Instant money transfers: What they are and how they work

Instant money transfers from a bank account are a quick and efficient way to send money immediately from one account to another. Users can use digital wallets and peer-to-peer payment apps like PayPal to make these transfers in minutes rather than days, like some other transfer methods.

With wire transfers taking anywhere from 24 hours to five days or longer, it’s no wonder that people are looking for ways to make instant money transfers from their bank account.¹

Whether it's splitting bills, making online purchases, or giving money to family or friends, this article explores ways to send money immediately, from how it works to potential pros and cons when doing so.

Table of contents

• What is an instant bank transfer?
• How instant bank transfers work
• Types of instant bank transfers
• Pros and cons of instant transfers
• Instant and easy money transfers with PayPal
• Frequently asked questions

What is an instant bank transfer?

Instant transfers use real-time processing, which allows funds to be available to the recipient almost instantaneously. They 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 peer-to-peer (P2P) payments.

How instant bank transfers work

Traditional transfers, bank transfers, wire transfers, or physical checks may involve a delay in processing. They require 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

Instant money transfers, however, are much more seamless. Here’s an overview of the steps:

1. Log in: The sender logs into their online banking portal or mobile banking app.
2. Initiate transfer: They select the option for "Transfer Funds," "Send Money," or a similar instant payment feature.
3. Enter details: Here, they specify the amount to be sent, provide the recipient's information,
4. Optional: Add reference or memo: Add a description for the payment.
5. Review and confirm: The sender carefully reviews all the entered details (especially the recipient's information, as instant transfers are often irreversible).
6. Authenticate: The bank may require a second layer of authentication (such as a one-time password sent to a mobile phone or a biometric scan) to authorize the transfer.
7. Transfer processed: Once confirmed and authenticated, the sending bank immediately processes the transfer through the instant payment network.
8. Funds received: The receiving bank instantly credits the funds to the recipient's account, and the money is available for use almost immediately.
9. Confirmation: Both sender and recipient usually receive instant notifications (email, SMS, or in-app) confirming the successful transfer.

Ways to make instant transfers from a bank account

Instant money transfers are a category of payment methods that enable immediate or near-immediate movement of funds. Below are some common types.

Real-time payment (RTP) networks or systems

Real-time payments are a specific type of instant transfer with infrastructures that allow for instant interbank transfers. They operate 24/7, 365 days a year, unlike traditional banks that are limited by banking hours, and process payments individually rather than in batches, so they go through immediately. Examples in the US include FedNow Service and RTP® Network by The Clearing House.¹

Peer-to-peer (P2P) payment apps

P2P payment services allow individuals to send money to each other quickly through an online app. They often leverage underlying instant payment networks or internal balances, meaning that they don’t rely on a specific bank, but rather the user's own banking information that they input into the application.

For example, for a small fee, PayPal instant transfers allow users to instantly access their money and use it to shop, send money, pay bills, and more.

Digital wallets

While not exclusively for bank account transfers, many digital wallets allow users to link their bank accounts and facilitate instant payments for goods, services, or to other users. When digital wallet apps are used for P2P payments and certain online/in-store transactions, they can leverage underlying instant payment networks, like previously mentioned, if the linked bank supports it.

Pros and cons of instant transfers

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

Pros:

• 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.
• Increased transparency: With instant transfers, users receive updates as the transaction proceeds.
• Built-in compliance: Because checks are automated, there’s less risk of errors. Instant transfers also include features that may help improve security, such as encryption, multi-factor authentication, and fraud protection.

Cons:

• 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 they have been initiated.

Instant and easy money transfers with PayPal

Instant money transfers can be an effective way to pay someone or send a gift in as little as a few minutes. Whether that’s an instant money transfer from a bank account, using a P2P app, or a digital wallet, the speed of the transfers enables individuals and businesses to send and receive money easily.

Learn more about how to send money with PayPal.