Why Do Online Payments Take Time to Process? (2024)

We’ve all probablyhad thisexperience. We log into our banking app,checkour balance, and feel relieved that we’re doingbetterthanexpected. Then, we suddenlyrealizeourbill payments haven’tcleared and the balance hasn’tupdatedyet.It candefinitely befrustrating when onlinetransactionstake several days to post.Unfortunately, if we wait toolongto make payments,it’s possible to missdue datesand incurlatefees. So,whyexactlydo online payments take so long toprocess?

How Are Online Payments Made?

First, it’scriticalto understandexactlywhatoccurswhen youmake an online payment. Let’s say you paytheelectriccompany$100this month. Youmayexpect your banktotakethis amountout of your account and senditdirectly to the service provider. However, this isn’tactuallywhathappens.

In reality, yourbankwon’tsendany amounttotheelectric company. They will send it to their bank instead.They may notevensend anything at all. Ifabank had to transfer money every time someone paidtheirbill, thatwouldbe tediousand involvetens of thousands ofdaily transactions.

Your bank will takeall ofits daily transactions and submit them in a batch file to the automated clearing house (ACH) network. This processeslarge volumes of credit and debit transactionsat once.The ACH network then sorts out transactions, allowing your specific payment to bemadeto your account, and makesthe appropriatepayment to the recipient.

For instance, let’s say your bank (Bank A) has a total of $500,000 in payments for your electric provider’s bank (Bank B), but Bank B also has a total of $510,000 in payments destined for Bank A. Your bank (A) wouldn’tactually sendany money to your electric company’s bank (B) but would rather receive $10,000 from them. This makes the process muchmore efficient bycreatingfarfewer transactions.

Why Online Payments Take So Long

With thisrough understandingofthe ACH network,one begins torealizewhy this process takes so long.The ACH network was designed over 40 years agoin a way that simplifies bank payments, not personal transactions.At that time, it wasn’tactuallyautomated, andit operatedduring normalbusiness hours. This meant it didn’t function on weekends or holidays.

As the process becamedigitizedand automated, these standards were kept in place.Paymentsmade after hours or onfederal holidayswon’tprocessinto a batch until the next business day.Also, banksgenerallyonlysend one batch per business day. If youhappen tosubmit your payment a few minutes after a bank sendstheirs, it won’t get includeduntil the following day. Thus, paymentsare rarely recorded immediately and cantake a few days to process.Keep thisismind next time youapproach the deadline for a bill payment. You’re at the mercy of the banks and theirACHprocesses, so it’s better to be proactive when it comes to online banking.