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Fed announces details of new interbank service to support instant payments (federalreserve.gov)
683 points by tigerlily on Aug 9, 2020 | hide | past | favorite | 420 comments

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...

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:


It's even further behind. I still live overseas and use a US bank account for paying taxes, etc. I'm still shocked that it costs me, my family, or someone money to send money instantly. Here when we go out to dinner with friends, someone pays the bill and we settle it with bank transfers within moments.

It's worse than that if the amount is non-trivial. Wells Fargo won't allow you to send an amount over $10k instantly without physically entering a branch.

I think the first problem is you are talking about Wells Fargo. One of the worst banking options imaginable in the US.

While limits might not be much different from other banks, at the very least it's not Wells Fucking Fargo.

ive banked with wells forever and never had a problem. Practices like this are mostly designed for security reasons and will be similar across the big banks

Lucky you. Wells Fargo are terrible.

Seriously, do some research. I'd never use those fools.

This is typical around the world. This is probably because it's a very practical way to limit losses if someone did gain access to your online banking.

When I lived in Australia, which I believe has a very modern banking system, I couldn't instantly send more than $5k a day. The one time I needed to send more money, I was fine with going into a branch.

FWIW the app for my ING bank account in the Netherlands allowed me to move up the slider allows me to move up the slider for daily transfers up to 50k euros. A little scary, but thought it could be handy if I need to move money around one day. Probably a different regulatory context, though.

You can up the limits at any decent bank using some sort of MFA solution without physically going to a branch as if it's 1980.

The $10K limit is a federal regulatory requirement. You have to fill out paperwork and provide identification that is turned over to law enforcement for review.

As an added note: Don't try to get around this by breaking the transaction up into two $5k payments. That's also against the law.

It's called structuring!

Europe just got an instant payment system a year or so ago and not all countries have even implemented it yet.

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...

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.

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?

You’ll be pleased to know we do now have this in the United Kingdom. It’s called Confirmation of Payee.

That does exist now in the UK, I had it last time I sent money - I put in the name I expected and then it showed me the name on their account because they were a bit different.

For companies there are present lists so I don't need to know most company details to send say gas bill payments.

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

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

In the interm there's been unfortunately little progress. Zelle is supported 'natively' by all major banks, although it has horrible UX (starting with "each bank is different"), and allows for pseudo-instant transfers of small amounts (up to $x,000) between individuals in the US. (It is instant for the user, but on the subject of replacing ACH, it's more correct to say that it's pseudo-instant, same as credit cards - it seems instant to users, but until ACH is replaced, settlement will still happen in nightly (possibly half-day-ly) settlement batch files.)

It's mostly functional, the problem is that it doesn't work for anything more than trivial amounts, for various reasons, so the choices are either to wait 2 days, or physically walk to a bank location, authenticate, get them to give you a magical piece of paper, and then walk to the other location. (And then sometimes you still have to wait a few days more if it's not something you normally do "while the check clears".)

It's a byzantine system, but at least it doesn't (as a customer - it still does in places on the backend) involve me having to find a fax machine to send a fax, or send a picture of a check through a sketchy "free" online service.

> 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.

Apple / Google Pay? this isn’t as complicated as you’re trying to make it out to be. get a number, find out if they’re google or apple, use the appropriate app. This has been possible for years now.

Your quote and your response seem to be rather disconnected.

I guess my point is: in Europe sending money from one person to another is easy and easily done with no third parties. All I need to know is the other person's account info, access to my own account either by app or website, and done. Almost instant transfers between people.

In the US a third party is required. Be that Paypal, Apple/Google Pay (I didn't know they had launched this as a thing for person-to-person), square, facebook, etc. Not only does it require a third party it requires two people to be using the same third party.

My mother-in-law is fairly technophobic. She doesn't do online banking, doesn't use apps, etc etc. Yet despite that I can still send her money without an issue, because the infrastructure is basically universal. Unless they are doing something very strange anyone who has an account can receive money. Plumber comes over to fix a pipe, send him some money digitally, buying a car, send some money, etc etc.

Thanks for the feedback! I’m aware that checks (and “instant” payments like PayPal, Venmo, Zelle) are settled via ACH; as other commenters have pointed out for me, the claim was that individuals can’t make “raw” ACH transactions.

As for sending money via routing and account number: I’ve received conflicting information from different banks on how acceptable this is. The university I went to allowed it as a way to pay tuition (you could give them your account number and they would debit you), but every bank that I’ve privately banked with has told me that I need to own or be responsible for both accounts in order to do a “direct” (i.e. non-cheque) transfer. But I don’t know whether that’s just a policy thing among financial institutions.

I think the distinction being made there is that, while individuals can request that banks or businesses perform an ACH on our behalf, as in your funds transfer example or to pay a bill without incurring payment card fee overhead, we can't generate and submit our own batches directly to any clearinghouse.

Which is just as well! In that circumstance, there would be nothing structurally to stop anyone who knows your routing and account number from performing ACH debits against your account. That's actually an already extant attack vector - and the reason why I never pay bills via ACH; I don't trust most payment processors to be very secure and fraudulent payment card transactions are easier to claw back - but without the barrier to entry inherent in the attacker having to subvert or convince some third party to act on their behalf, I think it'd be a much more common occurrence.

> I think the distinction being made there is that, while individuals can request that banks or businesses perform an ACH on our behalf, as in your funds transfer example or to pay a bill without incurring payment card fee overhead, we can't generate and submit our own batches directly to any clearinghouse.

Is that possible in any country? I've never heard of a banking system where ordinary people directly submit a transaction to the national clearing house. They always tell their bank to send their funds, right?

As far as I know, yes, and UPI/"FedNow"/Cashapp-and-friends don't change that.

That being so, if I'm honest I'm not really sure where the prior commenter's objection originates. Maybe they know about some directly accessible clearinghouse that I don't? I'd be surprised for several reasons to learn such a thing exists, but I've been surprised plenty of times before.

Unless this is actually possible in some country, I think they're both confused. But I'm guessing the objection was probably intended to convey "this is just as 'direct' in the US as it is in Australia", which would seem like a valid objection to the article.

Most country’s bank systems have a “receiving only” number which can be shared and then used by a 3rd party to directly enter an instant money transfer into the system.

Because America doesn’t have the equivalent of a “receive only” code, every service has to build that functionality themselves “on top of” ACH, and prevent direct access to ACH debit and credit functionality.

