
The Fed is getting into the Real-Time payments business - apo
https://www.cnn.com/2019/08/05/investing/fed-real-time-payments/index.html
======
daeroth
Some real-time payment infrastructures to compare to:

UK - Faster Payments Service (2008)
[https://en.wikipedia.org/wiki/Faster_Payments_Service](https://en.wikipedia.org/wiki/Faster_Payments_Service)

EU - SEPA Instant Credit (2017)
[https://en.wikipedia.org/wiki/Single_Euro_Payments_Area#SEPA...](https://en.wikipedia.org/wiki/Single_Euro_Payments_Area#SEPA_Instant_Credit_Transfer)

Australia - New Payments Platform (2018)
[https://en.wikipedia.org/wiki/New_Payments_Platform](https://en.wikipedia.org/wiki/New_Payments_Platform)

~~~
ggm
NPP has been hugely beneficial for p2p. I've used it and now trust it
implicitly, as a mechanism.

Being stuck in cheque clearing bank settlement delay is a royal pain.

International funds clearance and KYC remain problems.

~~~
aussiegeek
NPP is on it's way to being really handy, but it still sucks that I have to
hack things to force NPP for some payments

(ie. CommBank will only use NPP for PayID payments, but banks like Up will use
NPP for transfers for a BSB/Account number if the receiving banks supports it,
not all banks are fully on the platform yet)

The downside is my teenagers can now shake me down for cash remotely

~~~
natal60
NPP is a joke. There's a limit of $1,000 for transfers. It doesn't always work
if you don't use a PayID.

Compare that to Faster Payments which easily works with 250k with or without a
PayID

~~~
ggm
If you regularly need to move 250k sums electronically inside the Australian
economy, using this kind of mechanism, I'd love to know what you're doing.
Only because I am nosy: I cannot conceive of transactions on this level which
demand NPP class behaviour.

~~~
obtino
> If you regularly need to move 250k sums electronically inside the Australian
> economy.

Paying sub-contractors, settling property transactions, the list goes on.

When buying a house, I remember having to withdraw $60k in cash from my
savings bank account and walking over and depositing it in another because it
would take the other bank 3 working days to clear a bank-cheque. Some banks do
offer an over-night inter-bank mechanism, but surprisingly CommBank does not.

~~~
ggm
I don't think it was designed for what you want to do. Interesting problem:
fast efficient payment of GST-incurring and other taxable money in a low doc
manner.

------
throwawayForMe2
Good amount of detail here including flow:

[https://www.federalreserve.gov/newsevents/pressreleases/file...](https://www.federalreserve.gov/newsevents/pressreleases/files/other20190805a1.pdf)

“...In its simplest form, a completed payment through the FedNow Service
involving two participating banks would have the following steps.103 To start,
a sender would initiate a payment through its bank, by submitting instructions
to it using an end-user interface outside the FedNow Service. After the
sender’s bank authenticates the sender and validates the payment, it would
submit a payment message to a Reserve Bank using the FedNow Service. The
FedNow Service would authenticate the sender’s bank and validate the payment
message, for example, by verifying that the message meets the FedNow format
specifications. Before the Reserve Bank executes the payment message, the
service would place a provisional hold on funds in the master account of the
sender’s bank and would then send an inquiry message to the receiver’s bank
seeking confirmation that the receiver’s bank, among other things, maintains a
valid account for the receiver included in the payment message received by the
Reserve Bank. If the receiver’s bank sends a positive response to the inquiry,
the FedNow Service would execute the payment for the Reserve Banks by sending
a payment message forward with an advice of credit to the receiver’s bank and
nearly simultaneously processing a final debits and final credit to the master
accounts of the sender’s bank and receiver’s bank, respectively.104 The banks
are responsible for debiting and crediting their customers’ accounts and
providing further notification to their customers that the payment has been
completed. The entire process would take place within seconds...”

~~~
thinkloop
Is the primary role of the Fed in this case as an arbiter for disagreements?
Why can't the banks achieve the same directly between each other using an
agreed upon protocol?

