Financial Institutions and “Friction”

For this article, the term friction will be used to describe any barrier put in place that prevents access to YOUR FUNDS. The goal of this article is to make you aware of when friction occurs, and the hidden costs associated with it.

Since 1980, interest rates on CDs, checking and savings accounts have been dwindling. Today, rates are below 1%, and yet credit card rates are averaging 20% and rising. At the same time rates were decreasing, and regulations were introduced, increasing the friction that made moving money around more difficult. It seems the financial industry was unaware the Internet existed, which unlocked the ability to connect and communicate with anyone anywhere 24 hours a day.

Today in the US, all financial accounts over $600 must be reported to the IRS. This regulation was put in place in late 2021 based on feedback from the IRS.

According to USA Today, “The latest IRS estimates show a tax gap of $166 billion per year between the tax owed by businesses (not counting large corporations) and the tax actually paid. The document says requiring comprehensive reporting on money flowing in and out of accounts “will enhance the effectiveness of IRS enforcement measures and encourage voluntary compliance.”

Source: https://www.usatoday.com/story/news/factcheck/2021/09/29/fact-check-post-treasury-tax-proposal-partly-false/8411799002/

Prior to this, only transactions exceeding $10,000 needed to be reported to the IRS. The result of this $600 threshold is a blanketed monitoring of nearly 100% of all banking activity.

This increased regulation resulted in friction to amounts that electronic payment solutions like Zelle, PayPal, and Venmo would process. If the costs to comply with regulatory requirements were too costly, they would simply limit the transaction amounts to under $600.

I observed several fiat to crypto on-ramps decrease their buy limits to $600 from significantly higher levels to avoid reporting requirements.

A more distinct form of friction is access to your funds. If you wish to liquidate an account exceeding $12,000 you must contact the bank beforehand so they can schedule a date / time for you to make the withdrawal. Of course, they do not publish this information in their brochure or on their website.

If you wish to send funds via a bank wire, this requires a visit to the bank in most cases. It also requires the receiver to provide a significant amount of information regarding their bank account. Here’s the current policy on bank wires from several major banking websites:

Wells Fargo:

How much money can I send with Wells Fargo Online® Wires?

“For your security, we restrict the amount of money you can send to recipients online. You will be able to review any limits before completing your wire transfer in online banking. To request higher limits for online wires, please visit your local branch.”

PNC Bank:

How do I do a wire transfer at PNC?

Head to your local PNC Bank branch.
Request a Wire Transfer Request Form along with the wire instructions.
Complete and sign the Wire Transfer Form.
Turn in the completed copy to a PNC Bank employee to initiate the wire transfer.

SunTrust Bank:

To transfer funds to an International/Domestic account from your SunTrust Bank account, you need to fill Wire Transfer Request Form which can be availed from any SunTrust Bank branch.

If you receive wired funds, do not assume you have immediate access to those funds! I recently heard a hold was placed on wired funds as if they were a personal check at a different bank.

How Long Do Wire Transfers Take?

Transfers typically happen quickly. Generally, domestic bank wires are completed in three business days, at most. If transfers occur between accounts at the same financial institution, they can take less than 24 hours.

If you’re sending money to another country, however, it may take as many as five business days for the recipient to receive their funds. To find out exactly how long it’ll take to receive funds from a wire transfer, you’ll need to check with your bank or credit union. If you’re in a rush, you can find out if there’s a way to expedite the process.

Source: https://smartasset.com/checking-account/how-long-does-a-wire-transfer-take

Since 2009 and the introduction of bitcoin, we have another option for accessing and sending funds. Solutions by SANCTUARY DEX™ allow individuals, merchants, and non-profit organizations the ability to secure cryptocurrency funds safely and without the need for a third party like a bank. You can send funds 24/7 to anyone with a crypto wallet address in any amount you like. Most cryptocurrency transactions are validated and recorded to the blockchain ledger in less than 5 minutes!

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