
Fed announces details of new interbank service to support instant payments - tigerlily
https://www.federalreserve.gov/newsevents/pressreleases/other20200806a.htm
======
woodruffw
Settlement between banks in the United States is _astoundingly_ complicated,
for (fascinating, terrifying) historical reasons. FedNow is a huge step
towards fixing holes that private companies have been papering over for over
two decades.

Blatant self promotion: for anybody interested in learning more about the
Automated Clearing House system (which FedNow will eventually supplement) and
interbank settlement in general, I wrote a summary of much of it here:
[https://blog.yossarian.net/2019/12/25/A-shallow-dive-into-
th...](https://blog.yossarian.net/2019/12/25/A-shallow-dive-into-the-American-
banking-system)

~~~
djsumdog
My first job out of university was working for a debt collection firm that
made its own ACH engine in Perl. I remember all the 99999s and headers and
stuff. I didn't work very much on the engine though (thankfully).

I was pretty shocked at just how far behind the American banking system was
when I lived overseas for a bit. I wrote about it here:

[https://battlepenguin.com/tech/the-american-banking-
system-i...](https://battlepenguin.com/tech/the-american-banking-system-is-
still-in-the-1990s/)

~~~
cowsandmilk
Your blog article is startlingly incorrect pretty early on. Individuals can
and do use ACH between each other all the time. It is literally how paper
checks work in the US. And I’ve been able to use a routing number and account
number to send money to someone else online via ACH for decades...

~~~
Dobbs
In the UK if I want to send someone money to anyone in the UK I open the
mobile app and input their sort and account number, type in the amount of
money and hit send. Done.

Similarly in the NL if I want to send someone money to anyone in the EuroZone
I open my bank app type in their IBAN type in the amount of money and hit
send. Done.

Back in 2017 when I lived in the US this just wasn't possible. If I wanted to
send money to someone I had to use Paypal, TransferWise (or similar), Venmo,
etc. Some banks had direct access to ACH but far from all, then if they do
support it it takes two days to arrive. Some banks allowed easy instant
payments between accounts within the same bank. Much of my family purposefully
keep an account with a small west coast credit union to facilitate moving
money amongst ourselves.

Maybe things have gotten massively better in the US in the last 3+ years, but
it was light years behind the UK and NL. In terms of speed, ease of use, and
adoption.

~~~
pbhjpbhj
Those transactions always make me nervous - is there a reason they don't have
a step of showing the account name when you input the number? Like, I type
31-45-76 0452768934 and it says "Mr & Mrs Y O Mama" or "Notafraud & Co. Ltd."
or whatever, as a confirmation?

~~~
Dobbs
We have this for IBAN payments within the NL, I can't speak for the rest of
the EuroZone.

~~~
krageon
The name check isn't universally supported, so it is better to say that it is
strictly optional.

------
lelc
If anyone from the FED is reading this I have this advice: don't use ISO20022!
(I've been working on the brazilian instant payments project, known as PIX).
It's an overly-complicated-try-to-solve-everything standard that promises
interoperability but only delivers pain and misery. Since each country has its
own standards for person and account identification, in dealing with these
local realities, the ISO20022 adds quite a lot of complexity. But all this
cost does not result in interoperability. In fact, each payment scheme end up
with a localized version of the standard, incompatible with others. What could
have been a clean API, ends up a mess.

~~~
rafaelturk
I'm also working with Brazilian instant payments schema, aka PIX. We've simply
created a mapping layer to convert all ISO messaging to json.

Internally all our logic runs on json. It works because at the end of the day,
payments only need a few fields to work: Source, Destination, Amount.

~~~
apta
Quite scary to run financial transactions using an untyped format.

~~~
zo1
Everything is JSON these days, unfortunately.

~~~
novok
You can apply schemas and force integers although. You also have typed
serialization formats such as protobuf.