~~~
samat
They need to settle their master accounts anyway.

------
beefman
Better source: [https://www.paymentsjournal.com/fed-to-create-real-time-
paym...](https://www.paymentsjournal.com/fed-to-create-real-time-payment-
network/)

Edit: Also submitted here

[https://news.ycombinator.com/item?id=20616846](https://news.ycombinator.com/item?id=20616846)

with this even better source

[https://www.federalreserve.gov/newsevents/pressreleases/othe...](https://www.federalreserve.gov/newsevents/pressreleases/other20190805a.htm)

------
btown
> [Interoperability between all banks has] been one of the arguments for
> blockchain-based payment systems like Facebook's (FB) Libra, which would
> circumvent the need for third-party payment settlement. During two
> Congressional hearings on Libra last month, some lawmakers called on the Fed
> to create a real-time payment system itself rather than having to rely on a
> network developed by Facebook.

It's a reminder that blockchain solutions aren't as useful if there actually
is a trusted central entity, upon whose sterling reputation the global economy
relies in the first place, to record transactions. And it does speak to a
mission to regulate and facilitate interstate commerce. If they get the
branding and execution right this could be huge for enabling micro-
entrepreneurship. Of course, they won't get it right, but one can dream.

------
ianhawes
I expect banks to start charging a $65 per transaction premium to interface
with this system.

FedACH, or "direct deposit", costs pennies wholesale [0]. The value
proposition of Venmo/Zelle is not just that they're instant, but that the fees
are not insane. Compare that to retail banks which charge upwards of $35 for a
"next-day ACH".

The Fed should impose fee caps to encourage adoption.

[0]
[https://www.frbservices.org/resources/fees/ach-2019.html](https://www.frbservices.org/resources/fees/ach-2019.html)

~~~
wahern
The real cost to ACH is fraud, not the electronic processing, per se. The
faster a payment settles the easier and more profitable fraud becomes as it
makes it easier to cash out and run.

Low fees, fast transfers, high volume/high value--you only get to pick two of
the three. (Okay, maybe that doesn't quite work, but you get the idea.)

~~~
repiret
Once upon a time I heard a quote from a PayPal CEO that was something along
the lines of "we used to have a lot of competitors, but they all failed
because they thought we were all in the business of transferring money. We're
actually in the business of fraud prevention."

~~~
gingabriska
PayPal uses Ironfist approach to cure fraud.

It's known to freeze large amount of cash balance without contacting you or
getting anyone to talk to you about this.

------
xvilka
Yes, it is always ridiculous that bank transfers are so slow in the era of
fighting for every split second in the high frequency trading.

~~~
cwt137
Even with frequency trading, I think the trades still settle like 3 days
later.

------
lykr0n
FedACH is already widely used- this makes perfect sense. All US Banks are part
of the Federal Reserve system, so it makes sense for the FRB (which is the
entity being discuessed here) to drive this with the help of each Federal
Reserve branch.

------
vinay427
I'm still hoping for something similar where I currently live, here in
Switzerland (not in the EU). Payments generally arrive the next business day
but that isn't good enough for most in-person transactions.

~~~
adventured
Is Switzerland working on something along those lines now? I'm surprised,
given the outsized Swiss position in global banking, that they're not among
the leaders on this front.

~~~
Double_a_92
Swiss banks are not leaders on anything now... They are just expensive. I pay
10 swiss francs per month to have an account and card there. And they still
want 5 more so I can make more than 10 transactions a month (which I want
since I started paying contactless in shops). And there aren't really any good
alternatives, any bank is like that.

~~~
dafrie
And I pay 0 swiss francs for an account + card (you need more than 25k of
assets, else its 5...But any product such as third pillar retirement funds
count!) with unlimited transactions and cash-withdrawal at any ATM. You
probably have to shop around.

The reason why banks are charging now for simple accounts, is that since we
have negative interest rates (the lowest in the world), its actually damn
difficult for banks to make a profit now with normal accounts since the
traditional business model of the difference in interest rates is now actually
reversed (the target rate is negative, yet on my account I have 0%...).

------
HashThis
The Fed is probably doing this to fend of Facebook Libra. Walls Street is
probably wanting to prevent Facebook Libra from money flows.

