer accounts from the three working days that transfers take using the long-established BACS system, to typically a few seconds. CHAPS, which was introduced in 1984, provides a limited faster-than-BACS service (by close of business that day) for "high value" transactions, while FPS is focused on the much larger number of smaller payments, subject to limits that depend on the individual banks, with some allowing Faster Payments of up to £250,000.[1] Transfer time, while expected to be short, is not guaranteed, nor is it guaranteed that the receiving institution will immediately credit the payee's account.[
So the answer to why it takes longer in your part of the world is likely specific to your country or to the banks involved.
The problem is that (for whatever reason) instant clearing of funds between banks is not available in Romania.
Others have enumerated many reasons and alternatives for this. Here is an explanation of why this process takes a long time:
Two banks need a means to consolidate payments done to each other's accounts. The physical movement of notes and other instruments is just a secondary part of the problem. The main part of the problem is that banks don't have access to other banks ledgers (and rightly so, after all, this is confidential information).
This practically means that Bank A does not have the right or ability to deposit money into a customer's account at Bank B. Only Bank B can do that.
Since Bank A and Bank B don't have access to the other's customer's accounts, they agree to settle transactions in bulk, through settlement accounts. These accounts (if Bank A and Bank B are in foreign countries or dealing in foreign currencies, these accounts are called Nostro and Vostro, Italian for "ours" and "yours") are held normally with a central clearing house which is an entity whose purpose is to settle payments between banks.
It is common practice that the clearing house is the central bank of that country or jurisdiction.
For practical reasons and to make sure accounting and reporting is done properly, settlement through clearing houses is done in bulk.
It is common practice to have a cut off time for transactions. Any transactions posted before this cut off period are processed the same business day, any transaction posted after this period is processed during the next business day. The transaction cut off time depends on the clearing house (and sometimes, even on the currency of the transaction).
The purpose of the cut-off period is to allow banks to fund their correspondence accounts with the clearing house to consolidate transactions. Some clearing houses hold all transactions pending funding.
The practical process of transferring money (when no automatic clearing is in place) between Bank A and Bank B goes as follows:
Simplified for same currency transfers:
Transfer Process:
If the transfer is after the cut-off period, it is held till the next business date.
Reconciliation Process:
At the end of the business day, or after the cutoff period, or at an agreed interval by the clearing house and all banks, the following happens:
All banks transfer funds from their suspense accounts for outbound payments to their correspondence accounts at the clearing house.
The clearing house then credits all bank's incoming correspondence accounts for the transfers due to them.
Banks receive funds from their incoming correspondence accounts, to then credit their inbound suspense accounts (to zero the balance).
As this process takes time (the funding of accounts, the reconciliation), it can cause delays in local transfers.
The entire process is electronic, but it may not be stright through processing, that is - there might still be manual entry into systems for reconciliation. I know of some banks that simply do not process third party transfers during off hours (such as weekends) for security reasons.
