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, making online purchases, or giving money to family or friends, this article explores ways to transfer money immediately, from how it works to potential pros and cons when doing so.

Instant transfer vs. traditional transfer

Traditional transfers refer to the conventional methods of moving money, such as bank transfers, wire transfers, or checks. These transfers may involve a delay in processing, requiring the accumulation of multiple transactions before they are executed as a batch — which is known as batch processing. Batch processing can take several hours or days to complete, depending on several factors.¹

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

• Cut-off times: Banks and 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 holidays: Banks typically do not process transfers on weekends or public holidays.
• 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 funds to be available to the recipient almost instantaneously. Instant transfers may also potentially avoid factors like cut-off times or shutdowns on weekends and holidays, providing a quick and efficient way to move money in real time. Instant transfers can be an optimal way to collect money from friends and family or facilitate other 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, 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 physical bank visits or manual paperwork.
• Flexibility: Real-time transfers may enable individuals to respond promptly to financial needs or time-sensitive transactions.

Possible downsides of instant transfers

Some of the potential drawbacks include:

• Potential fees: While some instant transfer services may be free or low cost, others may charge fees.
• Security: The speed of instant transfers may raise concerns about fraud or unauthorized transactions.
• Lack of cancellation: Instant transfers may not allow the option to reverse or cancel a transaction once it has been initiated.

In 2022, bank transfer or payment fraud in the U.S. resulted in losses of approximately 1.59 billion dollars.² 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 invoice fraud: Scammers may send fake invoices, posing as legitimate vendors or service providers with a sense of urgency to pressure individuals to send money.
• Authorized push payment (APP) fraud: Fraudsters may attempt to manipulate people into authorizing instant transfers under false pretenses, such as posing as friends, family members, or trusted individuals.
• Account takeover (ATO) fraud: This can involve hackers gaining unauthorized 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.