~~~
incompatible
When will Libra go live? The Fed system will "aim to launch in 2023 or 2024".

~~~
wmf
It kind of looks like Congress is going to delay Libra until Facebook gives
up.

~~~
incompatible
Does Facebook need permission from Congress to launch?

~~~
wmf
Worst-case Congress can pass a law imposing onerous requirements on digital
currencies backed by a basket of something. Best-case Libra has to comply with
a bunch of existing money transfer regulations that were never written with
cryptocurrency in mind and thus are open to interpretation; various agencies
may choose stricter or looser interpretations depending on which way the winds
are blowing.

------
ForHackernews
RIP Zuckbucks ️

This removes a huge part of the mainstream rationale for digital alternative
currencies.

~~~
FourScore
Which in itself is one of the biggest rationales for developing such a system.
The Fed really has a third unspoken directive: maintain dollar supremacy.

~~~
thinkloop
Not so unspoken, Mnuchin on July 15:

"Treasury takes very seriously the role of the US Dollar as the world's
reserve currency, and will continue our efforts to protect our country".

[https://m.youtube.com/watch?v=zAICzg8ir50&t=370&feature=yout...](https://m.youtube.com/watch?v=zAICzg8ir50&t=370&feature=youtu.be)

------
pcdoodle
FedNow. That's a horrible name!

------
thinkloop
Do these kinds of initiatives reduce privacy by centralizing all transactions
at a single entity?

------
Bungbung
The are actually/ could actually be talking about xrapid blockchain inter
ledger protocol from Ripple, to settle within 3-5 seconds, they just can't say
it yet.

------
pencal
delivered in 2024? quite a long timeline for a realtime payment system.

------
kevas
How does effect Visa & MasterCard

~~~
stephen_g
Coming from a country that has had a modern payments system like this for a
while - you generally still use a credit card for anything online or at
stores, in an Uber or taxis, but use the real time bank payment system for
paying invoices and bills, or buying a car from somebody, or sending $12 to
your friend in real time because he paid for your lunch etc.

~~~
kevas
Why? Why opt for two when one, I presume, is sponsored by the gov and accepted
everywhere in your country?

~~~
stephen_g
I was lumping in debit cards/EFTPOS with credit cards (and of course cash is
also an option in stores). If not paying with cash, you use cards/contactless
in stores because the terminals are integrated into the POS systems, have
instant approval feedback etc. (and literally every card terminal here has
contactless that works with pretty much any card and Apple Pay etc. too, which
is nice).

To use a bank transfer you need to enter details (phone number or a bank
number and account number) and then need either a description or reference
number to match it to at the other side. And even with the New Payments
Platform (fast payments), it can still take 30 seconds or so to come through.
That's fine when paying an invoice or sending money to friends, but too
cumbersome at a point of sale.

------
westurner
This system will need to interface with other domestic and international
settlement and payments networks.

There is thus an opportunity for standards, a need for federation, and a need
to make it easy for big players to offer liquidity.

As far as I understand, e.g. Ripple and Stellar solve basically exactly the
24x7x365 RTGS problem that FedNow intends to solve; and, they allow all sorts
of assets to be plugged into the network. Could FedNow just use a different
UNL (Unique Node List) with participating banks operating trusted validators
and/or offering liquidity ("liquidity provisioning")?