------
koopuluri
I moved to India at the start of the year and there's the Universal Payment
Interface (UPI) here that essentially allows a Venmo like interface to
transfer $ instantaneously from any bank account to another - by simply using
the recipient's phone number or a QR code. There are multiple apps that
interface with UPI, and the barrier to entry isn't high - allowing for good
competition on the UX.

Literally every person I've met here or wanted to transact with in some way
accepts payments via UPI... heck I was forced (or rather "strongly
recommended") to pay a bribe to a cop that they were able to accept via UPI.

I felt like I stepped into the future. Transferring money to a friend w/ a
different bank in the US is such a hassle if they don't have Venmo (and more
than half in my circle don't), and I've had horrendous experiences with Zelle
(terrible UX, confusing and often incorrect sending limits that I have to call
my bank to resolve).

In India I mostly use Google Pay as my interface to UPI and wow, it's a
magical user experience.

Can't wait for there to be more competition in payments UX in the US once this
service is set up.

~~~
throwaway9d0291
> I felt like I stepped into the future.

It's more like stepping out of the past. It's not that India is particularly
ahead, it's that the US is particularly behind.

The EU for example has essentially instant SEPA transfers now and has done for
a while.

~~~
lopis
It's counter-intuitive, but if you think about it, less develop countries are
in a better position to deploy fully integrated systems.

E.g.: Portugal has a great, free, cross-bank, ATM system since the beginning
[1] because Portuguese banks were late to the party in regards to deploying
such machines. They could learn from other countries and create a more
resilient system, which has since been expanded to be able to pay various
services, from utilities, fines, tolls, phones, withdrawals without cards
(with phone), etc. Countries that developed earlier have to suffer with a lot
of baggage and the Banking industry is not known for it's desire to innovate
its tech.

[1]
[https://en.wikipedia.org/wiki/Multibanco](https://en.wikipedia.org/wiki/Multibanco)

~~~
personlurking
How’s MBpay? I loved using Multibanco when living in Portugal but I never got
around to using MBpay, which I think is the equivalent to what’s being
discussed for the US, essentially.

~~~
djbebs
Getting worse by the moment due to EU requirements for EU-wide standardization

------
harikb
One thing I don't see mention regarding the existing US ACH (or whatever
interbank) system is that there is absolutely no verification or security in
this system. Just like verification of paper check signature and a whole lot
of other financial items - most banks allow anything until questioned. The
easiest and cost effective way is to let it happen and reimburse for failures.

1\. I have linked a non-joint account in my name at bank A to another (non-
joint) account of my wife at bank B (accidentally) without any verification of
any kind. I call BS on anyone claiming they magically checked the home address
link or know we are married.

2\. I have walked in to my bank and did a wire transfer of a large amount
without any kind of verification. They didn't check my ID. I am not kidding. I
did enter my ATM card and PIN. Then why do they have a $500 or $1000 limit at
ATM. If someone did get my ATM card and PIN, they just had to appear confident
and walk in to the branch. This is one of the largest banks in the US.

3\. Because my wife doesn't like to deal with customer service of various
financial items (credit-cards, 401k etc). I regularly call and just say I am
her (clearly feminine name) and the conversation carries on as if nothing is
surprising/suspicious.

4\. On the other extreme, IRS's "MyIRS" site let us authenticate yourself
(first time setup) using a security question that allows one to type _any_
financial account number. CC, Bank, 401k, whatever. I mean how tf did they get
all that data on me? legally? Why does IRS need my CC number?

IMHO, the only thing keeping us secure is that nobody from outside US has
really tried to mess around with US banks.

~~~
techsupporter
> They didn't check my ID. I am not kidding. I did enter my ATM card and PIN.

If this is the bank I think it is, once you inserted your card and entered
your (valid) PIN, the teller was shown the color scan of your ID card that you
presented when you opened the account. The teller then uses this to compare to
you without you handing over a (possibly-faked) ID card.

That is why this bank will periodically ask you to provide a new copy of your
ID.

~~~
harikb
That is a fair point. It just felt too simple for a large transaction. I guess
I should be happy at how easy it was.