That being said, for $10/month any business can get direct access to ACH including debits and credits, and then whatever gateway you use is supposed to do some level of fraud detection against your transactions.

A few days ago someone here point out the numbers aren't actually "receive-only" for IBANs either, but anyway, the point you're making is a separate point from the one being made here. If anything, it's the opposite -- it's arguing that the US system is too capable, rather than insufficiently capable.

I suppose that's fair.

In the article author's defense, he did pretty much disclaim any detailed or experiential knowledge right up front. That said, while my own relevant experience is now many years past and was in any case mostly refracted through the payment card industry, I didn't spot any obvious howlers.

I tried that two months ago and the bank didn't support it, unless I was holder of both accounts.

Upvote for your amazing domain!!

The history of credit cards is also somewhat wild: unsolicited cards arrived activated in the mail, and consequently, a huge volume of credit card fraud was born. Consumer protections came a few years later cleaning up obvious issues. But looking at that story, it seemed awfully reminiscent of the Uber model.

"A piece of the action" is a great book on the history of this.

The whole history of settlement is really fascinating starting from correspondent balances to Clearinghouse (now CHIPS) to central bank clearing. I highly recommend Economics of Money and Banking course on Coursera if anyone is interested to learn more.

You say “FedNow will eventually supplement”, and I read through your post, not too thoroughly, but I liked it and saved it to my Pinboard archive. Why couldn’t FedNow eventually replace the system you described though?

It might be able to! I was being a little conservative.

It's possible that some of the more obscure abilities of ACH, like death notification entries[1], won't be needed in FedNow or will be replaced separately. But that's idle speculation on my part.

[1]: https://www.moderntreasury.com/journal/what-happens-when-you...

Well apparently they’re using some schema called ISO 20022, and I saw references further down that this is a complicated beast, to be expected if ISO is involved, but a cursory once over makes it appear to be the type of schema which whether easily or with the forging fires of hell or somewhere in between makes it possible to incorporate other schemas such as ACH.

Thank you for answering my questions, faster payments is something I think we can all get behind.

The complexity of this protocol seems to match its needs. I don't really get the issue. FTP and the file format come off as old-sounding but so what?

Why can't this just be batched faster anyway? Improve the hardware, run the batches every 30 seconds, and it's just like instant systems? I know there must be a reason but I'm curious why it is.

When money takes time to go from A to B, who do you think gets to use the money? Yes, the banks. They are all set up to make money from your money, by lending it out at attractive overnight rates.

Is that a problem? Perhaps, but you've been trained to tolerate it, because you have no choice. Multiply your money by tens of millions of bank customers, and you begin to see the size of the opportunity.

Is it any wonder the status quo has lasted for so many decades since the invention of the computer?

“It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

― Upton Sinclair

Attractive is a stretch https://apps.newyorkfed.org/markets/autorates/SOFR, granted rates are historically low but today a bank will earn $25 overnight for every billion lent out. Not really a cash cow. Maybe that’s why there is finally some progress.

Hey bud, never thought I'd see an old friend on the top of an HN thread.

That was a great writeup to read while lying in bed dreading the week!

Best, Misker

Blatant self promotion: I referenced your blog post in my weekly newsletter.


SIC and EuroSIC is pretty cool. Have to read your summary.:)

"Astoundingly" complicated???? ACH/NACHA isn't any more complicated than any other API. If anything it's easier than most if you're used to string processing, because the file format is just 80 character rows with 9 different types of rows starting with that numerical digit. The schema is well defined. In many cases a "transaction" is executed by simply FTPing an .ach file. What did you find so complicated?

As I mentioned in the blog post:

* ACH-formatted transactions are supposed to be 80 character rows, but ACH emitters play loose and fast with that. 81 (CR/LF) and 82 (CR+LF) character entries are common enough in the wild that financial communities regularly complain about them. ACH transactions are supposed to be concatenative, so it wouldn't surprise me to learn that most real-world ACH handling code needs to handle 80, 81, and 82-character records in the same stream.

* The envelope and hierarchy of ACH is extremely simple. The internal state machine isn't: there are plenty of overlapping entry classes[1], obscure return codes, common misuse of said codes, and rider entries (like addenda information). The records for international settlements are shockingly complex; no ODFIs or RDFIs seem to follow the rules about not clawing back money after various contest periods expire.

[1]: When do I use CIE entries versus PPD? Do I use WEB for a recurring utility payment that was initiated online?

In addition to the sibling comment: as already mentioned, the machinery to handle ACH (or any bank transactions, really) is very complex:

- the formats (there are more than one for interbank communications) are never properly followed by any bank, and many add their own undocumented proprietary extensions to them

- they are usually processed in batches, and the entirety of bank systems are built assuming that everything is processed in batches at specific times of day

- entries in batches may and will arrive out-of-order. For example, a request to cancel a transaction may and at one point will arrive before the request to authorize a transaction.

- a lot of other systems are built into the entire transaction process and assuming everything is processed in batches: fraud detection, dunning chains [1], account cancellations, reminders, fees etc. etc.

- There are systems where bank holidays are built into the system. If bank holiday is on a Friday, and you request/send payment, it will not be processed by the bank on the other side until Monday evening and the transaction will not be completed until Tuesday morning.

And that's just scraping the top of the iceberg. You can't just magically replace this. But you can try to build on top/work around that.

Source: worked at Klarna [2]

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

[2] https://www.klarna.com/

> entries in batches may and will arrive out-of-order.

This is on purpose by some banks. They will sort the incoming queue and process withdraws before deposits to increase the number of NSF fees they collect.

...and as someone that interfaces with clearing firms via SFTP, I can tell you that it's a nightmare. FTP was great for downloading ratio-ed mp3s in the year 1998. It's a terrible way to handle things in 2020. It perplexes me how much of my industry is held together by cron-jobs and SFTP processes.

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.

I actually do work at the New York Fed and saw this announcement recently myself. I was wondering about that standard and started looking at the website, but it seemed a bit light on information, which made me suspicious. At least I know my instincts may have been on the right track.

Unfortunately, I'm much too far removed to influence anything. The Federal Reserve System is massive and distributed into many large silos (Reserve Banks & The Board of Governor's) that prevent power from being too centralized in a single bank, but also make it difficult to work with anyone that's not in your bank. Interestingly, this is by design! Anyways, this work is primarily driven by the Board of Governor's and I'm at FRBNY, so I'll probably be getting most of my information from press releases like this one.

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.

