One regular service financial institution ( FI) customers use regularly is money transfer/ payments. Whether a small retail customer or a large Corporation moving funds from one entity to another can be a key service expectation.
The movement of money can take many legacy manual forms from cheques, drafts, wire transfers, payment orders and so on to diect on-line transfers.
Of course just handing over cash was one of the most widely used methods and although still popular for some transactions (e.g., drug deals) that method is slowly becoming replaced by on-line options (e.g., debit cards)
Payment Options
When moving money there are several considerations:
– timing of the acceptance of the payment
– payment guarantee
– convenience
Each of the common legacy money transfer options involve taking money from one account and moving it to another. Because these are not online real time transactions there is risk the funds are not available (lack of guarantee), lost in transit (inconvenient) or take time to move (slow)
When one FI takes the money from your account and then transfers it to another FI or credits your account and waits for reimbursement, it is called float. Float can be positve or negative depending on the flow of funds .
Accumulated positive free float funds can be profitable to an FI while negative float can be costly. In this age of digital technology it is surprising to me Fi’s still have not fully eliminted these legacy manual money transfer methods that involve unnessecary float.
It is true, world commerce continues to moves toward 100% real time online processing more and more, but unbelievably, there still is a high volume of offline processing (whether credit card, cheque or some other similar form )
Personally I find cheques archaic and frustrating but occassionally no alternative is offerd other than these slow inefficient paper options.
Hey bankers out there, get with it. Join the digital age. Resistance is futile . Force your customers to move off these slow, costly, labour intensive, high risk methodologies. Might have been okay 150 years ago when Canada became a country, but today, seriously.