Problem: Most money transfers to or from bank accounts are only possible between Monday and Friday.
Solution: This business would develop an entirely new clearing house that works 7 days a week, 24 hours a day to ensure that money can be transferred in real time, anytime, all the time. To learn more about this, I’d recommend listening to this 20 minute Planet Money podcast about why money transfers are so slow.
Supposing you don’t have 20 minutes to listen to the podcast, it’s worth understanding why things are the way they are. As described by a few Reddit users:
It's called the clearing and settlement process. Some clearing and settlement services are, in fact, in real time. Many are not.
There are a number of ways that banks exchange money. I won't delve into the complexities of the systems (as this is ELI5), but I'll try to give you a simple example.
You bank with bank A. You are using online banking to transfer to bank B.
Both Bank A and Bank B use a clearing system to transfer funds to one another that is not real time. It would not be efficient for their clearer to be constantly exchanging micro payments (micro from the bank's perspective). So all the payments take place at one time of the day (or days) depending on the schedule of the clearing system that is being used. This is called 'bundling.'
So you decide to transfer $150 to an account with bank B from your account with bank A.
At the end of the day, the total value of transfers made from bank A to bank B is $120m. Similarly, at the end of the same day, the number of transfers from bank B to bank A is $100m. Therefore, $20m will be transferred from bank A to bank B, being the difference in values. When this settlement finally occurs, the banks will then ensure that all of their customer accounts are credited and debited correctly.
…
According to Planet Money's episode on bank transfers the banks are partly to blame. The transfer process is nearly all automated at this point, they just choose to shut off the servers at night and weekend. The reason is that a lot of banks don't want to be bothered to handle incoming requests late. I infer from that that they also don't want their competitors to have such an option. There is also wait time baked into the process for historical reasons.
Of course the rest of the developed world just laughs. They've had bank transfer times measured in seconds for well over a decade. Paypal would be out of business overnight if we had, for example, Poland's bank transfer system.
Of course, the Tweet above is a bit tongue-in-cheek; however, imagine if your email took days and days and days to arrive! The big draw for financial institutions not to implement lighting-fast payments (after all, it’s already a thing in the UK) is the fact that these banks are making tens of billions of dollars off wire transfers (which cost anywhere from $15 to $45 per transaction).
The market, ultimately, is huge! In 2019, 185.5 billion purchase transactions were made worldwide using Visa payment cards. Just in the US, there were 39.6 billion combined purchase transactions. This figure includes 31.2 billion purchase transactions from the top 50 issuers of Visa and Mastercard credit cards in the U.S. plus another 5.66 billion from American Express and 2.72 billion from Discover. (See these sources or Statista).
Finance is huge, and faster finance is a dauntingly large market.
Monetization: Fees (1%? 0.1%?)
Contributed by: Michael Bervell (Billion Dollar Startup Ideas)