Settlement is not a formality. Money still has to change hands behind the scenes in various bank accounts. The only thing that's instant is the check for available funds. The actual transfer of money still occurs via ACH.
And of course even if you deposited a check that day it wouldn't clear until the next business day so you'd pay a negative account balance fee for three days before your money hit.
Right, there's probably no way to margin call people who have already initiated the transfer of the money. RH has to float it a few days for the ACH to complete.
> Instant money transfer means instantly draining someone's bank account with no recourse. Checks have plenty of opportunities to stop the money, so you can write a check on a Sunday as easily as a Wednesday.
This argument doesn't actually work; the period during which you can recover a check that shouldn't have been valid is (much) longer than the settlement period. This immediately shows that instant transfer does not mean instantly draining someone's account with no recourse. The recourse period isn't related to the settlement period.
Yes, and only next day settlement. Because there’s no real time authorization, payments have two business days after settlement for the banks to report ordinary failures like insufficient funds.
How quickly a bank responds in that window depends greatly on the bank. In practice at decent scale, we see banks using every possible hour of that two day window to fail transactions.
An ACH debit made on Friday night technically has until open of business Wednesday to fail.
This is also why you can end up with an extended hold on a deposited check.
Consider for example personal check issued between banks in two countries. There may not be a formal complete resolution process, so funds are released to you only after your bank is reasonably certain that the other bank is going to honor it, or more likely, not going to ask for it back.
That seems unlikely. Settling accounts instantly in that kind of system is almost impossible. Unless the money is going directly from payer to the payee there must be some slack in the system somewhere, and that means debt. I will admit though I could have an incorrect understanding of how these accounts are settled.
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