How do bill payments work?

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#434950 3-Feb-2011 17:04

How strange - I haven't thought about bill payments for years. I was with ANZ and now with Kiwibank and bills just get paid whenever they are due. I don't even think about the date as the money just disappears when it is supposed to.This is a presumption since I haven't received an overdue or unpaid notice since forever.

What did surprise me the other day was a trademe sale. The buyer transfered money via internet around 9.30 am. When I checked my account about an hour later the loot was sitting there already.

wreck90

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#434960 3-Feb-2011 17:12

Woohoo, about time. The banks are moving to 5 times a day settlements.

Not sure about the weekends though - - would be nice.

http://computerworld.co.nz/news.nsf/news/bank-payments-systems-set-for-overhaul

Realtime would be better, but guess that will be for the future.

gabba

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#435021 3-Feb-2011 20:06

LOL how our memory's are short!

It wasn't that long ago that there were several banks operating a near real time system in NZ. Remember Trustbank?

A bit of background though. The reason why it takes overnight to complete transactions is that over night an interchange process occurs, that moves all the transactions around the banks. If the banks don't open during weekends and public holidays, then interchange doesn't occur. Bear in mind that banks need to be open for interchange because they need the opportunity to dishonor the payment (should funds not be available).

Banks don't share your account details so other banks have no way of knowing how much you have or even if the account number you have is open. In a sense even your ATM transactions occur over night, but the paying bank gets an approval from the account owners bank before handing out the cash!

So online systems sound great, and they have their advantages, but they also have their disadvantages. Imagine the situation where you make a transaction, and then want it reversed. Sorry - your money's gone off to that Nigerian bank account (as an example - I have nothing against Nigerian's!) and has been moved on within minutes. No point in claiming you have a right to dishonour it. The moneys gone, and not likely to be seen again, so exactly what do you expect to dishonour?

Of course the bank could hold it at the receiving end until it was guaranteed to not be dishonoured. But that's akin to waiting for a cheque to clear - and we all love that process, right?

Cheques are a different thing altogether. They physically take 5 days to get from one bank to another, be signature checked, processed through your account and give the bank the opportunity and appropriate time to dishonour them.

If you need to get a cheque cashed you can still do that. Just take it into the bank / branch it was paid from, or alternatively ask for a special answer on the check at your local branch (and they will just do the legwork for you, for a fee of course!)

If you need to send cash to anyone urgently, and have it clear immediately, most if not all banks have a process called same day cleared payments, which will allow you to do so. If you need to send cash urgently overseas then investigate a telegraphic transfer.

This is the first I've seen about intraday processing between banks - looks interesting, but my guess it will still be batch based. It will be interesting to see how they do it

timmmay

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#435023 3-Feb-2011 20:09

Same day clear payments are usually more business focused, though they'd probably do it for a consumer. I know the business banking systems have SDCP built in, because I helped write part of it at one bank, but i've never noticed it through my personal banking.

sbiddle

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#435035 3-Feb-2011 20:35

There are a few extra things to consider before people gbet too excited.

Firstly an interchange is simply the transfer of the phyical money between banks. The transfer of money into accounts is a different process and the two aren't necessarily done at the same time. Interchanges between some banks already happen more than once per day, this doesn't mean you will phyically get the money in your account the very minute your bank gets the money.

The article also didn't make any mention of the settlement windows, the first of which will still be mid afternoon, extending into the evening and then night like the main settlement windows now.

kyhwana2

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#435038 3-Feb-2011 20:41

Imagine the situation where you make a transaction, and then want it reversed. Sorry - your money's gone off to that Nigerian bank account (as an example - I have nothing against Nigerian's!) and has been moved on within minutes. No point in claiming you have a right to dishonour it. The moneys gone, and not likely to be seen again, so exactly what do you expect to dishonour?

So are you implying that if I do an interbank transfer for say, a trade me auction. It's a "business day". Are you saying that once it's been completed, ie, tuesday to wednesday, before 10pm, that I can say I want it reversed?

gabba

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#435048 3-Feb-2011 21:15

kyhwana2:
Imagine the situation where you make a transaction, and then want it reversed. Sorry - your money's gone off to that Nigerian bank account (as an example - I have nothing against Nigerian's!) and has been moved on within minutes. No point in claiming you have a right to dishonour it. The moneys gone, and not likely to be seen again, so exactly what do you expect to dishonour?

