I am just curious. In US there is this thing called ACH. But that requires a routing number and banks in Indonesia do not have a routing number.

So how does paypal do it? ACH? Transfer?

4 Answers 4


On a summary level, there are three conceptual ways of clearing money electronically.

  1. Immediate clearing, where banks (often, but not necessarily) with support of the supervisory entities, send immediate drawing rights against their own cash reserves, and dedicate this right to the account of the receiving customer. This is rather expensive, as it limits the banks ability to use their cash reserves for their own banking operations (crediting etc). This is often the only way to wire significant (in comparison to the bank size) amounts of money.

  2. Internal clearing, where the money actually never leaves the bank - it's just moved between accounts of two different customers of the same bank. It's usually free, as the bank is still free to use your money to do it's banking, and it's usually immediate since nothing actually needs to happen besides a change in the banks entries.

  3. Batch clearing, where banks submit outstanding requests against each other, and calculate the net settlement. Basically, when you from bank A wire money to me in bank B, there is a high chance that a similar amount of money is wired between two other users it the opposite direction. After a bit of accounting the net imbalance is computed (and often drawn via immediate clearing) but the bulk of the money actually never leaves any of the banks, it just is reassigned between each banks customers as per agreed books.

There are also additional ways where companies decide to open accounts in each of the banks and provide some sort of immediate clearing backed by the operators cash reserves rather than the banks.. and so on..

How does it happen in Indonesia? I have no idea, but I think a good overview of how it happens around the world is a publication by a partner entity of ours;


If you are really curious, I'd research under what legal form does Paypal Indonesia operate (it should be somewhere in the archives) and figure out what other wiring options are available.


I haven't seen anything specifically about how PayPal operates, but my guess is that they maintain relationships with banks in many countries via affiliates, and they settle the money transfers internally within the PayPal system.

You basically have two types of bank transfers (there are others as well that I'm not getting into):

  • Wire transactions: These are transfers between banks that settle immediately (once you get a confirmation number, the transaction is complete). Behind the scenes, different banks actually move money from accounts that they have access to at the destination bank to your recipient. Transaction costs are relatively expensive -- starting around $25.
  • Drafts: Drafts include checks and ACH transactions (in the US). These are orders to pay which are processed in batches and take some period of time to settle (possibly weeks for international). Transaction costs are cheap -- something like $0.25.

I think PayPal is a hybrid -- they send and receive money using drafts to keep costs down, and manage the international stuff by operating a proprietary network. So if you send money from Indonesia to the US, you pay "PayPal Indonesia", who then tells "PayPal USA" to issue funds to your recipient. So they are cheaper than a wire, faster than a check, but limited in terms of transaction size and some other factors.


Paypal does it differently in different countries, depending on how the system in that country works. That is why it is not a service that is available everywhere - rules and systems differ.

In the US it is done through the ACH system (US internal inter-bank transfer system). It is the same system used to process checks.

I know that in several countries, PayPal deposits/withdraws money through credit cards (it is not possible in the US to the best of my knowledge). In the US we can withdraw money from PayPal by check or ACH transfer to the bank (or by using their own debit card).


In Europe in most of the countries there is also a thing called ACH. In UK there is a thing called BACS and in other countires there are other things. Essentially every country has what is called a "Low value Net Settlement System" that is used to transfer funds between accounts of different banks.
In US there is rounting number, in UK there is a Sort Code, in Indonesia there is a sort code. Essentially a Bank Identifier that is issued by the Governing body within respective countires.

Certian identifiers like SWIFT BIC [Bank Identification Code] are Unique across world.

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