I see your point in theory, but in practice it doesn't seem to apply.
Even regular bank transfers, i.e. transferring money from one checking account to another checking account, usually take a day to clear over here. I am talking about regular bank accounts in Germany, by the way. The economy manages to run just fine with this system.
As long as something as basic and fundamental as simply moving money from point A to point B is that slow, I really don't buy the argument that the real economy needs transactions on financial markets to clear that quickly. What's the point of having a trade clear in milliseconds if it takes me a day to transfer the money to a different account?
In the EU, bank transfers (in €) have to clear within one working day. Transfers between your own accounts at one bank are typically instant. There is no fundamental reason for bank transfers to be slow. And unlike bitcoin, banks can handle more than a few transactions per second worldwide without grinding to a halt.
Fast international money transfer is something that is already handled very well for those that truly need it. I know for a fact that the european central bank handles large volume transactions in a matter of seconds if not less. There is really no reason why traditional banks could not offer significantly shorter processing times for the majority of their services, it is just not in their interest to do so.
Slow banks would still be a thing, they just cant (be allowed to) process these transactions.
Also, the bytes don't really have to flow from A to B. The payload is much to predicable. For 8 hours money flows into the account and flows out of the other account at a fixed rate. A daily or weekly validation would be enough. (with automatic fines for not updating the work schedule)
Banking infrastructure is pretty terrible by default. Almost everywhere. It‘s 2021, instantaneous transactions should be the default. If you send a SEPA payment in Europe (most modern standard) it still takes one business day. And intercontinental transactions take even longer.
I get the whole interbank exchange weirdness, but still. Banks basically transfer money akin to using analogue switchboards.
I live in Germany, and even local transfers (between different banks) are not guaranteed to come fast - sometimes it's quick, sometimes it's next working day. So what's true for you is not true everywhere even in the Western world.
In fact what parent is saying is that fast transaction speeds are not something that are solely enabled by bitcoin. There is absolutely no technical reason why transfers have to take days between banks. That's just down to the banks in your country having a crappy infrastructure.
In fact, among the interesting properties of Bitcoin, I'd rate transaction speeds as the least relevant - chiefly because network throughput and transaction speed is actually pretty poor if you compare it to what is achievable with classical tech.
In Europe, we can transfer money between any two bank accounts on any European country, and the transfer must complete in less than 90 seconds (from an account in bank A, in Spain to another account in bank B, in Italy, for example). And frequently those transfers are also free.
It's not a banking industry problem. It's an obsolete American banking industry problem.
so why does it still take me 3+ business days to move money between banks? I assume it's just because they use that float to make money, but it still sucks. i for one like transactions clearing in a few seconds rather than a few days.
Fast transfers are not something that cryptocurrencies uniquely enable, so I think it is unfair to highlight that as a feature.
Transfers could (and often are) instant without cryptocurrencies too. Inside Europe most transfers clear within minutes.
The main reason why some transfers are slow is due to KYC rules which cryptos do not implement. With the same procedures in place, they'd be just as slow.
Yah but banking sucks as an eventual consistency problem. Sure there are processes to go back and solve conflicts, but they suck too.
Part of the reason we can't transfer money instantly between two accounts in the USA is due to sorting out eventual consistency. Federal guidelines on transfer intentionally make it a slow process so the manual processes can catch up.
Are you saying that the USA is still far behind the EU banking system? That's news to me - I've always assumed that banking, of all things, would be far superior in the US. I've always imagined that the experience in the US, at least compared to German banks, would be one of slick apps and super-friendly paperwork because 1) banks want your money 2) something something capitalism.
When I want to do a domestic transfer in Germany, if the recipient's bank does not accept SEPA Instant Pay (looking at you, Baader Bank), then it takes around 2-3 _days_ for my funds to get to the other person. That's insane. In India, our slow transfer (It's called NEFT. UPI is the new shiny instant transfer system) takes at most a day and even before UPI no-one was using NEFT because there were faster alternatives. I've always thought that the slow fund transfers were a German thing and that the US would be better. Guess the grass is not greener on the other side.
you maybe never lived in other countries in the EU. It takes more than 24 hours. Client gives order to his bank in country A on Monday evening, bank will execute this order next morning because bank is closed. Money will be transferred from bank A to bank B within this 24 hours. Client b sees on mid day on day 3 or even 4, that's Wednesday (or Thursday) his money on his bank account.
Don't tell me about the law... it does not work (and maybe only interbank it works) and I know from practicall experience this is not untypical.
It might not be reasonable, but there is an explanation. It's been a while since I heared the podcast but Planet Money explained something along the lines that all the American banks are invested in an old, inefficient system of processing these transfers and there is no incentive to change. Here's the episode:
http://www.npr.org/blogs/money/2013/10/04/229224964/episode-...
In Europe, the EU recently established the rule that all money transfers within the entire EU must be concluded within one business day. Thus most Europeans are surprised when they hear that it takes so much longer in the US.
EDIT: Another commenter pointed out that the EU directive is actually still somewhere within the legislative process. My misconception arose from the fact that I can't remember the last bank transfer that took longer than one business day.
Love the down votes -- he didn't say different bank, did he? Funnily enough, money also moves between accounts at the same bank.
My bank transfers to other banks take a couple of hours, but I don't live in the US. The money comes out of the account instantly though.
I think it's a bit of a stretch to say that a bank doesn't need transactions.
As for credit cards, that's great, but that doesn't address what he said, which is that it's an analog experience, which it isn't. Also, it depends on the bank, but there's generally an available balance and a credit limit. Credit card payments come out of the available balance instantly. I'm pretty sure that's running in a transaction. :)
What happens between then and actual acquisition is irrelevant.
Anyway, the point isn't the technical details, or how implementations differ. The point is that the argument presented is flat out wrong (in this case). Banks are a completely different beast to your web 2.0 startup. :)
Germany has a very bad banking system, mostly due to the high market share of very small banks that don't want to or cannot adapt quickly.
Here in the UK transfers also arrive within seconds 24/7 and debit cards can be used for online payments. No idea why transfers in Germany need 1-3 days (depending when you submit it) in a time when there's no manual work involved.
Even regular bank transfers, i.e. transferring money from one checking account to another checking account, usually take a day to clear over here. I am talking about regular bank accounts in Germany, by the way. The economy manages to run just fine with this system.
As long as something as basic and fundamental as simply moving money from point A to point B is that slow, I really don't buy the argument that the real economy needs transactions on financial markets to clear that quickly. What's the point of having a trade clear in milliseconds if it takes me a day to transfer the money to a different account?
reply