Even the BCB itself has this ISO20022-xml to simpler-schema-in-json mapping layer.


I hope you aren't using floats for cents!

Honest question. Would it differ if one used floats in json rather than floats in XML?

I wouldn't think so, the issue is not so much float in the storage layer (although precision in converting to and from the storage layer can make for interesting complications) it's floats in the applications layer.

No it would not, but you could use decimals in xml.

Edit: looks like there is no float in xml.

Nor are there floats in JSON! Json numbers are stored in decimal with varying lengths.

Yes, but almost any standard JSON package will map a number with decimals to their internal float.

While alternative parsers exists (javascript has LosslessJSON for example), they're a pain to use.

Using strings for floats only has a tiny overhead, but it allows users to use standard JSON parsers and it signals a good practice.

If you use JSON numbers to serialize money, you create a situation where the path with the least friction is the incorrect one.

> While alternative parsers exists (javascript has LosslessJSON for example), they're a pain to use.

FWIW in Python that's as uncomplicated as

    json.loads('1.1', parse_float=decimal.Decimal)
though of course it helps tremendously that `decimal` is part of the stdlib.

Numbers in JSON are stored as strings. So as long as encoder/decoder is storing them in suitable format e.g BigDecimal no precision need be lost.

That may be technically true, but decoding sad encoding JSON without reading numbers as doubles is a special feature.

what do you guys think of https://mojaloop.io/ vs ISO?

Quite scary to run financial transactions using an untyped format.

You'd be surprised just what kind of stuff goes through JSON to be parsed by unreliable Javascript engines 9ver software that doesn't correctly implement the JSON standard


Everything is JSON these days, unfortunately.

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

Not a good start.....

To support these goals, the service will use the widely accepted ISO 20022 standard and adopt other industry best practices, that would remove barriers to interoperability, in order to avoid unnecessary and burdensome incompatibilities, to the extent the existing private-sector service also uses publicly available, widely accepted standards.

And I got downvoted for predicting this a few weeks ago.

Not today! ISO20022 is indeed a mess

Congrats on predicting it, but if you don't have any proof, you look exactly the same as all the crazies spreading unjustified rumors.

Without proof (or at least some great reasoning), I think downvotes of "predictions" are correct.

Just need to look at all the other instances.

Incidentally, the Australian equivilant of this (NPP) is going with ISO20022.

Canada is too

What would be an alternative?

A brand new protocol.

A standard backed by the US government isn't going to be just another standard.

Yeah, there is an amazing amount of power to force adoption if the Fed tells banks, that to continue to be banks, they must adopt this data standard.

Why don't just copy what's in use in other countries? For example, sending and receiving money in the EU is pretty simple, you only need their IBAN, and maybe their name (AFAIK some countries require it). I'm not even aware of what's going on in the background, but from the user perspective its easy and free.

Well "what's going on in the background" is exactly what's being discussed here. End users will never be exposed to any of it.

No. They didn’t say build a new protocol to rule them all.

On the contrary the argument was to build a locally minimal, but sufficient, protocol that doesn’t try to compete with other locally suitable protocols.

People are taking the parent comment very seriously.

Well documented json

Any protocol with schema is better than well documented anything.

I’d pick protobuf. Or json with schema if json is preferred.

Schema works on machines, good documentation is work for humans.

But you can aut-generate the docs from code/schema!

What alternative do you suggest? Keeping in mind all the parties that will be involved, besides your project.

Create a fit to purpose, simpler, protocol using a good interface specification language (OpenAPI or protocol buffers). Maybe borrow concepts and patterns from the ISO standard, but not adopt it. It will not deliver its promise of interoperability. It might actually make it harder to interoperate with other payment schemes.

Interledger Protocol (ILP, ILPv4).

Interledger Architecture:

https://interledger.org/rfcs/0001-interledger-architecture/#... :

> For purposes of Interledger, we call all settlement systems ledgers. These can include banks, blockchains, peer-to-peer payment schemes, automated clearing house (ACH), mobile money institutions, central-bank operated real-time gross settlement (RTGS) systems, and even more.


> 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 [AKA routers] 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.

ILP > Peering, Clearing and Settling: https://interledger.org/rfcs/0032-peering-clearing-settlemen...

ILP > Simple Payment Setup Protocol (SPSP): https://interledger.org/rfcs/0009-simple-payment-setup-proto...

> This document describes the Simple Payment Setup Protocol (SPSP), a basic protocol for exchanging payment information between payee and payer to facilitate payment over Interledger. SPSP uses the STREAM transport protocol for condition generation and data encoding.

> (Introduction > Motivation) STREAM does not specify how payment details, such as the ILP address or shared secret, should be exchanged between the counterparties. SPSP is a minimal protocol that uses HTTPS for communicating these details.


  GET /.well-known/pay HTTP/1.1
  Host: example.com
  Accept: application/spsp4+json,  application/spsp+json

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.

> 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.

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

FYI, the term for this is leapfrogging -- essentially the lack of infrastructure allows developing countries to suddenly advance past established countries in terms of policy/tech integration & utilization. In other words, no tech debt to pay off first :-)


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.

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

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

It seems that for me (in Germany) transfers still only arrive the next business day. Something must be going on there...

There are normal SEPA transfers (taking between a few hours and 1-2 days) and there is SEPA Instant which transfers the money within a few seconds. Those are two different systems and not all banks support SEPA Instant yet.

I've done a few SEPA Instant transfers in Germany already and they really arrived within a few seconds to a few minutes.

The instant trasfer costs money in Italy. I saw fees from 5 to 50 Euros.

Most banks in germany do it for free, my bank does 1'000 Instant Transfers for free (incoming + outgoing) after which I have to pay a fee for every additional block of 1'000 transactions. 1'000 is plenty considering the supermarket would still be fine with a next-day standard SEPA, so 3-per-day on average seems reasonable to me.

Where I live (in Estonia) all bank transfers are instant payments, and they are free. I don't have to pay a transaction fee for them.

Must be a problem with your bank, or the other banks. They must implement the instant payments in their systems.

Here in Estonia the SEPA payments were a step back, because we already had a quite fast transaction system between banks, transactions happened about every hour or so. Then came SEPA and transactions became slower, and now we have instant transactions, even better.

I don't know how much you know about payments in India, but they are, from what I have heard, fairly evolved and advance.