------
supernova87a
What I really want this payment system to do is eliminate the direct debit
system from checking accounts and return some real security to banking.
Secure, irrevocable payments, only initiated by me, from my account to others.

No more system that allows mistake debits or others to
accidentally/maliciously deduct from my checking account, such that _I_ have
to be watching for errors and ask for them to be fixed. Or wondering if
someone's payment to me might be reversed. Or having my (or your) parents fall
victim to an advance fee scam with bounced checks 2 weeks after deposit.
Ridiculous.

It's well past time for this. Or at least now give me the choice to have those
loopholes eliminated from my checking account.

~~~
jonahbenton
There will be banks that offer products for handling pulls differently, it's a
product decision, various features around this are available for the big boys,
just haven't trickled down to the masses. But this decade they will. Has
nothing to do with Fed Now.

Irrevocability- for consumer payments there will always be revocability.
Humans doing stuff make mistakes, and need to be able to "take it back." At
the ledger level, all transactions are irrevocable. You apply other
transactions on top to implement recovability.

~~~
Silhouette
_Irrevocability- for consumer payments there will always be revocability._

And yet, if you go into a store and buy something with cash, you have never
been able to just arbitrarily reverse that payment and keep the goods several
months later, and the sky has not fallen.

 _Humans doing stuff make mistakes, and need to be able to "take it back."_

And what about the humans who didn't make a mistake, but simply chose to abuse
the system at the expense of whoever they transferred the money to? Certainty
and security are important for those on both sides of a transaction. If you
have a dispute, that's what legal systems are there for. The quasi-judicial
role that financial services play in resolving disputes, often with little
regulatory oversight and absolutely no requirement to be neutral or objective,
is long overdue for retirement.

~~~
tmp538394722
Scale is relevant. It’s why people don’t typically make down payments on
houses with sacks of nickles.

And why people don’t wire funds to buy a bag of snackums.

------
pfundstein
Nearly all first world countries enjoy instant payments at the point of sale
and person to person. It boggles my mind that it has taken this long and a
pandemic to even set the gears in motion, all while battling ridiculous levels
of cheque and credit card fraud.

~~~
crazygringo
As a general rule, the US is terrible at a lot of first-world things for a
good reason: because it was the first (or close).

We have crappy old subways, airports, bridges, skyscrapers, and so on...
because we built them early, versions 1.0. And they stuck around.

Other countries had the luxuries of building their versions decades later,
when the technology was 2.0 and 3.0 and so on.

So the US is stuck with both old and crappier versions of a lot of stuff, but
where it still doesn't make financial sense to rip them out and replace them
with the newest.

Our financial system suffers from a lot of similar flaws. E.g. by the time
other countries knew enough to base their credit cards on chips+PIN, the US
was still stuck with a legacy installed base of stripes+signatures. Money
transfers is just one more example.

~~~
pacaro
Banking in general and international banking, predate the US

London, Glasgow, Budapest and Paris all have metro systems that predate the
New York Subway

There are multiple bridges that are still in use that predate European
colonization of North America

While the oldest airport is in the US, (College Park), Hamburg, Bucharest,
Bremen, Rome, Amsterdam, Paris, Sydney all follow very shortly after

AFAICT Skyscrapers is really the only example you give where the US
canonically built the v1.0

I think that there are probably other reasons, my suspicion is primarily rent
seeking

~~~
madamelic
I have always been under the impression it is because the US wasn't bombed to
bits during WWII and didn't basically get to re-think infrastructure.

~~~
issa
Based on things like the Chicago Fire and the SF Quake, it seems (at least
anecdotally) clear that massive destruction has a positive effect on
infrastructure down the road.

~~~
pacaro
The Great Fire of London (CE 1666) did this for London too

------
tobinfricke
Will this be anything like SEPA and the easy, cheap, fast, ubiquitous
interbank transfers allowed in Europe?

[https://en.wikipedia.org/wiki/Single_Euro_Payments_Area](https://en.wikipedia.org/wiki/Single_Euro_Payments_Area)

~~~
Qworg
Just the B2B part of SEPA.

