4

Domestic wire transfers are typically free in France: example (mirror).

Domestic wire transfers cost around 20 USD in the United States: see below for some examples, taken from nerdwallet (mirror)

Why are domestic wire transfers free in France but cost ~20 USD in the United States?

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    Why are prices for things different in different places? It's because that's what the market will bear...... – quid May 25 '17 at 23:53
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    @quid There could be other explanations such as regulations, banking system infrastructures,… If you think this is just because that's what the market will bear you're welcome to convert your comment into an answer. – Franck Dernoncourt May 26 '17 at 0:10
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    Why does a dog lick himself? Because he can. – WGroleau May 26 '17 at 15:56
  • @WGroleau Many other factors may explain why a dog licks, e.g. skin irritations. Did you read the existing answer? – Franck Dernoncourt May 26 '17 at 22:53
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    Because French bankers are nice and America bankers are big meanies. – Michael Oct 30 '19 at 2:33
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Because US banks would rather use (free) ACH instead.

From https://www.nerdwallet.com/blog/banking/ach-transfers/ (mirror)

Delivery of ACH transfers can take several business days, meaning days that banks are open. Unlike the real-time processing that wire transfers have, ACH network operators process transfers in batches only three times a day. […]

ACH debit transfers, including payroll direct deposits and most bill payments, are typically free. If you need expedited bill payments, there can be fees. For ACH credit transfers, banks might charge a fee of around $3 for sending money between accounts that you have at different banks, but many offer these so-called external funds transfers for free. There’s usually no fee to receive them."

From http://www.finance.umich.edu/node/2149 (mirror):

A wire is a real-time method of transferring immediate funds and supporting information between two financial institutions and is relatively expensive to use. An ACH is similar to a wire transfer only it uses a batch-process. Transactions received by the bank are processed in batches and funds are not available in the beneficiary account until the next business day. ACH transfers are less expensive than wire transfers.

  • Good point, but can you cite a source? – Michael May 26 '17 at 0:30
  • @MichaelC. nerdwallet.com/blog/banking/ach-transfers (mirror)"ACH debit transfers, including payroll direct deposits and most bill payments, are typically free. If you need expedited bill payments, there can be fees. For ACH credit transfers, banks might charge a fee of around $3 for sending money between accounts that you have at different banks, but many offer these so-called external funds transfers for free. There’s usually no fee to receive them." – Franck Dernoncourt May 26 '17 at 0:32
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    Thanks for the answer. Interestingly, "wire transfers" in France are in fact more similar to ACH transfers in the USA, in the sense that "wire transfer" in France also take some time to be executed, just like ACH transfers in the USA, and unlike wire transfers in the USA. The difference of execution time may explain the difference of price. – Franck Dernoncourt May 26 '17 at 0:36
  • At my Dutch bank, I can do a regular transfer for free, or an "urgent transfer" for a (variable) fee. I've always had regular transfers arrive within the same business day so I don't know when I would use "urgent", but perhaps those "urgent" transfers are more comparable to US wire transfers? – gerrit Jun 16 '17 at 9:18
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    Do ach transactions really take days to clear? – Ted Taylor of Life Sep 19 '17 at 10:19
3

This is very much about three things:

.1 Electronic maturity for payments Some countries are more mature for electronic payments, some less. USA is slightly less mature than as exemple France or Sweden or Holland. It might be influensed by these three countries beeing more on the size of individual states in USA. Take me as an example, it is more than 20 years since I last even saw a check. All my recurring bills are paid by direct debit from my account (I live in Sweden).

.2 Competition in the market space As we all know banks are profit making companies. Compared to other companies they do not produce and package and market and sell physical products. Instead the (sort of) produce money, package it and sell it. Pricing in a competitive market depends on the customers actually caring about the price and the competitors actually working with price as a parameter. Compare buying bank products to buying anything else. (Remember, making profit is not bad in our market economy)

.3 History History is always important in an market that has existed for a long time. Pricing, offers, terms and conditions are all part of the market history. The finance industry is in a bit of a change process right now with a lot of alternative suppliers and alternative products. I believe though that the customers are extremely conservative and slow to change.

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    You left out regulation. For example, banks in the eurozone are required by law to provide electronic money transfers to anywhere within the eurozone for the same cost as a domestic transfer. – Mike Scott Oct 29 '19 at 18:21
3

It is primarily a regulatory issue - an EU directive required countries to introduce a modern 'faster payments' system that realised the potential of electronic banking systems to rapidly transfer and clear money betweeen accounts. (In the UK the implementation of the regulations sets a 2-hour limit but in practice transfers are essentially instanteous). These are generally free for consumers but businesses will pay a transaction fee (a few pennies) which is the same as exists under the old cheque clearing BACS ("Bankers' Automated Clearing System") that took 3-5 days. BACS is still used for a lot of routine payments.

There is still a same-day 'wire transfer'-type system in the UK called CHAPS ("Clearning House Automated Payments System"). This costs c £20 per transaction and is still necessary for payments larger than the Faster Payments limits (usually > £20-50,000/day).

This situation is broadly the same across EU members thought the charging model may vary a bit, though one of the EU requirements is that banks charge customers the same for intra-EU payments as for at the same cost as intra-country payments)

Before they were forced to introduce 'Faster Payments' the banks resisted making changes, perhaps because they would get c. 3 days interest on the volume of transactions they were processing, but also because they were all largely dependment on ancient legacy systems written in things like COBOL that ran on an overnight batch-processing model and which they were terrified of breaking. Besides, it would not have been easy to get voluntary agreement from even just the main clearing banks on all the commercial and technical requirements.

In general, the USA's fragmented banking system is generally behind the rest of the developed world on banking systems. For example, by the time the USA was just starting to roll out Chip-and-Pin security it was near universial in Europe and large parts of Asia.

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