Notably, Ripple is specifically positioned to do _international_ interbank
real time gross settlement (RTGS) _and_ remittances. Ripple could integrate
with FedNow directly. Most efficiently, if it complies with KYC/AML
requirements, FedNow could operate an XRP Ledger. Or, each bank could operate
XRP Ledgers. [https://xrpl.org/become-an-xrp-ledger-
gateway.html](https://xrpl.org/become-an-xrp-ledger-gateway.html)

Getting thousands of banks to comply with an evolving API / EDI spec is no
small task. Blockchain solutions require API compliance, have solutions for
governance where there are a number of stakeholders seeking to reach
consensus, and lack single points of failure.

Here's to hoping that we've learned something about decentralizing distributed
systems for resiliency.

>> _In contrast, the XRP Ledger requires 80 percent of validators on the
entire network, over a two-week period, to continuously support a change
before it is applied. Of the approximately 150 validators today, Ripple runs
only 10. Unlike Bitcoin and Ethereum — where one miner could have 51 percent
of the hashing power — each Ripple validator only has one vote in support of
an exchange or ordering a transaction._
[https://news.ycombinator.com/item?id=19195050](https://news.ycombinator.com/item?id=19195050)

So, you want to get banks onboard with only one s'coin USD stablecoin; but you
don't want to deal with exchanges or FOREX or anything because that's a
different thing? And, this is not just yet another ACH with lower clearance
time?

> _Interledger Architecture_

[https://interledger.org/rfcs/0001-interledger-
architecture/](https://interledger.org/rfcs/0001-interledger-architecture/)

> _Interledger provides for secure payments across multiple assets on
> different ledgers. The architecture consists of a conceptual model for
> interledger payments, a mechanism for securing payments, and a suite of
> protocols that implement this design._

> _The Interledger Protocol (ILP) is the core of the Interledger protocol
> suite. Colloquially, the whole Interledger stack is sometimes referred to as
> "ILP". Technically, however, the Interledger Protocol is only one layer in
> the stack._

> _Interledger is not a blockchain, a token, nor a central service.
> Interledger is a standard way of bridging financial systems. The Interledger
> architecture is heavily inspired by the Internet architecture described in
> RFC 1122, RFC 1123 and RFC 1009._

[...]

> _You can envision the Interledger as a graph where the points are individual
> nodes and the edges are accounts between two parties. Parties with only one
> account can send or receive through the party on the other side of that
> account. Parties with two or more accounts are connectors, who can
> facilitate payments to or from anyone they 're connected to._

> _Connectors provide a service of forwarding packets and relaying money, and
> they take on some risk when they do so. In exchange, connectors can charge
> fees and derive a profit from these services. In the open network of the
> Interledger, connectors are expected to compete among one another to offer
> the best balance of speed, reliability, coverage, and cost._

Why should we prefer an immutable, cryptographically-signed blockchain
solution over SQL/BigTable/MQ for FedNow?

Blockchain and payments standards:
[https://news.ycombinator.com/item?id=19813340](https://news.ycombinator.com/item?id=19813340)

... Here's the notice and request for comment PDF: "Docket No. OP – 1670:
Federal Reserve Actions to Support Interbank Settlement of Faster Payments"
[https://www.federalreserve.gov/newsevents/pressreleases/file...](https://www.federalreserve.gov/newsevents/pressreleases/files/other20190805a1.pdf)

"Federal Reserve announces plan to develop a new round-the-clock real-time
payment and settlement service to support faster payments"
[https://www.federalreserve.gov/newsevents/pressreleases/othe...](https://www.federalreserve.gov/newsevents/pressreleases/other20190805a.htm)

------
0xDEFC0DE
Good lord, that's an _awful_ name for something like that.

~~~
blackdogie
Especially for something that’s actually not available now but in five years
...

~~~
lioeters
FedLater℠ Service.. Joking aside, this area is ripe for an overhaul/redesign,
and I'm glad they're working towards it.

> The rapid evolution of technology presents a pivotal opportunity for the
> Federal Reserve and the payment industry to modernize the nation's payment
> system and establish a safe and efficient foundation for the future.

