Instant money transfers: What are they and how do they work?

Looking for a quick way to transfer money? An instant money transfer may enable seamless, real-time transactions, allowing people to send money in a matter of minutes instead of days.¹

Whether it's splitting bills, shopping online, or repaying family or friends, this article explores ways to transfer money immediately, from how it works to potential benefits and drawbacks when doing so.

Instant transfer vs. traditional transfer

Traditional transfers refer to the conventional methods of moving money, such as bank transfers, electronic bill pay services, or cheques. These transfers may involve a delay in processing, especially when transferring to other banks, making payments inside a bank branch, or posting cheques to other states by registered post.

Factors that could influence the time it takes for a traditional transfer to clear may include:

• Cut-off times: Banks, credit unions, and other financial institutions often have specific cut-off times during the day. Transfers initiated after these cut-off times may be processed in the next batch, resulting in delays.

• Weekends and public holidays: Banks typically do not process transfers on weekends or on public holidays, such as Boxing Day, Easter Monday, or Anzac Day.

• Intermediary banks: Transferring funds between different financial institutions or across borders may result in additional processing time.

• Verification and fraud checks: Traditional transfers may involve manual verification processes and fraud checks, which may delay transfer time.

Instant transfers use real-time processing, which allows the recipient to access funds almost instantaneously. Instant transfers may also potentially avoid factors like cut-off times or shutdowns on weekends and public holidays, providing a quick and efficient way to move money in real time. Instant transfers can help people collect money from friends and family or make other peer-to-peer (P2P) payments.

Instant transfer apps

Known for their convenience, speed, and ease of use, instant transfer apps are digital platforms or mobile applications that allow individuals to send and receive money quickly. These apps and platforms may either be solely focused on P2P payments or feature P2P as one of their offerings.

With apps that transfer money instantly, people can link their bank accounts, debit and credit cards, or other financial accounts to an app, allowing them to initiate transfers directly from their devices.

Keep in mind that different instant transfer apps may have varying features, security measures, fees, and transfer limits.

Potential pros and cons of instant transfers

There are potential advantages and disadvantages of instant money transfers. Here’s what to know.

Possible benefits of instant transfers

When it comes to transferring money instantly, some of the potential benefits include:

• Speed: Instant transfers generally allow for immediate movement of funds, providing quick access to money.
• Convenience: These transfers can usually be initiated and completed through digital platforms, eliminating the need for bank branch visits or form-filling.
• Flexibility: Real-time transfers may enable individuals to respond promptly to financial needs or time-sensitive transactions.

In 2022, the Australian Competition & Consumer Commission (ACCC) received more than 14,000 reports about bank impersonation scams, leading to more than $20 million in losses.¹ While instant transfers can be convenient for quick and seamless transactions, it's important to be aware of potential scam tactics that may exploit them, such as:

• Fake invoices: Scammers may send fake invoices, posing as legitimate suppliers, freelancers, contractors, or service providers with a sense of urgency to pressure individuals to send money.

• Text message fraud: Scammers may use text messages to attempt to manipulate people into authorising instant transfers under false pretenses, such as posing as utility providers, charities, streaming platforms, and even mates, relatives, or other trusted individuals.

• Account takeover (ATO) fraud: This can involve hackers gaining unauthorised access to an individual's accounts — often through phishing or other cyber-attacks — and initiating instant transfers from the compromised accounts to their own.

Learn about sending money with PayPal.