In fact, in India there are 4 different ways in which you can do online transfers across the banks (NEFT, RTGS, IMPS, and UPI). The latest iteration, UPI, is indeed state-of-art. It lets even companies like Amazon, Google, and PhonePe, which are not traditionally banks, to offer ability for people to do transfers from their Bank account. QR Code for UPI apps are very commonplace at least in metros and it enables nano transactions without really a fee to small merchants and users. There are lot of fail safe mechanisms and safety features built into the protocol and a user is not really hostage to the bank or the payment app as you can switch both at your will.

Australia and New Zealand have Osko, which is instant and supports Unicode

Good luck convincing the shop owner to accept payment in SEPA instead of cash the next time you get a beer.


Is Girocard debit/credit card? If yes I don't see how that is any better compared to USA.

> Good luck convincing the shop owner to accept payment in SEPA instead of cash the next time you get a beer.

Girocard is a debit card. But it operates over SEPA. So „ Good luck convincing the shop owner to accept payment in SEPA instead of cash the next time you get a beer.”, no problem, just pay with a Girocard :)

In some countries in the EU there is a minimum amount required to pay with Giro but generally it’s not a problem.

There is no minimum amount for UPI. And you don't need a card to use UPI. You just scan the QR code and send the money from your phone. And UPI is accepted almost all the shops.

I agree wholeheartedly. In my opinion, UPI has been an unmitigated success. Nearly everyone from a roadside street-food vendor to a 5 star hotel accepts UPI and it makes the whole flow of day-to-day payments entirely contactless which is especially useful with the COVID-19 situation.

Now if only they could introduce some way to enable subscription payments, it'd be the cherry on top.

So, subscriptions are possible - just programmatically request a payment on a recurring basis.

As a consumer I actually prefer this approach because I get a payment request that I must explicitly accept for my subscription to be renewed, as opposed to forgetting about a subscription and have it show up on my bank statement.

For example: Every month Netflix sends me a payment request asking me to pay for another month's service.

Perhaps they could allow for auto-withdrawing to reduce friction for subscriptions you definitely know you want, but I strongly feel this request-before-withdrawing model should be the default for any subscription service and anything else should be explicit opt-in.

Ohh. Thanks for linking this. I'm excited for this.

And completely trackable

US banks have something mostly like this: Zelle [1]; the company behind it, Early Warning Systems, is owned by JPMorgan Chase, Bank of America, Capital One, Wells Fargo, PNC, basically every bank has a stake in it, and every bank supports it. And it works better than Cash App/Venmo; enter phone number or email address, get an instant direct bank-to-bank transfer, no fees, all from the normal bank app you'd already be using.

What we're really talking about with FedNow is not user-facing: Zelle runs on Mastercard Send/Visa Direct, but traditional bank transfers run on ACH, which is very antiquated. FedNow is supposed to replace all of this (though, who's to say if Zelle would actually use it; its possible Visa/Mastercard have stakes in it as well, and they'd lobby against it; but, even in those cases, Visa/Mastercard likely make heavy use of ACH somewhere, and they'd be using FedNow. Its all ACH all the way down)

Zelle's issue is really that most people don't know they have it. For example, Chase has had, for a very long time, QuickPay, which could be used to instantly send money to other Chase customers. Naturally, no one relied on it very often, because if I'm out for drinks with my friends, I'm not going to lead with "Hey, do you have Chase?". QuickPay now uses Zelle, so the bank doesn't matter, but people have their apps.

Its actually the exact same "problem" as WhatsApp is elsewhere in the world. Upgrades to the fundamental, platform-agnostic technologies (SMS->RCS, ACH->Zelle->FedNow) lose stickiness when people have "their app" they'd rather use. In my view, Zelle is one of the greatest tragedies in the US financial system; the banks did everything right with it, its an incredible product, but even very smart people I know refuse to use it, because its not Cash App or whatever.

[1] https://www.zellepay.com/

What skeeves me out about zelle is there is no fraud protection unlike most other payment methods in the USA. So I'm going to continue to use venmo, credit cards, etc:


When people started trying to pressure me to use Venmo, my research at the time led me to the conclusion that it offers no guarantee of fraud protection either.

Just like PayPal before it, it's not a bank and doesn't have to follow any of the rules.

How it's legal to operate in such a fashion is beyond my ability to understand, but that's my understanding of the situation.

Venmo & paypal have a reputation of helping you if there is a fraud dispute, zelle has the opposite. The difference between guarantee and practice.

God - Zelle is HORRENDOUS.

Seriously - check out your limits. I can ACH into the 100's of thousands but I can zelle basically nothing - I don't think you could run even a small payroll on zelle or make even a medium sized purchase with it.

The fraud story is horrendous.

The traceability and audit-ability of things is horrendous - seriously -> you CANNOT see where the funds are and no one will tell you / can tell you.

With a cancelled check image I get the back and I can trace down what account it went into if need be.

With a wire I get my reference number and can trace status that way.

With NACHA I can do Payment Trace Requests...

Zelle - forget it, the money is GONE and no way to trace who got it.

Zelle is horrendous and cannot die soon enough. How are people even considering this as a settlement service?

For context - Fedwire does something like trillions of dollars per day in activity. NACHA at least $100B per day+.

According to the Zelle website they have 924 partner financial institutions. If you total the number of FDIC insured institutions and the number of credit unions in the US the total is very near 10,000, so Zelle is very far from universal.

Today was the day I discovered Zelle was same day deposits as I had just assumed like everything else before it, that there would be 2-3 day settlement. US Banks are comically bad at branding and user experience and the lack of cooperation between them all historically has left a pretty bad taste in the mouth, leading to my own ignorance displayed here.

Zelle is not supported by every bank. A major exception is Charles Schwab.

Best feature of UPI for me is you can interact with UPI via USSD code (*99#) which is terrific for someone like me who don't use any proprietary apps on his Lineageos.

They made cash almost illegal allegedly to fight corruption, but I think that has an awesome UI.

Of course the poorest were strongly hit by declaring the currency illegal. Some negligible UX experience wouldn't be my first thought on the issue

> instantaneously from any bank account to another

I am already able to do that with eTransfer. That's how I pay my rent and haven't had any problems.

The rest of the developed world can do that from their bank, no financial data-selling middleman required. Oh, and for a decade or two.

The main thing I still hate about anything that's not a wire transfer is the transfer limits, doubly true in all the fintech apps.

