# How do inter-bank electronic money transfers work? **URL:** \ **Category:** Factual Questions\ **Created:** [December 6, 2007, 4:35pm UTC](https://boards.straightdope.com/t/how-do-inter-bank-electronic-money-transfers-work/429040 "2007-12-06T16:35:40Z")\ **Posts on this page:** 3\ **Page:** 2
**Author:** ![Aioua](https://avatars.discourse-cdn.com/v4/letter/a/87869e/32.png) [@Aioua](https://boards.straightdope.com/u/Aioua)\ **Post date:** [December 7, 2007, 9:20pm UTC](https://boards.straightdope.com/t/how-do-inter-bank-electronic-money-transfers-work/429040/21 "2007-12-07T21:20:08Z")
[QUOTE=saladin9876] … **Scenario B** A customer rocks up at a bank with a suitcase full of cash - 1 million dollars to be exact. The customer announces that he wants to deposit it in to his bank account, and the bank agrees. The bank credits the customer’s account with 1 million dollars _and takes possession of the cash_. A few weeks later, the customer decides to _electronically transfer_ the million dollars to some other bank. He does this, and the bank deducts 1 million from **his** account. Result: The bank is in pretty much the same position as it was before the customer deposited the million.. except.. it still has the 1 million in cash! So.. when it comes time for the bank to purchase their bank notes from the Fed… that’s 1 million _less_ they need to worry about spending. A saving of 1 million. A saving of the exact amount that the customer deposited in cash. To put it another way - are you saying that giving 1 million in cash to a bank, and then wiring it out - results in a $1 million profit to the bank? (Because it’s one less million they now need to spend on notes)? [/QUOTE] (note emphasis) This is the problem, here. A customer’s account doesn’t have any money in it, it’s just a record of how much money the bank owes the customer. It’s like if I loaned you 100 bucks. Then, I ask you to send a $100 check off to someone else (stupid gambling debts!). You still have the $100 bill in your pocket, but you aren’t $100 richer. ---
**Author:** ![Tim\_T-Bonham.net](https://avatars.discourse-cdn.com/v4/letter/t/46a35a/32.png) [@Tim\_T-Bonham.net](https://boards.straightdope.com/u/Tim_T-Bonham.net)\ **Post date:** [December 7, 2007, 9:30pm UTC](https://boards.straightdope.com/t/how-do-inter-bank-electronic-money-transfers-work/429040/22 "2007-12-07T21:30:13Z")
[QUOTE=saladin9876] Now that we have fiat money, and the transfer is “electronic”, how is it done, logistically speaking? [/QUOTE] [QUOTE=Antinor01] If I remember, I’ll ask a friend tonight. She’s the VP of the electronic funds department for a bank. (Lot going on today, so I promise nothing) [/QUOTE] Neither of you are likely to get much in the way of a detailed, specific answer. Both individual banks and the Fed prefer to answer only in general terms, for security reasons. ---
**Author:** ![saladin9876](https://avatars.discourse-cdn.com/v4/letter/s/838e76/32.png) [@saladin9876](https://boards.straightdope.com/u/saladin9876)\ **Post date:** [December 9, 2007, 1:00pm UTC](https://boards.straightdope.com/t/how-do-inter-bank-electronic-money-transfers-work/429040/23 "2007-12-09T13:00:15Z")
[QUOTE=friedo] You’re forgetting that there’s no loss involved when the bank buys currency from the Fed. They electronically transfer $X to the Fed, they get $X worth of bills. This week, because they got the suitcase of dough, they transfer $X minus one million to the Fed, and get $X minus one million dollars of bills. No profit or loss occurs in either case. [/QUOTE] Yes, yes, this is what I wasn’t getting. I was thinking the bank was incurring a loss by “buying” notes from the Fed. Of course, they are not. Thank you to everyone who replied. [Previous page](https://boards.straightdope.com/t/how-do-inter-bank-electronic-money-transfers-work/429040.md?page=1)