Is this situation familiar to you? You have an urgent bill to pay in your home country but inadequate funds in your local bank. You wire the money home, expecting it to show up in your account in a few days. A week later and there’s no sign of it. Then you remember that your home country is in the middle of a major national celebration and all banking operations have halted for the duration. Looks like you’ll need to figure out another way to pay that bill!
It’s staggering to think that, in an increasingly international world, where normal consumers are dealing with overseas businesses on a daily basis, everything money-related can grind to a halt in a heartbeat because of some centuries old traditions. Global centres of finance can be silenced just because it’s the first day of May, institutions overseeing billion-dollar trades left deserted because the day has some ancient religious significance. In the UK, they’re even more up-front about the fact as public holidays have been known as ‘bank holidays’ since the late 19th century - at the time, it was considered that remarkable that banks and their employees should get a day off!
Depending on your home country and which country you are living in, the timing of national holidays can potentially become a perfect storm of inconvenience. What if you are a UK citizen and want to send money to or from Thailand in April? Between Easter back home and Songkran in the Land of Smiles, you could be waiting most of the month for the funds to reach their destination.
It’s 5 o’clock somewhere!
It’s not just national holidays that that slow down international money transfers. In fact, those are really the least of your problems. A much more significant issue is the simple fact that the overwhelming majority of money movements are controlled by just a few intermediary banks. When those banks are offline - as in, when the current time where you are is outside of regular office hours where they are - money simply cannot move.
Perhaps unsurprisingly, the aforementioned banks controlling the flow of money are in the US, with the biggest among them being Wells Fargo, Chase Bank, Bank of Americaand Citibank US. For the most part, these banks operate on a normal 9am to 5pm work day, with maybe an hour’s variation between them at most. With all of their main offices in the EST time zone, that means that money can only be moved when the time is between about 8pm and 4am in Thailand, which is outside of banking hours here. Put simply, you can submit a request to send money from Thailand to wherever in the world you like during the day and absolutely nothing can happen until at least the next day.
What if the next day is a Saturday? Well, then you’re out of luck. Again, remember that the SWIFT system of sending money from bank to bank across international borders only works when the intermediary banks are open and operating. US banks, including those essential intermediaries, don’t process this kind of request on Saturdays and Sundays.
They also won’t process payments during US holidays. In other words, if you’re sending money from Thailand to the UK and it happens to be 4th July, your money isn’t going anywhere, despite the fact that neither the country of origin nor the destination celebrate a holiday on that date.
While Saturday and Sunday form the weekend in the overwhelming majority of the world, the Middle East is the exception to the rule. Because the Islamic holy day is Friday and not Sunday, banks and businesses in the UAE, Qatar, Saudi Arabia and Oman are closed on Friday and Saturday, with the week beginning on Sunday. If your money is being sent to or via a bank in any of these countries, that could be an extra few days added to the time it takes to get there.
A digital solution?
Given that we live in a world of 24-hour eCommerce and digitally enhanced convenience, this situation seems extremely outdated. This is a world where you can get virtually anything delivered to your home with just a few taps on a phone app - anything from consumer goods to your weekly groceries. With streaming services, you can be watching prime-time television shows at 4am, and yet your money can be held in limbo because your bank’s employees are too busy splashing water on each other to celebrate the start of the Buddhist year, because it’s past closing time or a holiday in the US or because some of the Gulf countries have their weekend on a different day.
That’s not to say that we are advocating that banks should not get holidays, of course - they have as much right to time off as anyone else. The solution to this problem is certainly not in abolishing holidays. However, given that this most essential of services simply ceases to function at what can be very important times, something will inevitably have to give.
The environment in which we live, as stated above, has been enabled and enhanced through digital innovation. Content streaming and online purchases were impossible before the internet, and the quantum leaps made in smartphone technology in the last decade or so have only accelerated the process. There has even been some digital innovation in the world of banking, rapidly accelerating what were previously slow, labour-intensive processes.
Many of these innovations handle symptoms of the overall problem. For example, eKYC has seen the use of smartphone technology to simplify what was previously an arduous and imperfect process of ensuring that the person asking to make changes to their account was actually the account holder. However, even with eKYC, those changes can only be made during bank working hours.
Much greater innovations have not just improved the banking system but have effectively supplanted it. Non-bank financial institutions like independent money remittance services have made it so that international money transfers can take place instantly and at any time of the day and year. This bypasses the SWIFT system that typically takes several days to send money from one country to another, even when one of those countries isn’t in the grips of a national holiday.
An even bigger innovation still is the reinvention of how we think about money. The development of blockchain technology that led to the creation of cryptocurrencies offered a paradigm shift effectively removed the need for banks (and their employees) in the movement of money. The significantly more secure nature of the cryptocurrency means that there is no need to rely on trust as there is in normal money transfers.
However, there are faults with this as an alternative to just waiting for the holidays to end. For one thing, cryptocurrencies are still not widely accepted as a form of legal tender. You can not, for example, pay your bills with bitcoin in most countries, though there are some services emerging to allow this. There’s also the problem that there are now over 2,000 different cryptocurrencies - significantly more than there are national currencies. Relatively few of these are widely accepted as a means of paying for more than a couple of different products or services.
Central Bank Digital Currency
Central banks have decided to either solve or add to the problem of there being thousands of currencies by experimenting with their own - a significant step forward in the wider acceptance of digital currencies.
Banque de France, in particular, is starting to investigate the option of using a central bank digital currency (CBDC) for interbank settlements. Banca d’Italia has also led the way in adopting blockchain technology in the Italian banking system, though is yet to look seriously into digital currencies. However, the European Central Bank is already looking beyond these initial experiments at the idea of a retail CBDC.
It’s worth noting that these are still only the first delicate, probing steps into a future of central bank-approved digital currencies. There is still a lot of work to do and progress to make and it is far from guaranteed that Banque de France’s experiments will be successful.
Interest in digital currency has been especially accelerated by the impact of COVID-19. With the insistence that as many people as possible should remain at home, the reliance on digital solutions significantly increased, especially in banking. This situation especially put a lot of strain on banks since they needed to keep money flowing, which means keeping employees in their offices. The option to remove that requirement would make the whole process of moving money around significantly more efficient.
While the future certainly seems promising for digital currencies to remove many of the delays inherent in international remittance, that future is still some distance off. Given the speed of technological innovation these days, it could be just a year or two away, if that. However, if you need to pay a bill now, you are better off using a non-bank financial service like a remittance company.
This article is provided to you by DeeMoney. Thailand's money transfer solutions provider licensed by the Bank of Thailand. Interested in transferring money from Thailand to the world? Download the app from the Google PlayStore or the Appstore to get started.