~~~
ATsch
Kind of typical. Wouldn't want the government to provide any useful service
directly to it's citizens without some corporate middleman. Still a very good
step though.

------
vxNsr
> _The rapid expenditure of COVID emergency relief payments highlighted the
> critical importance of having a resilient instant payments infrastructure
> with nationwide reach, especially for households and small businesses with
> cash flow constraints, "_

The main issue with releasing cash as I understand it wasn’t that it wasn’t
arriving fast enough; rather it was verifying the recipient was eligible and
was who they say they were.

The only way to solve that as I see it is with a national ID which I am more
against the more I hear about the abuses that both democrats and republicans
do with what little power they have to identify political enemies.

Obviously ACH could be faster but when it comes to getting gov money back I
just don’t see how the 2 extra days was the issue.

~~~
foxfired
Correct me if I'm wrong, but the Real ID act[1] is a national ID in every way
but the name.

[1]: [https://www.dhs.gov/xlibrary/assets/real-id-act-
text.pdf](https://www.dhs.gov/xlibrary/assets/real-id-act-text.pdf)

~~~
reaperducer
_Correct me if I 'm wrong, but the Real ID act[1] is a national ID in every
way but the name._

If it was a national ID, it would be mandatory. Real ID is optional.

~~~
Animats
Not if you want to travel by air.

~~~
Reelin
That's an abusive attempt at a workaround by the Fed to make it mandatory.

Thankfully, it appears my state will continue to offer the same IDs it always
has in addition to the "enhanced" ones. I suppose I'll have to start using my
passport for domestic flights in 2021.

------
fesja
In 2024, USA will reach the current present in Europe ;)

Since 2017, the SEPA Instant Credit Transfer protocol is enabled in Europe.
Which is basically what FedNow will be.

Multiple apps and banks have built on top of it solutions for consumers and
businesses.

I interviewed Bizum, the success story of Spain related to instant payments.
Here, "bizum" is a verb. 100% of banks supoort it. Everyone, kids and adults,
use it to pay for beers, food or presents
[https://www.javierescribano.me/bizum/](https://www.javierescribano.me/bizum/)

~~~
Reason077
_" Since 2017, the SEPA Instant Credit Transfer protocol is enabled in Europe.
Which is basically what FedNow will be."_

The UK has had instant interbank payments (FASTER) since May 2008 ;)

[https://www.fasterpayments.org.uk/our-
achievements](https://www.fasterpayments.org.uk/our-achievements)

------
trollied
We have this in the UK. It's called Faster Payments.
[https://en.wikipedia.org/wiki/Faster_Payments_Service](https://en.wikipedia.org/wiki/Faster_Payments_Service)

Never had a problem with it. I use a few banks that are technically good, and
I can send a payment from one to the other & get a push notification a couple
of seconds after sending cash from one account to another. It's great!

~~~
stephen_g
Yeah, we have a similar system called the "New Payments Platform" in
Australia. You can use the traditional account/branch identifier numbers, or
register a phone number or company number to an account. So people can
generally just instantly transfer you money without even asking for details if
they have your phone number.

~~~
dalanmiller
Under the hood, it is currently significantly more expensive than BECS
however.

------
cymon
This is quite a shame on the US part to be so much behind the times:

Kenya has had a Real-Time Gross Settlement (RTGS) system for years supported
by the central bank which works in near-realtime during working hours, and an
even better one was recently introduced by a conglomeration of the local banks
which works in real-time 24/7 called Pesalink:
[https://www.ipsl.co.ke/pesalink](https://www.ipsl.co.ke/pesalink) ..

~~~
zo1
Agreed. What's an even bigger shame is that places like the US and UK don't
have proper centralized and verified citizen databases and national
identification documents linked to it.

------
TedDoesntTalk
Planet Money did a piece on ACH seven years ago. It’s a batch system written
in COBOL in the 1970s:

[https://www.npr.org/transcripts/229224964](https://www.npr.org/transcripts/229224964)

And that’s why the Feds want to replace it, not refactor it.

~~~
tyingq
Your Visa transactions are running through older TPF 360 assembler. Old isn't
an excuse for bad.