So are you implying that if I do an interbank transfer for say, a trade me auction. It's a "business day". Are you saying that once it's been completed, ie, tuesday to wednesday, before 10pm, that I can say I want it reversed?

The example above I gave related to a possible scenario that could occur in an online real time banking system, that other posters were indicating they would like to see. I'm not sure if your question related to that or an overnight batch system

Under the current overnight batch processing system, technically you could request a reversal up to the end of the business day (bearing in mind that rocking up to the bank at 4:30pm won't help your case), but each bank will have it's own policy. Best to ask your bank

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richms

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#435063 3-Feb-2011 22:06

kyhwana2:
Imagine the situation where you make a transaction, and then want it reversed. Sorry - your money's gone off to that Nigerian bank account (as an example - I have nothing against Nigerian's!) and has been moved on within minutes. No point in claiming you have a right to dishonour it. The moneys gone, and not likely to be seen again, so exactly what do you expect to dishonour?

So are you implying that if I do an interbank transfer for say, a trade me auction. It's a "business day". Are you saying that once it's been completed, ie, tuesday to wednesday, before 10pm, that I can say I want it reversed?

Happened several times when selling. Always from national bank.

Get a letter from ASB even about it. Its a scam that they can reverse payments by simply taking money out of their account like that. IMO, if the national banks systems are so broken they dont take payments off the available balance immediately, they should wear the losses

Richard rich.ms

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#435078 3-Feb-2011 22:36

I would assume if they went to 5x a day, payments that are electronic will either pay or fail - some banks presently allow electronic payments to be paid even if you don't have funds. whereas under this scheme, it would decline more often.

This would be the end of cheques a we know them.

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richms

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#435100 3-Feb-2011 23:08

Some banks appear to be only one IME, national bank. It seems some people use that to their advantage on trademe too.

Richard rich.ms

thestokes

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#435102 3-Feb-2011 23:10

Settlement Before Interchange (commonly know as SBI currently scheduled for testing May ater being pushed back from March with a go live in November) won't mean much unless your bank is online real time. Currently the only major bank is online real time to my knowledge in NZ is ASB (although Kiwibank might be able to do something similar). The only real benefit for the other banks is better liquidity management for settling with the Reserve Bank.
Electronic funds can either be transferred as clear or uncleared. Uncleared funds just like cheques can be dishonoured up to 3 working days after they were sent... although statistically way less than 1% of electronic direct credits are reversed.

wreck90

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#435111 3-Feb-2011 23:45

thestokes: Settlement Before Interchange (commonly know as SBI currently scheduled for testing May ater being pushed back from March with a go live in November) won't mean much unless your bank is online real time. Currently the only major bank is online real time to my knowledge in NZ is ASB (although Kiwibank might be able to do something similar). The only real benefit for the other banks is better liquidity management for settling with the Reserve Bank.
Electronic funds can either be transferred as clear or uncleared. Uncleared funds just like cheques can be dishonoured up to 3 working days after they were sent... although statistically way less than 1% of electronic direct credits are reversed.

Will this mean ASB becomes the preferred bank for online commerce?

richms

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#435114 3-Feb-2011 23:53

ASB already is IME, probably about half the customers have ASB and therefore expect immediate shipment. Despite there being no way to tell from the CSV file from the bank if they are ASB and therefore already cleared or from national bank so at the risk of reversing suddenly.

Richard rich.ms

wreck90

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#435116 3-Feb-2011 23:58

richms: ASB already is IME, probably about half the customers have ASB and therefore expect immediate shipment. Despite there being no way to tell from the CSV file from the bank if they are ASB and therefore already cleared or from national bank so at the risk of reversing suddenly.

Yes, asb to asb transfers are realtime.

But,currently, if someone makes a transfer from a non-asb bank to your asb account you won't see until the next day.

From what I understand, the new enhancements will allow asb account holds to see updates 5 times a day - a great thing for ecommerce so you can send goods on the same day as the order is placed.

Details are still light though, need to see a better analysis from our so-called financial journalists - i may be totally wrong :)

sbiddle

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#435132 4-Feb-2011 06:18

richms: Some banks appear to be only one IME, national bank. It seems some people use that to their advantage on trademe too.

National's system is actually not that great.. ANZ are also dumping their own platform to move to this!

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