wolfft

After a bit of a struggle I recently opened a US bank account (Capital One 360) and must admit I'm getting home sick for UK bank accounts as I'm used to paying bills, making one off payments etc quickly and simply on-line in the UK.

I have just had to make a one off payment to a US Shipping company (for excessive custom examination fees!) and attempted to do so online. In the UK all you do is enter the Sort Code, Account Number, Ref Number and amount and the payment will normally be made via Faster Payments within 2 hours.

When trying to do this with my US bank account there was nowhere to enter the Routing Number. For the Person to Person Payment option you only put in the last 4 digits of the account number - which seems bizarre! I used the Bill Payment option where you enter their account number and company address. I was told that if the company's bank (Bank of America) accepts electronic payment it will be paid in 2 days if not it will be sent in the mail as a cheque. Well I made the payment on Monday and have now been informed that the payment has been sent in the mail as a cheque to the shipping company.

How come it was not possible for an electronic payment to be made between two large US banks (Capital One and Bank of America) as opposed to an actual cheque been sent in the mail?

Michael

For "Bill Pay", Capital One 360 requires you to enter the name of the company. For most large companies, the name is in the database and the database knows the routing and account number and you are only required to enter the reference number that is on your statement. For large companies, there may be a list of several possible accounts when the company name is entered. If the company name/address is not in the database, a paper check will be issued.

For Person to Person, the email address and only the last 4 digits of the account number is given of the recipient. The person is then notified via email that you are transferring money to them and they enter their routing and account number (must be the same as the last 4 digits you entered) to initiate the electronic transfer.

I believe both of those is due to privacy laws that restricts banks from asking a person for someone else's routing and account number via the internet.

As far as using ACH instead of wire transfers, there are about 10,000 banks in the US (were about 40,000 banks in the 1980s) compared to about 5 banks in the UK. Up until the early 1990s, banks were restricted to operate in only one state. All the banks had land lines to the Federal Reserve for clearing the transfers but most of the smaller banks had very slow lines and wire transfers would have been impossible for all transfers since the speed of the lines likely couldn't keep up with the traffic. Therefore ACH was used for most transfers which is a batch system where all the daily transactions are batched to the Federal Reserve clearing house after hours. The process of sending batch files to the clearing house, forwarded to the receiving bank, and acknowledgements to the initiated bank are done during successive nights.

I suspect land lines are still used since the Federal Reserve and banks probably don't trust the internet.

The US banking system is more like free cross border transfers around the world than the UK banking system. In the UK, all banks have high speed dedicated lines to the BOE plus powerful computers but that is not the case in the US. Finally many small banks have yet to implement the interface to accept ACH transfers for person to person so paper checks are always issued for those banks.

amideislas

My UK bank works great for transactions within the UK. Outside the UK, it's brain-dead - There isn't even a facility for it in their online banking system. You personally have to go to a branch and fill out forms. And the charges are astronomical. I have to use an online FX transfer service to transfer money out of the UK, it's fast, simple, and their charges are near-zero.

Conversely, my Spanish and my German banks allow me to send money to any bank in any country, easily, online. It's fast and simple, and the charges are inconsequential (for amounts less than say, €5k).

Why such differences? If the infrastructure exists to enable European banks to do this so easily, why wouldn't US and UK banks?

robin1234

When I first lived in the US in 1976, banks in Massachusetts were restricted to operating in just one county, not statewide. So no bank in Cambridge, MA had a branch in Boston, MA, just across the river; they are in different counties.

Michael

That must have been a state law since federal law was regulated by the Glass-Steagall act from the great depression era. When the Savings and Loan crisis occurred in the 1980s, laws were passed to allow banks to buy distressed banks in other states but many states forbid that. Then later, laws were passed to allow banks to buy any bank in another state whether distressed or not but many state still forbid that. Then in the early 1990s, a federal law was passed that required states to allow banks to buy banks in other states.

States rights go out the door when republicans pass laws that they want.