Hey here is this arbitrary limit for "security" purposes! Not good enough? Well now listen to this low level banker and customer support person make up a fake anti-money laundering law on the fly! We are still left wondering why the compliance team interpreted actual laws so ridiculously, or maybe this institution is just insolvent. Oh great, the entire population is also brainwashed to stigmatize ever having any actual money to transfer, can't talk to them about it either.

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.

> 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.

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.

I have never been asked for ID outside of opening an account and it was not scanned in at any point.

I don't think either TD Canada Trust (Canada) or TD Bank (US) have ever photographed or scanned my ID, nor have they ever asked to update them.

Regarding #3:

In general - from my time working at a phone company call center some years back - it is a much better indicator of security to ask folks to verify some account information than to try to say someone is doing something fraudulent by judging whether or not the sound of their voice matches what I think it should sound like based on their name. Verifying information tends to mean that the person has permission to speak about it. A lot of companies will let folks 'authorize' someone to speak on an account, set up a password, or simply allow her to tell them to talk to you and hand the phone to you. If you call from her personal phone, that is another step to verify as well.

Trying to judge someone's voice doesn't add security, though. Some folks don't have voices that can be classed as one gender: Some folks voices simply are deeper or higher than expected. Not to mention that some folks are transgender, which does mean that sometimes the voice won't match outward appearance or perceived gendered name. Some folks have health issues that make their voices seem deeper or higher as well.

They could have just though you were old, too. Sometimes older voices are more unisex.

To complicate things even more, parents name their children non-gendered names and some names have switched genders over the years. And to add another layer: Foreign names can sound like they "belong" to a gender they aren't traditionally used for.

I was just talking to my transgender friend and she much more frequently gets questioned after she changed her name which is a bit frustrating for her.

I'm not saying that it can be used as a tip-off for extra verification but the real solution is to use a strong authenticator in the first place and not worry about these "softer" details.

Related, though not necessarily in reply:

HSBC in the UK have a system they call "Voice ID" which claims to authenticate you by your voice: https://www.hsbc.co.uk/ways-to-bank/phone-banking/

I've not enrolled...

Yeah, I don't blame you. What if I have a strong head cold? Can folks that mimic voices trick it?

Fingerprints are fairly unique, but not necessarily special to you and only you. I really don't know if voice is even that special or if this is more like a car door lock: It's ok so long as there is enough verification.

Regarding #3, having a bank agent state on a recorded call “well, you don’t sound female” seems like a good way to get sued by a protected class.

I had that happen to me while doing the same (trying to get my girlfriend off insurance she didn't want). I said I am ill and that was it, I had to know her 'birth number' though (date of birth + four numbers). Am European.

that's not discrimination, might be a bit insulting, but that's not against the law...

There are a lot of federal regulations that ensure equal access to banking based on ethnicity, gender and veteran status.

If the bank in question has literally never dealt with federal funds (e.g. FHA mortgages) then they may be exempt but this does not apply to most consumer banks.

EDIT: The Equal Credit Protection Act and the Fair Housing Act explicitly covers gender and sex as protected classes. Very few consumer banks in the US are not covered by these acts.

Which? Trans people aren't a protected class in the US.

You are mistaken. If it wasn't clear about what 'sex' meant in the Civil Rights Act of 1964, it was made more clear a couple of months ago:


> Trans people aren't a protected class in the US.

Technically but not materially true, since gender identity discrimination, like other forms of conformance-to-sex-stereotype discrimination, has been found by the Supreme Court to be a form of sex discrimination.

A lot of security in banking is the ability to reverse and track/audit the transactions.

This is what cryptocurrency people ignore. They see reversing as a bug, when it's clearly not.

Let's say you abuse linking, and you take money. Great. The tx is reversed and you go to jail.

Prevention is better, but it's not that the security isn't there.

> there is absolutely no verification or security in this system

Regarding 1, 2, & 4: You aren't taking the physical angle into account. In all of these cases it sounds to me like one US institution dealing with another. Wire fraud is a federal crime. All US institutions collect a fair bit of identifying information when you open an account. Good luck fraudulently transferring money into an account you control and getting away with it.

Regarding 2: They probably verified a picture of you that they had on file without you realizing it. Moreover, it's safe to assume the bank lobby was absolutely carpeted in cameras. I expect you would be unlikely to successfully commit fraud with this approach.

> 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?

Credit reporting agency and data broker data. It’s legal and it’s used by the IRS to perform identity proofing so threat actors don’t defraud the US Treasury with fraudulent refund requests using bogus return data.

While I get the credit reporting agency angle, it was far more slick than typical credit verification question. A single field to enter the account number! You don’t even have to say what that number is for.

> just say I am her (clearly feminine name) and the conversation carries on as if nothing is surprising/suspicious.

A friend that works on a call center for a US bank told me they are not able to ask about the caller's gender, like when the perceived voice/gender and name don't match. They may report the call to the fraud department if the conversation is suspicious though.

Regarding 3, securing against well-informed attackers (ie, family or spouses) is really difficult. They have access to their partner's phone, know their last four addresses, have their email on an iPad, so on and so forth. Bruce discusses the challenges with it in a recent paper [1]. Really interesting and worth a read, IMO.

[1]: https://www.schneier.com/academic/paperfiles/Privacy_Threats...

I'm pretty sure they at least authenticate the sftp connection for the ach transfers.

Yes, for the bank I deal with, we GPG encrypt and sign the ACH transfer file, and then we send across scp/sftp where both sides have known public keys. Both are rotated regularly.

I imagine many banks operate similarly, but I can't say that for certain.

I'm curious if the GPG signature is properly checked. There is no easy way to validate a GPG signature (ie fail if the file is not signed by X), you have to use a verbose machine mode and look for a specific string. GPG will happily decrypt a non signed file also, so there are many ways to misuse GPG, and many of them are SO top answers ;)

Well I know my side is checked :) I've never tried to send a not properly signed file, however. GPG is indeed a mess, but it's not like there are awesome alternatives, really.

Regarding your last sentence, I think that’s true for, well, basically the entire world. Our security sucks in general. Humans aren’t as mean as they seem, or maybe they just generally suck at it.

Oh that’s neat, I did enjoy it. Thanks. It makes sense to me. Lying is work. Humans usually take the easiest path. Sometimes lying is less work than actual work and then humans lie.

I was only expecting something like OTP enforced by bank (not a choice by customer). Yes, I get the SMS / insecure transport problem, but other countries do this.

> Our security sucks in general.

Don't forget to account for physical enforcement.

