You've made me terribly jealous of the UK. I'm in the US and see our current situation with regard to money transfer as an extremely dangerous one. Aside from the annoyance of money transfers needing to go through a bank, the fact that payment networks charge a PERCENTAGE drives me mad. It does not cost more to move a larger number over the wire. There is no justification whatsoever in charging a fee which gets larger when more money changes hands. And as more and more of our economy moves away from cash and toward payments that flow through these networks that skim percentages, we are quickly getting to a point where banks and credit card companies are getting to skim a percentage off of each and every single transaction that ever takes place in our entire economy. That is madness. We are setting them up as de-facto tax collectors, with the ability to levy and collect taxes with no public involvement. People fought wars over that in the past.
I've had an account with Dwolla for ages, and absolutely love what they provide. Flat fee money transfer. It saddens me that I can't use Dwolla everywhere. Are the advances in the ACH system going to do away with fees that include a percentage component? I would be very surprised if banks simply decided to voluntarily step back from a system that will enable them to have more control over the US economy than the federal government (there are many tax-free transactions in our economy that the banks will still get to 'tax' with their transfer fees, giving them more control).
Most people probably don't realize what a herculean effort you are involved in. During college I worked in a data center for a bank as a mainframe operator (this was 1997-2001), and processing the ACH data was one of my responsibilities. The system the bank used was an NCR mainframe. It was so old that during my time there, the company (it was actually a separate company from the bank for some reason) received a call and was told that the only other organization in the country still running that model of mainframe, a restaurant in North Carolina, was getting rid of it and would give it to us for free if we would haul it away. We setup a Disaster Recovery system with it. I left the data center shortly before graduating college, and the bank was being acquired by a larger bank which was going to bring all of the processing into their own data center. However, about a decade later I ran into my old boss and learned that the transition never happened. Moving away from that ancient mainframe was apparently deemed too problematic/expensive so it persisted. I would not be surprised if that mainframe was still running the show for half a dozen bank branches, with its antiquated tape drives (the kind where the tape is a big reel, 9-track I think, like the things you see in films of mainframes from the 1960s). Banks are, as far as I understand it, the pinnacle of 'if its working, don't upgrade it'. My hats off to you sir for being involved with trying to move us forward!
>> Are the advances in the ACH system going to do away with fees that include a percentage component?
Didn't Stripe just debut ACH that had (admittedly an initial percentage based) pricing capped at $5? They have a $10,000 limit per payment, so maybe you that's not high enough for what you're talking about, but it does seem like things will move that way.
I will say, the higher the dollar amount, it seems like there is an increasing fraud/risk component that while not costing any more money to send/receive, needs to be considered and paid for by someone.
We live in a capitalist country where no endeavor willl be undertaken without some vision for profitability. This is fair. Stakeholders in the new system, the ones that put up the money to build and support the system (Financial Institutions, providers, etc), will need to find a way to compensate themselves for their investment and prove to their share holders the fiduciary value of doing so.
From there, there are three factors that will most influence pricing.
1) Scale: how many transactions the system as a whole will process? We're all familiar with Wires and how expensive they're compared to ACH. That's because they don't have the critical mass or number of transaction ACH does. The more transactions on the system, the less financial burden the system has to assess on the end-users.
2) Market forces: How providers will price their services all depends on the market and their target customers. You mention stripe's percentage model, that's their business decision. Dwolla, a counterpoint, offers a flat fixed monthly model. The intelligence that formed the pricing models is what makes the free market so powerful.
3) Fraud: How this system mitigates fraud (through tokenization, improved fraud sharing among participants, better authorization practices, etc.) will greatly influence how much financial burden is passed on to us, the consumer. Good news is that we're starting over. LOTS OF POTENTIAL HERE!
> Are the advances in the ACH system going to do away with fees that include a percentage component?
See my answer to @hannan below. (Short answer: yes)
> I would be very surprised if banks simply decided to voluntarily step back from a system that will enable them to have more control over the US economy than the federal government.
I don't think I've ever heard this more accurately or succinctly put. In this megathread, here on HN, everyone thinks it's about banks wanting money. From working with banks on this for nearly 5 years, this isn't true. They're fighting for relevancy, the status quo. They've had control over this system since the 70s and have built fortification after fortification (through regulation, technology, etc.) to protect themselves from the whims of trending market forces.
But you remember in Rocky 4, when Rocky made Ivan Drago (the invincible super-soldier) bleed? (source: https://www.youtube.com/watch?v=VefZwIhCdqI) It showed Balboa that Ivan was human, had vulnerabilities. The match shifted after that.
The fear Ivan felt is exactly how financial institutions feel now. New market entrants (see: Apple, Stripe, BTC, Dwolla), regulatory uncertainty (CFPB, Dodd-Frank, etc), and changing customer expectations (real-time communication, uberization, etc) have shown banks that they're no longer unaffected to the whims and trends of consumer innovation.
This is why they're at the table (despite torpedoing Same-Day ACH in 2011). They're choosing the least worst of two options: have the Fed step-in with a mandate (could get from congress in the next 2 years) or inform the next infrastructure of the US economy.
The good news is that this time, unlike in the 70s, it's not just banks designing the system. Fed Fast Task Force is comprised of consumer groups, retailers, innovative tech companies (including Dwolla, Ripple, and many more), regulators, academics, and many more. We may not have as many cards as we think, but we've been able to influence some pretty key decisions.
Also, banks aren't always the villians we make'em out to be. Behind those logos are real people that really want a better payment system, not just to protect their bottom-line but because they want something better for their families, neighbors, and (selfishly) themselves. We'll get lapped by other economies if we don't (See: 37 other nations with or creating a real-time system). They're fighting hard to make the best system possible, given their constraints (fraud, liability, existing regulation, and, yes, their P&L).
I've had an account with Dwolla for ages, and absolutely love what they provide. Flat fee money transfer. It saddens me that I can't use Dwolla everywhere. Are the advances in the ACH system going to do away with fees that include a percentage component? I would be very surprised if banks simply decided to voluntarily step back from a system that will enable them to have more control over the US economy than the federal government (there are many tax-free transactions in our economy that the banks will still get to 'tax' with their transfer fees, giving them more control).
Most people probably don't realize what a herculean effort you are involved in. During college I worked in a data center for a bank as a mainframe operator (this was 1997-2001), and processing the ACH data was one of my responsibilities. The system the bank used was an NCR mainframe. It was so old that during my time there, the company (it was actually a separate company from the bank for some reason) received a call and was told that the only other organization in the country still running that model of mainframe, a restaurant in North Carolina, was getting rid of it and would give it to us for free if we would haul it away. We setup a Disaster Recovery system with it. I left the data center shortly before graduating college, and the bank was being acquired by a larger bank which was going to bring all of the processing into their own data center. However, about a decade later I ran into my old boss and learned that the transition never happened. Moving away from that ancient mainframe was apparently deemed too problematic/expensive so it persisted. I would not be surprised if that mainframe was still running the show for half a dozen bank branches, with its antiquated tape drives (the kind where the tape is a big reel, 9-track I think, like the things you see in films of mainframes from the 1960s). Banks are, as far as I understand it, the pinnacle of 'if its working, don't upgrade it'. My hats off to you sir for being involved with trying to move us forward!