~~~
TedDoesntTalk
It’s not bad. It is simply a product of its time: according to planet money in
that 2013 piece, ACH batch processing runs only once per day and only during
bank hours (no weekends, etc).

Presumably, increasing that frequency would break something in the system or
it would already have been done.

In the ‘70s, no one predicted 24/7 banking or even ATMs let alone internet
payments. I remember my father using an ATM for the first time in 1981, I
think. Perhaps it was 1980. But we had to drive 7 miles to get to it.

Stocks were still traded in fractions, not decimals!

~~~
lyrrad
Things have improved somewhat since then, with the introduction of Same Day
ACH, which provides two additional ACH processing periods each business day.

[https://www.nacha.org/rules/same-day-ach-moving-payments-
fas...](https://www.nacha.org/rules/same-day-ach-moving-payments-faster-
phase-3)

It's more expensive than regular ACH transactions. The above page seems to
indicate the sending bank has to pay the receiving bank 5.2 cents per same day
transaction on top of regular ACH fees (that appear to be 0.0185 cents per
transaction sent or received for 2020).

------
blahedo
Nearly _two decades_ ago, in 2002, I remember being appalled at how slow money
transfer worked. If I deposited my paycheck at my bank, it could take two or
three days before that money was available (and my bank compounded the sin by
including the amount in the "total" for my account but not all of that money
"in" my account was actually "available"). In late '02 I was so irritated by
this[0] that I actually started cashing my paychecks at the issuing bank
(which was across the street from the building where I worked) and walking the
money to my own bank two blocks away and depositing it. Cash deposits were, I
believe by federal law, immediately available.

Even then, there was no excuse why physically walking cash from one place to
another, with in-person interactions at both ends, should have been faster
than a direct electronic transfer, but it was, by a factor of something like
150. Improved electronic infrastructure has been a _LONG_ time coming.

[0]The final straw was the time I deposited a check at the bank, then wrote a
check on that money, put it in an envelope and mailed it, and the check
_still_ bounced. It still kind of boggles my mind that the system was that
slow, although I kind of assume there was a certain amount of bank-being-gougy
in there too.

~~~
m463
I remember when I was younger hearing about "check kiting" which appeared to
be the exact opposite of your bounced check ... somehow you could turn the
slow money transfer around and build up a huge balance by playing with the
delays.

------
seibelj
> _The target launch date for the service remains 2023 or 2024, with a more
> specific time frame to be announced after additional work is completed._

4 years away, at least...

~~~
pfundstein
Just to be pedantic, 2023 is less than 2½ years away, so not "4 years at
least".

~~~
auslegung
In my experience with government, 2.5 years easily becomes "4 years at least".
Maybe that's what the person meant?

~~~
culopatin
The FED is not government. And if it’s slow it’s because of the big impact it
would have if they messed up, and because it’s already hard for them to hold a
positive reputation without messing up.

------
grizzles
This has little to no chance of coming into service. It's absolutely a direct
threat to Visa & 100+ others. They will make sure that this is killed in
Congress + legislation will likely be written prohibiting the Fed from
creating something like this ever again.

[1] [https://www.propublica.org/article/congress-is-about-to-
ban-...](https://www.propublica.org/article/congress-is-about-to-ban-the-
government-from-offering-free-online-tax-filing-thank-turbotax)

PS I knew I'd get these downvotes. The comment stands. Uncomfortable things
should be said.

~~~
antihero
Visa and Mastercard are doing just fine in the UK, it would be highly
inconvenient to have to bank transfer to every merchant you interact with.

------
jperras
Canadian here. This sounds like Interac eTransfer, which is available to any
person sending/receiving money where the endpoints are Canadian banking
institutions (all of them, I guess?).

