Why does it take 5 days for electronic payments to clear?

Electronic Payments take upto 5 business days to clear because:

• The Transferring bank has to deduct funds from your account
• Transfer fund to the receiver bank
• The receiving bank has to receive funds into their account
• The receiving bank has to credit the amount into the payee account

All these involve time & effort. That is why it takes this much time.

To quicken this banks offer quicker transfer features but they charge a higher fee for the same.

This could be done immediately since it is done by computer. They do not actually transfer actual money to the bank. The banks do this because they make more money by holding your funds for 5 days. They have earned 5 days of interest by lending it to someone else. Notice how they can "immediately" take out your money when you have to pay them, but not immediately when they have to pay you.