Oh I don’t. All digital security problems are eventually physical security problems.

The FBI receives every payment card swipe in the United States, in real-time, with no warrant.

This has been going on for at least a decade. There is approximately zero financial privacy in the US.

Do you have a source for this?

This doesn’t remotely support your accusation

> For credit cards, agents can get real-time information on a person’s purchases by writing their own subpoena, followed up by a order from a judge that the surveillance not be disclosed.

You implied both that there is no oversight and that it is bulk collection. Both are not supported by your source, which says there is some oversight by a judge and that the FBI manually requests data on specific individuals. It may be a violation of civil liberties, but it doesn't support your claim.

Is this a public fact or an accusation?

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.

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.

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.

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.

> 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.

I would bet that the Fed views this as a feature, not a bug. Regardless of your (and mine or their) beliefs on that matter, I would hope you see why they might choose a measure of progress in payment clearance and disassociate the two goals. I imagine the Fed fully knows it plays the role of a rather strong glue within the broader global financial system, and could just as easily throw on another layer of binding to require irrevocable payments by sheer fiat if they chose, regardless of the technical implementations of bank payment clearance.

> 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.

Honestly, from what I've heard of the US Court system, I'd much rather have the least competent bank in the country deal with my disputes than have to go through the courts. Slow, expensive, and also unjust.

I'm also under the impression that this would be a tightly regulated area but I don't know for sure.

This sounds like Bitcoin.

What? How?

>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

Sure, with bitcoin you can't get charged maliciously (if you don't get your keys stolen) or get hit by a chargeback but... i can't think of any financial system that's less error tolerant and that requires more attention to errors. What he describes has nothing to do with bitcoin, at all.

The difference is that you have to watch that you don't make the errors, not other people.

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.

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.

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

I’m from Glasgow. Completely random fact ahead:

The underground in Glasgow was comprised of orange trains. They “ran like clockwork” and had the nickname “the clockwork orange”, which is where the Stanley Kubrick movie title came from. Allegedly.

Based on a quick search, that does not seem to be true. The title of the movie comes from the title of the book it is based on. The book's author has given some explanations for the origin of the title that do not involve Glasgow trains. [0] It seems the name for the subway comes from the movie. There also seems to be some dispute about the usage of that name for the Glasgow subway. [1]

[0] https://en.wikipedia.org/wiki/A_Clockwork_Orange_(novel)#Tit...

[1] https://en.wikipedia.org/wiki/Glasgow_Subway#Nicknames

Holy shit!

Never thought I'd get to know what Clockwork Orange actually means through a random comment on HN.

Except the comment is incorrect. The underground nickname came from the movie not vice versa.

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.

I am not sure this is true, tho it sounds interesting.

Before WW2 there wasn't much infrastructure to begin with, the big highways have been built after.

The metro lines from before are still there and the bridges that were built before the war have just been rebuilt in the same places (i.e. were the roads arrived and the river was narrow).

Most of the big cities also still have medieval and older city centers, and we're still using roman-era routes for roads.

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.

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

In the case of banking you have to realize that US bank accounts here are often completely free, but they will charge you a penalty for anything and everything that is a result of action or inaction on your part (its always your fault). Everything is designed to maximize the chance of your making a mistake so they can charge you a fee.

Maybe now that its getting bombed to bits because of COVID, something good might end up happening?

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

There are bridges in use that predate Christianity.

There is another reason. This is very specific to the way USA does things. It has to do with the role of the government vs. market. Other countries also had an antiquated payments infrastructure e.g. Cheques in Britian, Scandinavian countries etc. The government there simply mandated the dozen or so banks to come up with an instant/real-time payment system and it was rolled out in a few years

US has more than 10,000 banks and credit unions. That combined with the fact that US the most "market driven" of the industrialized countries it has take a backseat approach of letting the "market" solve it

There have been attempts by the "market" e.g. wallets and lately "push to card" by VISA/MC and RTP by the The Clearing House but it has realized that the Federal Government needs to come up with a standard settlement network with specifications and a protocol that "market" i.e. private companies can build upon.

Given the timeline i.e. 2023-2024, it may be a little late since apps and companies building on top of P2C (Push to Card) and RTP (Real-time Payments ) are likely to corner substantial portion of faster 24x365 payments before FedNow is ready.

And don't forget even if it's ready on time it'll take another 2-4 years for all the Financial Institutions to connect to it

The same day and instant payment systems in Sweden were initiated and are owned jointly by major banks, and were not government-initiated. Specifically the Swish mobile payments started with a very small number of banks and it has been a race for other banks to join to stay competitive.

The main digital ID system was also made and is owned by the banks. The government just set legal standards for digital ID to fulfill to be legally valid, there were a few competitors (including one by a phone company), and the bank system won because everyone already had strong digital ID for internet banking.

The EU-wide international systems, however, have been pushed from above from the EU

I wonder if there are a lot of studies of the market "fighting back" progress. Everything about the free market is predicated on informed customer decisions, and if you, as a company, can gaslight consumers effectively through propaganda (let alone lobbying...), then you've basically broken the invisible hand.

Have there been studies about this? I'm pretty sure Adam Smith predates mass advertising, branding, modern marketing.

It’s even less nefarious than that.

To put it simply, humans are creatures of habit. In a vacuum devoid of propaganda, we will still continue to repeat the habits we have developed.

Facebook or google don’t need to do any advertising to keep their audience on the platform. That pesky “g-o” you impulsively type into the address bar will do it for them!

The only saving grace for humanity is that people die, and not all of their habits get passed to the next generation.

You'll generally find the rest of the (first) world did 1.0 too. But they invest in public infrastructure, so also did 2.0 and 3.0.

The USA is a very strange mix of hyper-first-world and second/third-world, and a lot of it has to do with how taxes are raised and spent.

The fact that it has federal and state systems probably bears a portion of the responsibility.

Spain has states with relatively similar state/federal power to the USA. The EU has nation states with more or less power depending where you look. Australia has states, Canada has provinces...

One aspect of US taxation and funding that seems wildly out of step: Primarily local funding of schools. Way to build inequality into the system!

> Spain has states with relatively similar state/federal power to the USA. The EU has nation states with more or less power depending where you look. Australia has states, Canada has provinces...

None of these seem like very close comparisons to the US model. There isn't the same legal independence in Spain on a number of matters, from what I recall, but I'll see if I can find a source that provides a direct comparison. For starters, Spain could actually issue centralized coronavirus restrictions and has only recently devolved this to a limited degree to the autonomous communities.

