Understanding the Delay in Online Bill Pay Processing

Many consumers have encountered the perplexing situation where a credit card payment made through an online bill pay system shows up quickly on their account online, but a similar payment through the same service takes 2-4 business days to process. This discrepancy can be confusing and is often the result of different payment processing methods and workflows used by the payment service provider. Let's explore the reasons behind this delay and shed light on the technical aspects.

Payment Processing Workflows in the US

One of the key factors influencing the speed of transaction processing is the payment processing workflow. In the United States, many companies that offer online bill pay services use a batch processing system. This means that they collect multiple online bill pay transactions during a specific period and then send them to the card processor in a single batch at the end of the day or the following day.

While this method can be more cost-effective for the company, it results in a delay in when the payment is recorded in the card account and when the invoice is marked as paid in the service provider's system. This delay is typically within 2-4 business days, which explains why online bill pay payments may appear later than credit card payments made through other methods.

Example: A company collects online bill pay transactions for the entire day and then sends them to the card processor in a single batch at the end of the day. The card processor processes these transactions and returns a list of transactions that were not successful. This method is cheaper on a per-transaction basis and mimics the workflow for incoming mailed payments, leading to the delay in processing times.

Complexity of Payment Systems

The situation can be further complicated by the different payment systems and the regulatory environment in the US. The Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly known as the Durbin rules, mandates that debit card interchange fees are capped, leading to some providers opting for alternative payment methods.

Another factor to consider is the single versus dual message system used in payment processing. The single message system is a simplified process where a single message is sent between the card issuer and the card processor, while the dual message system involves two separate messages. This distinction can affect when a payment appears on a card account and when an invoice is marked as paid.

In the US, both Visa and Mastercard debit cards can use either single or dual message systems, and the specific system used may be dictated by the transaction routing policy, which can be further influenced by the issuer and acquirer of the card. This means that even if a card is a Visa, the transaction might be processed through a Mastercard network, and vice versa, complicating the payment process.

Contextual Differences Across the Globe

It's important to note that not all countries operate under the same payment processing systems. In Europe, for example, debit cards typically function using the dual message system, which can lead to different processing times. Additionally, some countries have local payment networks for local transactions, which adds another layer of complexity to the payment process.

The Durbin regulations and varying payment systems can cause payment and processing delays, and the end of the day posting processing can sometimes result in an unauthorized transaction showing as available for use, potentially leading to an overdraft if a higher priority transaction comes in before the end of the day processing.

In Conclusion: The delay in online bill pay processing is due to the batch processing system used by payment service providers in the US, the single versus dual message system, and the regulatory environment. Understanding these factors can help consumers and businesses expect the typical processing times and make informed decisions regarding their payment methods.