We've had this since 2003.

~~~
zymhan
This has been such an ongoing issue in the US that a massive industry has
sprung up to fill the void for "instant transfers". Paypal, Venmo,
Apple/Google Pay, Square Cash, etc are all because the US financial transfer
system is hopelessly outdated.

------
antihero
Is this going to be like FPS that we've had in the UK and works wonderfully?
(It is so fast, that if I pay e.g my Monzo from my Starling, the received
notification from my Monzo happens before the sent notification from my
Starling. It's absolutely amazing and totally free for the consumer).

------
btian
> The target launch date for the service remains 2023 or 2024

Does anyone in fin tech know why it takes so long?

My understanding is this achieves the same goal as wire transfer, which
already exists today, but is for whatever reason super expensive. Why is wire
transfer so expensive?

~~~
at_a_remove
Just as a hunch, but maybe "move fast and break things" doesn't really
resonate with the people who are concerned about where billions of dollars
are.

------
justinzollars
With this tech the Fed will now be able to buy junk bonds with monopoly money
at light speed.

------
ahmedfromtunis
How come the US -- the biggest economy in the world, and home of the most
sophisticated banking sector on the planet -- is still not equipped with such
a system? Are banks resisting it and if yes, why would they?

~~~
throw0101a
> _is still not equipped with such a system?_

Inertia, at least partially.

It's why chip-and-pin is still not a thing in many places: Old School credit
card POS devices were distributed to a lot of places over the years, and those
only had the magnetic strip readers. Replacing is time consuming and no one
wants to go through the expense and effort of changing it in all the places
that they're in (e.g., gas pumps).

Sometimes it's handy to be a late/delayed adopter of technology and to skip a
generation or two.

~~~
AnssiH
This is often said to be the reason, but that alone does not explain it IMO.

Chip-cards replaced old cards here in 2006. During those 14 years every reader
has already been updated several times, including gas pumps.

So it seems somehow the US has a much lower rate of updating readers - I'd
really like to know why that is... Maybe the merchant services market is
somehow radically different?

------
dblock
When I moved a couple of years ago I started banking with Fidelity which has
17-digit account numbers. Using those for ACH with ConEd resulted in them
failing to bill me at the end of the month. I thought it was a typo and put
the ACH numbers in again, only to fail and get disconnected and flagged at the
end of next month plus some late fees.

The whole problem was that the account number was too long. No error messages
anywhere. Fidelity also has a 13-digit account number version that I've been
using ever since.

What a mess.

------
jawns
There was a technology that I started seeing about 10-15 years ago (I believe
Paypal used it at some point) where bank payments happened "instantaneously"
because they were backed by a credit card on file. The bank settlement still
took the same amount of time under the hood, but because the credit card acted
as a backstop, there was an appearance of an instant payment. I was always
surprised at how few merchants adopted this. Hopefully, FedNow will make it
totally obsolete.

------
mike503
I thought (and maybe just my personal conspiracy feeling) that banks lagged on
transactions mainly to hold on to the cash longer and get interest. Secondary
thought was just poor old technology debt.

Something akin to hearing that payroll at a large company was a batch job
dumping a ton of text files to a share or something and the bank slurped them
up for direct deposit.

~~~
Qworg
Partially this is due to self interest - holding the cash longer and getting
interest - but most of it is actually due to self protection. Small banks have
less cushion to recover from fraud, have less people to process payments
quickly, and generally lack technological sophistication. NACHA represents all
of the various institutions, from JPM down to the First Bank of Your Hometown,
so it has limited flexibility in adopting new things that increase
cost/requirements.

------
marmshallow
What does this change from my perspective? No more waiting 2-3 business days
for all my transfers between banks or 3rd parties?

------
iou
Does anything actually exist yet, is this just a notice of intent?

~~~
ffggvv
>>> The target launch date for the service remains 2023 or 2024, with a more
specific time frame to be announced after additional work is completed.