A few EU countries may be more relevant, but I think the closest comparison I've found so far is with Switzerland where I currently live. However, the federalism in the US seems to involve a lot more infighting with frequent lawsuits between state and federal agencies.

As other posters have pointed out this doesn't really hold up. I suspect it's more that since the Reagan era the USA has frequently had a self hating government, that is a government run by people that believe government itself is bad. This has led to a lot of intentional neglect and sabotage of infrastructure in the belief that "the market" will magically provide public goods. We have similar issies in the UK

Europe has many old subways and bridges too and like in the US they can be difficult to upgrade for cost reasons. (E.g. The London Underground still lacks air con on some lines because of narrow tunnels; there are parts of the network built with asbestos in the tunnels. In both cases fixing it would require closing the line and rebuilding the tunnel, so it doesn’t happen)

That’s not true in banking though where many upgrades are software based and not so disruptive/expensive. The UK, and presumably other countries, did not start from the systems we have today - we moved from signatures to chip & pin, and from checks to bank transfers to instant bank transfers. My parents would write checks all the time when I was growing up, but I’m in my late 20s and have never written one in my life.

This is actually a very good point.

Solely as a side note: London has an underground system from 1863 that is still in use today. New York’s subway (the first in the nation) didn’t get going for more than forty years later.

> 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).

Is that really true?

ATMs were first in Europe and Japan, BACS in the UK is older than ACH in the US.

I think this is more about lack of coordination (i.e. political reasons) than something like a natural first mover disadvantage.

German debit cards for example simply had both stripes and chip for the transition period.

I dont buy this we were first to do it. Plenty of other countries do continual upgrades to subways, banking, bridges, financial systems etc. My reasons are partly these;

1) I think US tend to think of itself as No.1 nation and makes it less likely to look at other countries doing things better and looking to follow. I think this becomes a mental limitation for many US citizens and policy makers.

2) There is too much corporate capitalism. Money in politics etc. Look at the internet system where Google tried to roll out fibre and there were regions passing laws stop competitors even going into the market. Look at the prices you pay for mobile services. For the world leading free market, there is way to much corruption where markets are restricted rather than government pushing to open established markets to new business when they become entrenched.

3) Over investment in military. US could have that budget, still be the largest military by a mile and be dropping hundreds of billions in building and repairing infrastructure.

4) Too much focus on making money vs doing things well. The desire to keep building a nation seems to be gone. same in my country of Australia. You read history from earlier in the 20th century and they had a view to get things done that would benefit a nation overall. Now its 'would a rail line really pay for itself and be cost effective' type mentality that limits visionary projects.

5) Career politicians. Like other nations I think many career politicians want to take the safe route for reelections. There is endless media criticism of these guys if something goes wrong, and big projects, things do wrong and no-one wants to hear were putting up taxes this year to pay for stuff. No idea how, but we need to filter better for people that believe in what they are doing and have a vision vs popularity based vote for me campaigning. And generally vet them for brains and ability vs I always vote for this party.

Your point (1) definitely. Humans are far more alike than they are different so you will be very well served by learning from the experiences of others instead of insisting on making all the mistakes for yourself, not least because some mistakes are fatal.

Take US healthcare. There are a lot of models for how you can deliver universal healthcare to all your country's residents. They're all different. They all have problems. They're all better than the current US situation. They're all cheaper for a start, most of them have better outcomes by some measures, often by almost all measures.

There was plenty of room for two political parties to have ideological disagreements about how to deliver universal healthcare to Americans as a result. Which examples to follow and which to reject.

But the Republicans didn't do that. They decided the hill they wanted to die on (or at least, for some of their voters to die on) was the ideological rejection of universal healthcare as a goal. They would literally tell people it can't be done, despite the fact that every comparable country already did it.

There are a few things most outsiders don't understand about US healthcare:

- It's primary purpose it to bill people, not to cure people. It is doing really well at this.

- The secondary purpose is to provide incredible care to the richest of people. It does pretty well at this as well. Not as good as it used to, but still probably good enough.

Pretty far down the list of priorities is to heal poor people and make sure they don't fall sick again. It is not something most people give a shit about. If they die, they hey they should have been rich instead.

It is slowly changing with the middle class that was rich enough to get good care being eroded away enough to realize no-one gives a shit about them but they have enough voting power that people have to pretend (similar situations happen all over the world, just maybe not with healthcare).

> I think US tend to think of itself as No.1 nation and makes it less likely to look at other countries doing things better and looking to follow.

The coronavirus testing response, where the USA refused to use existing, proven, tests from Germany (or S Korea) proved this to me more than any other single event.

There's another reason besides being first: corruption.

> It boggles my mind that it has taken this long and a pandemic to even set the gears in motion

The gears were set in motion prior to the Pandemic. They are just saying that the Pandemic reinforces the work they have been doing.

"Since we initiated FedNow one year ago, we have been hitting our project milestones, and today I am pleased to announce the Federal Reserve Board has approved the core features and functionality based on extensive input from stakeholders."

US has means of instant payments, it's just not standard across banks. There's lots of way other countries are far behind as well (like Canada having banks that still charge for every transaction you make).

I wouldn’t say Canada is “far behind” because the banks like to rip people off.

We’ve had a single unified payment network for like 40 years. We’ve had instantly settled electronic transfers (Interac e-Transfer) exposed to consumers directly through their institutions for about 20 years. We’ve had chip and pin and NFC contactless payments for quite a long time.

And the rip off is really just the handful of big banks. My credit union (which is in another province but thanks to the unified network and mobile deposit, etc I’ve been able to continue using on the other end of the country without issue or inconvenience) provides free accounts with no per-transaction or other fees. They’re also happy to issue a loan or provide other services online.

Obviously I’m not as familiar with the US system, but I think putting Canada anywhere near the same level as the US is a mistake.

The US has a unified payment system (ACH) and has had it for many decades it's just not instant, usually takes 3 business days for a transaction to fully settle.

> The US has a unified payment system (ACH) and has had it for many decades it's just not instant

And for instantaneous transfers, we have Fedwire. The original real-time wire service. It’s free for most commercial and high net worth users, and thus, from a bulk economic perspective, sufficient for industry.

Interac (in Canada) is trivially simple to use, and quick.

