Banks implement new, faster payment processing systems
Making payments via online banking is something that most of us do virtually every day. But do you know how it works, how quickly you can expect payments to be processed, and what you should do if things seem to have gone wrong?
The major banks have recently updated their systems so that payments are dealt with much more quickly. But there is a chance some people could be caught out by money being taken from their accounts earlier in the day than they are used to.
Banking Ombudsman Nicola Sladden said she received payments complaints and inquiries every year.
"We investigate payment processing mistakes such as incorrectly delaying or failing to make a payment, or duplicating payments, or providing incorrect information about the processing of payments. But we can't investigate complaints about the payment system rules because these are managed by Payments New Zealand," she said.
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Here is what you need to know.
How does it work?
According to Sladden's office, the process works a bit like this: A bank customer instructs their bank to make a payment.
The sending bank checks the customer has enough money, and then prepares an electronic file of this and other transactions for the bank whose customer is receiving the payment.
The collection of payments is called a batch. The sending bank then sends the batch to the Reserve Bank, which transfers the value to the receiving bank's accounts. Once settlement is complete, the batch is sent by the Reserve Bank. The receiving bank then credits the payment to the recipient's account.
How quickly does this happen?
Within a bank, payments are immediate.
Between banks, processing now takes up to about two hours, depending on their systems.
Banks now process payments in batches at regular intervals through most of the day. This means people no longer need to wait for midnight to see their payments turn up in their account.
ANZ is adjusting its systems to follow suit next week.
Kiwibank spokesman Bruce Thompson said it used to be that banks sent all the files for transfers between 10pm and 1am, creating a large pile-up.
"Now it's not so big because so many are done during the day. What that means is that the payments used to always go out between 10pm and midnight but now they go at 10.15 in the morning. People who receive benefits are paid on a Monday night and they used to get it between 10pm and 1am the next day but now they get it between 7.30pm and 8.30pm."
Kiwibank starts running payment batches at 9am and finishes at 10pm. Thompson said if a payment did not go with the batch of payments processed at the top of the hour immediately after the transaction was done online, it should go in the next batch.
"Theoretically, it should go every hour but it can take a couple of hours."
BNZ makes transfers between 9am and 11.55pm and said the payment should normally go to the recipient within an hour. ANZ processes payments out every half an hour.
The exception is public holidays and weekends. During those times, transfers within the same bank are instant but payments to other banks are not processed until the next business day.
Sladden said one of the biggest complaints her office received was about transfers on non-business days. People did not always realise they had to wait for the next working day - and over Christmas and Easter that could be some time away.
What about automatic payments?
As well as sending internet transfers much more frequently, banks are now also taking automatic payments out of accounts much earlier in the day.
When ANZ recently warned customers it was changing its processes to match the other banks', it said they could expect APs to be deducted from 4am on their due date, instead of 10pm as they might have been used to.
BNZ starts trying for APs from 5.30am on their due date and Kiwbank tries twice a day - at 10am and 10pm.
Direct debits tend to go whenever the request is received from the company being paid, although Kiwibank and BNZ still deal with them overnight.
What happens if there isn't enough money for an AP?
Banks will try several times before they charge a dishonour fee for a failed payment.
Bankers' Association chief executive Karen Scott-Howman said it was worth asking banks to clarify their procedures.
"If you're concerned about how your automatic payments may be affected by these changes, it's worth checking with your bank whether they retry unsuccessful payments, and when or if you'd incur any dishonour fees.
"You may also want to think about changing automatic payment dates if you rely on money coming into your account to make those payments. If a payment is due to go out on a particular day, quicker payments processing means it's worth making sure there is enough money in your account the night before."
Who gets the interest when a payment is on its way?
Generally, if the money is coming from an interest-earning account, the owner of that account will continue to earn interest on it until it is actually processed through to the recipient's account, even if it looks like it has gone.
Sladden said some people thought the processing time was another way for banks to earn interest, holding on to it rather than processing to the receiving account straight away.
"Payments are batched for processing and while your account balance may show the money has been debited, the sending customer will generally continue to earn interest on it until the money is processed and arrives in the recipient's account," Sladden said.
When should you worry?
Now that banks have changed their systems, customers can query payments if they do not show up within a few hours.
"Assuming a payment is made on a business day in the normal course of business a customer should expect the recipient to see the funds within four hours. If the payment hasn't arrived the following day, we'd advise them to get in touch with us to trace the payment.," an ANZ spokesman said.
BNZ agreed it should be quick.
"If a payment that a customer has made to another party is not visible in the other party's account by the start of the day the next business day then they should contact the payer to investigate further. If a bank has a system issue that has delayed payments, they will let their customers know through normal outage notification channels."