Bank transfers and account name checking

I’ve been making electronic transfers from my bank account for years and never had any trouble with them – just plug in the account name, number and BSB code into the form, and a few days later, the money arrives in the destination account.

Window washers descend the NAB Building

I recently switched banks and unfortunately for me, a bank transfer failed – the money left my account but didn’t arrive at the destination account – but thankfully it bounced back a few days later! I verified the account number and BSB code I used with the destination bank, who said that it was all correct, but they flagged one possible issue – the account name.

Normally the account name isn’t something I worry about – I don’t always use my middle name, so my account names are all different, yet the bank usually manages to get my money to where it should go. However, it looks like my new bank is a bit more pedantic than my old one, as this thread on the Whirlpool forums suggests:

In a previous thread it was mentioned that ‘big banks’ do not cross reference account names and account numbers, and thus only a BSB and account number will suffice for transfers to go through. It was said credit unions/smaller institutions do manually cross reference account names / account numbers and therefore account names are required.

On further investigation I realised that I entered a dummy name for the bank transfer which failed – problem solved!

The Financial Ombudsman Service has more to say on account names matching when processing electronic transfers, in this document dated September 2003 (my emphasis):

Internet banking screens for online payments commonly require the name, and account number (including the
BSB) of the intended recipient’s account to be keyed in. Traditionally, the account name has been treated as part of the payment instructions on, for example, a deposit slip and the account name has always been an important part of the instructions for payment of a cheque. Payers often assume that the name and account number for a deposit will be checked against each other before the funds are credited to the payee’s account. In practice we know that an electronic transfer is processed solely on the basis of the account number.

This has the effect that, if the payer keys in the wrong account number the payment will be made but to the holder of the account number that has been keyed in. The mistake may only come to light when the intended recipient tells the payer that the payment has not been received. When the payer tries to find out where the payment has actually gone, he or she may be told that the recipient’s name cannot be released for reasons of confidentiality. Their bank may claim that it acted on the basis of the instructions it was given, that is, the account number.

The Ombudsman Service goes on to detail how the Bulk Electronic Clearing System (BECS) rules apply to online transfers, and account name matches – it gets complicated very quickly in regards to which bank is responsible for bank transfers misrouted due to account number / name mismatches.

So the moral of the story seems to be don’t fat finger the account numbers of transfers to big banks, as they might send the money to the wrong person – and pay attention to the account names for transfers to small banks, as they actually pay attention to the small details!

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6 Responses to “Bank transfers and account name checking”

  1. Andrew says:

    While I am very very careful about account numbers, this is quite alarming.

  2. Anthony says:

    I wouldn’t stress too much about this. I’ve worked for two major banks who both did the following and I have every reason to believe all the banks do the same.

    Account numbers include a checksum digit which is calculated based on the other digits of the number. If the checksum is not consistent with the rest of the number, the account won’t exist. If you mistype the account number, it is highly unlikely that you’ll accidentally type a number whose checksum is correct.

    This is why this sort of misdirected electronic transfer doesn’t happen all the time. Given how feckless most people are, there’d be misplaced monies all over the place without this mechanism, but there aren’t so… Don’t Panic!

  3. CG says:

    I had considerable difficulty transferring from a BankWest account which used my full name to a Bendigo Bank account which uses only initial and surname – as do all Bendigo accounts. In the end the assistant manager at my Bendigo branch who knows me in person got through to the relevant person at BankWest and managed to convince them that the account details I had given were correct.

  4. Philip says:

    Anthony, above, explains why there are very few computer errors. All inter bank xfers are done by batch operation and error checking is done before batch run. Which is why you have close off times. Intra xfers were also done by batch until a few years ago when they were changed to real time due to increased processing capacity.
    Some trivia
    Contrary to conspiracy theorists banks do not use money in electronic transit on short term money markets. The money debited from an account awaiting xfer is effectively withdrawn from the economy from the transaction time until deposited in the target account the following morning. It just sits in a batch file. Australia wide this adds up to hundreds of millions of dollars out of circulation at any one time.

    Voucher xfers were once all done using optical readers and manual data input. The data was put on tape reels and exchanged overnight. In Melbourne in excess of a thousand staff, almost exclusively women, were employed in this system. If you ever saw thirty or so taxis pulled up outside some anonymous city building after 10pm you were witnessing a bank shift end. The mustard yellow panel vans around the city at night did the physical transfer of the vouchers and tapes. An amazing system and it worked.

    Bank systems for batch operation are set up to do customer debit transactions before credit transactions. In the past many people set up regular debits for payday expecting ample funds only to find they overdrew due to insufficient funds even though they now had money in the account. Savvy employers usually deposit salaries the day before a nominal payday. Sorry to the conspiracy guys, this is historical, well before IT systems took over.

    Early bank systems were written in FORTRAN and later its successor PASCAL. Many of these core modules were ported at great cost onto the different platforms as systems were upgraded to NT and XP and still exist now. If you ever meet a bank system engineer, ask (very gingerly) what he/she thinks of Microsoft withdrawing XP support.

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