------
uchman
One of the many things that surprised me in the US was seemingly complicated
means of transferring cash between bank accounts. This process has been
trivial in Nigeria (and some other countries) for a long time now with the
NIBSS settlement system. I look forward to hearing about the progress of this
project and the possible impact to existing payment services such as Venmo,
Cashapp, Paypal...

------
harshdeep
India is having similar concept (UPI) in place from 3 years. About 40%
transactions have moved to this new payment processing.

------
oneplane
Welcome to 2005, you're gonna like it! /s

To be fair, this has been the norm here for decades and it baffles most of us
that some shady companies like venmo are used so much in the USA. The same
with 'numbered accounts' or no-factor authentication where people can steal
your money by knowing a single number.

------
tehabe
instant payments were just introduced in Germany, it is weird if you get the
money the same day someone wire transfered it to your account. Wire transfers
are very common in Germany, checks are almost gone. But these instant
transfers are really new. Before those transfers were cleared once a day, I
think.

~~~
skrause
Same-day wire transwers were already common in Germany in the last few years
with the old system (the settlement is done every few hours), except for a few
slow banks.

SEPA Instant is literally settled in a few seconds. I tried this out a while
ago: Started the money transfer from one bank account to another, logged in
into my second bank account immediately after and the money was already there.

------
sschueller
Can the US also implement IBAN please?

------
lingxiaoling
For those in the crypto world, one real-world use case I hear sometimes is
faster inter-bank settlement, in essence providing a tech solution to a
(semi?) regulatory problem. Does the Fed's actions meaningfully impact your
value proposition?

------
rektide
The Fed wants transfers to go through them.

I hope not. What incompetent assholes.

Hopefully the banks start taking making public consumer/business/bank facing
standard apis seriously cause this is a shit show disaster. This is not a role
the fed should be taking.

------
xyst
Assuming all banks adopt this standard in that specified timeframe, the
existing P2P solutions (Apple Cash, Venmo, PayPal, Zelle, CashApp) will
ultimately become useless.

I wonder how these companies will pivot once banks begin to adopt this
interbank service.

------
wprapido
That's pretty much the norm in every developed country and many developing
countries.

------
iknowstuff
Is this kinda like SCT Inst for the Eurozone?

[https://www.europeanpaymentscouncil.eu/what-we-do/sepa-
insta...](https://www.europeanpaymentscouncil.eu/what-we-do/sepa-instant-
credit-transfer)

------
bitxbit
Here’s a thought: come up with an online payment platform with ZERO txn fees.
You only pay 1% when you cash out. It can be done and it will be done.

------
crystaln
What are the chances this is not going to be a debacle, take 10 years, and
late with disappointing dated features?

------
neltnerb
I suppose they already have a complete log of all your transactions, so may as
well make it function better.

------
idclip
* hodling intensifies *

They cant honestly beat the motivated masses that hold collectively billions
in crypto currency.

------
nicofcurti
The European Union has the SEPA payments which support most big banks, it
works just great

------
adammunich
Are wires about to get cheaper?

~~~
toomuchtodo
This likely replaces (most) domestic wires, checks, ACH transfers, and other
legacy funds transfer mechanisms.

[https://www.federalreserve.gov/newsevents/pressreleases/file...](https://www.federalreserve.gov/newsevents/pressreleases/files/other20200806a1.pdf)

~~~
TedDoesntTalk
We will still need banks’ mobile apps to support this kind of transfer
(FedNow).

Considering that I’ve never been able to do wire transfers by mobile app with
two major US banks (but Zelle transfer by mobile app? Of course!), I’m not
confident this will replace Zelle, Venmo, etc for some time.

Sure, in 10 years or so... but don’t hold your breath.

