Why are PayPal transfers faster than traditional bank transfers?

It is quicker because the ‘balance’ is essentially being moved in the same company. The common denominator is that regardless of the US, Canada, UK, etc. the balance for PayPal is held by one PayPal company or the other, and it is managed by a treasury software that makes sure at the end of the day, netting off happens. Your balance is not moved per se in real-time to another bank. It is simply a deduction from one ledger account in PayPal and addition to another ledger account in PayPal. The key component being that the ledger is maintained by the same company.

Within banking, it is not. One bank has no control of the ledger of another bank across the road or across the country or across the world. This is why banks have to be members of a clearinghouse or some sort and work with correspondent banks. Instructions to make deductions from one ledger, don’t equate as a credit in another bank’s ledger across the world in real-time. It takes time. As ledgers have an ‘external’ component to it, everything is done sequentially and follow-the-sun cycle.