Then in the late 1990s, Clinton took the advice of Greenspan and Rubin and gutted the glass-steagall act and allowed commercial banks to be investment banks and that allowed the big banks to run on steroids.

Pulaski

The US banking system is quite different to the system in Europe, and one of the differences is that banks will process debits against an account without the approval of the account holder, so only a fool would hand out his/her account and routing/transit (sort code) numbers. Obviously these numbers are on cheques, so there is a risk to handing cheques out too.

It is now possible to transfer money between banks by e-mail. I am still not sure exactly how this works, because when someone e-mails me money from another bank the first thing I get is an e-mail from my bank saying I have received a payment, then minute or so later I get the e-mail from the person sending me the money which contains the payment information. Somehow my bank has intercepted the e-mail and processed the payment instructions before I receive the e-mail.

The only things I need to do to receive payments by e-mail is to give my bank my e-mail address and link it to an account (I just did this once, to set up the account to receive e-mail payments), and then give my e-mail address to the person who is going to pay me. My account shows as containing the funds immediately. At the moment the maximum payment size is $1,000.

jjmb

LOL, yes, all banking systems seem to be complicated whichever country you are in but my RBOS account is the easiest and the my parents' French one is the worst, requiring written letters to complete actions. Not only that, they managed to convinced my parents (both in their late 70's) to put all their savings into Bonds, shares and insurance policies. Now we have the ridiculous situation where their checking account is almost empty because all the payments are going into savings. When we need the money most for nursing home in the UK (£1250 a week!) and an air ambulance, we cannot access the funds unless we write a letter. Not a happy bunny to say the least.
Just hoping that Fbar doesn't lead to RBOS closing accounts are it has been a lifeline in the past few months. Using my US bank isn't quite so easy for international transfers.

Michael

I've always have to give approval before some company can debit my account. At one time, a form had to be filled out and mailed with my signature but now it seems that online authorization at a company's web site is becoming more common.

I'm not sure how much security is involved when done online to make sure it is authorized since an unscrupulous company could debit my account if there wasn't any and they had my routing and account number.

Pulaski

You might think so, and I used to assume so too, but that is not actually the case as banks (i) don't routinely check signatures on checks (contrary to popular belief it has been decades since that was common practice), and (ii) banks will process checks marked with some wording such as "authorized by the account holder" printed in the signature space.

wtkp0u

This works well with Chase bank. You log in to your account and enter an amount and recipient email address. I think the recipient then enters their routing info to receive the money. That way the sender never sees the recipient's bank details

Michael

I agree that signatures on checks are seldom checked and I doubt they are regularly checked in any country. That is why most banks won't accept 3rd party checks unless the person has an account at that bank since the bank is liable and not the account holder for accepting unauthorized checks. I was referring to electronic debits.

Pulaski

Almost all checks are electronic debits these days. ...... And if you mean debit card charges to your account, I had two of those despite never using my debit card. After the second fraudulent charge I told my bank (Wachovia back then) to cancel my debit card and send me a specific ATM card, and I have had an ATM card ever since and no debit card ..... nor any fraudulent debit card charges either!
Exactly! And that seems to be the point.

Michael

As I stated, the bank is responsible for fraudulent debits whether paper or electronic. They have to go after the company or person that made the withdrawal if they want their money.

How is that different than the UK? How is the bank 100% sure it is not fraudulent? How can a web site be sure that the person making the transaction is the holder of the account since a PIN isn't asked for?

Pulaski

In the UK
(i) for decades you have been able to set up recurring electronic payments from your account, not the ridiculous arrangement where US banks take instructions via their web site then print and mail a check, and
(iii) for thirdparty debits you have to sign an authorization for your bank to honor those debits. They are called "direct debits" and are useful for recurring variable payments such as utility bills.
(iii) as far as I know banks don't accept random non-standard checks. As far as I know you can't get checks printed by a third-party in the UK like you can in America; the only checks that work are ones supplied by your bank.

Michael

So in the UK, someone can't use their debit card for PayPal or other web sites that accept debit cards without first signing an authorization with your bank?