~~~
mixmastamyk
At least they’re finally working on it.

~~~
toomuchtodo
Indeed, having the infra in place is half the battle. Requiring banks provide
access to the infra through their customer facing endpoints is just a bit of
regulation away at that point.

It'll take a while, but it's nice to know a decent end state is on the
roadmap.

------
martin_bech
What year is this??

------
codecamper
Wow so they'll be able to print and deliver within seconds.

------
shawkinaw
> 24x7x365

24x7x52?

------
zaroth
Based on reading through the PDF, I would summarize FedNow as a service which
provides the low-level infrastructure to support near real-time money
transfers between domestic US bank accounts. The system is implemented as a
_credit-only_ system - meaning payment transactions must always be initialized
by the sender.

The protocol is a full handshake between the banks which provides the ability
for the receiving entity to confirm the account number of the destination
account in real-time and provide confirmation to the sender that the transfer
is accepted. This is notably different from ACH where errors can come hours or
even days after the fact.

Account identifiers appear to be standard bank account and routing numbers as
they exist today -- I say this only because I couldn't find anything in the
PDF saying otherwise. There is a section on using "Alias-based Payments" and
on how directory services might be integrated or even centralized, but the
current approach would rely on 3rd party directory services to facility
"alias-based payments" (think Venmo).

IMO a major security shortcoming of FedNow is that it reuses the existing
account numbers. As a credit-only system, if a new (unique) account identifier
was used then that number could be shared freely, printed on invoices or web
pages, and handed out without any loss of safety, and used without the need
for a directory service. Aliasing could be built on top this new unique number
in 3rd party directories, but it would no longer be a _security_ method,
rather purely a usability one.

The service will use ISO 20022 messaging standard
([https://www.iso20022.org/](https://www.iso20022.org/)) and will define both
payment and non-payment message types which include the ability to attach
meta-data such as invoice and receipt information, as well as to transmit a
'Request for Payment' to make up for the lack of debit transactions which
would normally be used for recurring payments.

In the 'Request for Payment' use-case, the account holder would be presented
with a user interface provided by their banking institution, e.g. in their
bank's mobile app) which would list pending requests for payment and provide
the ability to approve payments.

From what I can tell, there's nothing necessarily stopping a bank from
providing a UI which could allow pre-approving _future_ payment requests, e.g.
by matching the date / amount / account number of the Payee, but if the
'Request for Payment' doesn't include the necessary meta-data it becomes
increasingly difficult to not require the Payor to manually approve recurring
requests.

For the use-case of bill payments, I can only hope that the messaging format
could be standardized to the point where something like the following could be
possible;

1) Checking out at a retail store. The register computes the total amount due.

2) Select FedNow in our Apple Pay / Android Pay settings as the payment method
and wave your device in front of the payment terminal. Here's where you would
want NFC to be able to transfer a _one-time-use_ secure identifier for where
the payment request should be sent.

3) Phone presents a confirmation screen with the name of the store, total
amount, and an Approve button. The one-time identifier sent in Step 2 could
carry an implicit approval up to a certain amount (e.g. $250)

4) Full itemized receipt from the transaction is attached and automatically
saved in the wallet.

5) Total amount charged is reduced by 1% as a bonus for not using a credit
card.

The key component of the system is a service which hides the long-standing /
re-usable account identifiers from the POS system, and replaces it with a one-
time use only identifier. At first glance it seems like such a system could
conceivably be hacked on top of FedNow by a type of directory service that
also acted as a proxy for the Payment Request messages.

------
classics2
PayPal be like o.O

------
grognak420
Boomer technology

------
shp0ngle
ctrl-f "blockchain"

0 results, here or on the actual website

you disappoint me, HN

------
tehjoker
The government will do everything to make the financial system work for banks
and nothing to make it work for people.

~~~
triceratops
"The rapid expenditure of COVID emergency relief payments highlighted the
critical importance of having a resilient instant payments infrastructure with
nationwide reach, especially for households and small businesses with cash
flow constraints," said Federal Reserve Board Governor Lael Brainard."

It sure sounds like this particular thing is good for "the people". It'll take
away some business from industries that prey on the poor, like check-cashing.

~~~
tehjoker
There are some minor benefits from faster payments, but I assure you that
people with lots of money to move are the ones welcoming this and asking for
it.

~~~
triceratops
You're vastly underestimating the benefits to regular people. You haven't
lived in a country with instant, universal electronic payments.

