U.S. banks slow to speed up?
The latest news from the Kardashians may spread across the country in seconds, but how long does it take electronic payments, debits and deposits to clear your checking account?
Too long, in many cases. Roughly half of all bank fees spring from the slow payment system that is typical of U.S. banks, according to Richard Cordray, who heads the Consumer Financial Protection Bureau. Cordray and others are pushing for faster electronic payments — not only to make life easier for customers but also to catch up with the rest of the world.
Real-time banking is especially critical to people born since 1980 who rely on electronic banking and expect their bank balance to be up to date — even up to the minute. Having come of age during the recession, many are struggling financially. Debits and payments that lag behind wreak havoc on their accounts, and they wind up paying overdraft fees. Lots of them.
Consumer advocate Bob Sullivan recently cited statistics that will make people old enough have watched “The Ed Sullivan Show” cringe. “Young adults aged 18-25 are four times more likely than folks 62 and over to suffer 10 overdraft fees or more every year, according to data from a Consumer Financial Protection Bureau report,” Sullivan said.
That will seem like reckless living to a generation of people who dutifully balance their checkbooks each month and keep a cushion in their bank accounts. Judge the non-balancers if you will, but keep in mind that the people who don’t have a financial cushion are helping to make banks profitable. At an average of $32.74 a clip, overdraft fees are $32 billion source of revenue for banks. It’s practically predatory.
Make no mistake. People who overdraft their accounts should pay a penalty and learn to track their money better. But banks have lured consumers into online banking platforms that look faster than they are. Behind-the-screen operations lag behind what consumers experience elsewhere online.
Of course, bringing banking to real-time would be an enormous, expensive undertaking. An NPR report on the subject said going faster would require new computers, rewriting software, rewriting rules and employee training — and a lot of time. Speed costs money. But it could also be a competitive edge.