1. Send the payment through your logged in session at the bank or credit union, or via their respective phone app. 2. Select the recipient, adding a new one if needed. They'll need a mobile # or email address. 3. Include the question and its one-word answer that the recipient has to answer to accept. 4. Hit send 5. Recipient is notified, follows the link, and answers the question. If they have it set up, it might be auto-deposited without the question/answer.

It takes minutes, and doesn't ask the sender for the recipient's banking details.

So why isn't ACH used widespread?

Because the Fed sits on your money for 1-5 days so they can play with the float. It means you either need to wait out your transactions for this random length of time or take the other guy at his word that he send the money (LOL).

> Nearly all first world countries

And many poorer countries too -- pretty common here in Thailand to scan a QR code with someone's bank details in it to send them money, bank-to-bank, instantly.

Americans have such a strange relationship with technology... the most innovative startups, and yet the worse infrastructure.

here in Europe it's the contrary :)

and btw: the service will be active in 2023 or 2024... while I enjoy immediate transfers bank to bank since years...

Two things (probably more) contribute to this, I think:

1) Americans have been trained from birth to distrust government in all forms. Centralizing more and more services triggers a visceral fear response. (IMO it's nonsense, for the most part, but it's there nonetheless.)

2) Being "first to market" with new technologies often means you're just stuck with the sub-optimal first version, while other countries can learn from your mistakes when they do their first implementation.

On the flip side, when I'm in Europe, I definitely run into more places that only take cash, which I find annoying to no end. It's rare for places in the US (at least in fairly well-populated areas) to not take credit or at least debit cards.

A house built down the road from me came pre-wired with cat6 and also solar panels preinstalled. Other houses here don’t even have the roof alignment for solar electricity.

There’s advantages and disadvantages to being early.

Could also be a forced thing due to being relatively fragmented with many different countries under a union which isn't as tight as the US union of states.

Great thing about the US is that it's possibly the biggest homogeneous market in the world where you can form a lot of reliable expectations of people throughout. By contrast, countries such as China and India are highly diverse culturally. You can't even expect people to be speaking the same language (yes, each have national languages but not everyone speaks them and it's not a first language for many.)

China is diverse linguistically? You mean to say I can encounter some one in a major metro in China and they won't speak mainland Mandarin?

I have never been to China. I'm from the US and I only speak English. Currently I'm living in the Philippines though.

I imagine China is a lot like the Philippines. There are a lot of dialects and then one national language. The national language here is Tagalog, but English is also a national language.

You can expect that almost everyone speaks the local dialect unless they are from another region. You can expect that most people speak conversational English. Some have a difficult time speaking Tagalog and may revert to English if Tagalog is the only common language among the speakers.

People feel confident speaking the languages they use regularly. For regions outside the Tagalog regions, that's mostly the regional dialect. Most street signs are in English. Local TV is mostly Tagalog but there are English stations as well.

Everyone is unique, but in many cases people have no reason to speak Tagalog. They may hear it, but hearing is different than speaking. In any case, you can't make the same assumptions nation-wide as you can with people in the US.

In the Philippines, you could do pretty good with marketing in English. Kids are taught English in school and it's possible the regional dialects could quickly disappear in the future. If you're going to learn only one language in the Philippines, it should be English. Other countries may not have this same unity on language. Each country is different.

In the US, you have (Wikipedia 2019 numbers) nearly 330 million people who you can make solid assumptions for in terms of language. Most of those people are English as a daily driver if not a first language. It's hard to beat the combination of one of the most widely spoken languages and one of the largest countries by population.

I don't know what other language has that many "first language" speakers in a single country. Mandarin could be, but even within the Mandarin language there are lots of dialects (one caveat is that the writing system is the same for all.) So, it's difficult to determine what the actual numbers are. According to a quick Google search, a quarter of the Chinese population doesn't speak the common tongue at all.

An honorable mention might be Brazil, a country with a population of over 200 million and all-in on Portuguese.

While the Chinese government has forced the majority of young people to learn Mandarin in schools, even just taking a 1 hour train ride from Shanghai to Hangzhou, both cities have local languages that are mutually unintelligible. Elderly people, especially in the countryside but also in the cities occasionally, often don't know how to speak Mandarin at all. But if you mostly hang out with urban youth you should be fine entirely with Mandarin.

Unless you only speak to younger people in tier-1 cities, China is enormously diverse linguistically.

I can confirm that, the situation may improve in the next generation.

I take issue with the word "improve" there. Whilst I definitely agree that a common language is valuable in many ways, it would be preferable if a common language could be achieved without a loss of diversity (i.e. additional to, rather than replacing, the existing languages).

Different languages embody different cultures, and different ways of thinking. This diversity should be celebrated and embraced, not only as an aesthetic matter, but also because being able to communicate and think in different ways makes humans more capable.

Agreed. But this trend looks unstoppable,to most parents in Shanghai, even English is more important than local language.

Maybe what happend in 2020 would change that...

Agreed - I have a few Shanghainese friends, and they tell me their parents discourage them from learning/speaking Shanghainese, since there is no "value" in doing so. They used to push them to learn English (but maybe that will change a little now). Perhaps they have a point, but when you're young and still good at learning language, you don't have to choose one or the other.

I have heard similar stories from Europeans coming from places with strong dialects / local languages, so it's not unique to China for sure.

i am not sure if improve is the right word here :)

i believe losing linguistic variety is almost a tragedy.

1) They have been trained to distrust government and are the country with the most consistent freedom on the planet bar none. I am not from the US, but if US Americans suddenly decide to change that, it would be a big loss. Europe certainly cannot hold up to anything here, even if it too believes in division of powers.

And otherwise I like cash and social security is one factor. Let's take a "problematic" country like Germany and its social security net. In the event that you cannot take care of yourself, the government gives you the minimal amount of money you need to survive. In exchange for total control of your accounts. There is a gray area with abuse of social security, but I think it is clear what that control can entail.

Will they even seize 10$ you got from your friend for a pack of cigarettes? Yes, they will... Being critical of government is the better way, it cannot be your parent and if it is, it is a lousy one. These rules were made by civil servants that cannot even get into that situation and it shows.

So don't give up the suspicion just yet.

regarding the flip side, at least in Germany that is partially due to your point 1: distrust in government. Where the USA wants guns to protect themselves, Germans want cash.

> On the flip side, when I'm in Europe, I definitely run into more places that only take cash, which I find annoying to no end.

This is mostly for tax evasion reasons and sometimes for employees skimming off the top. The more “proper” a place, the less likely they are to encourage cash transactions.

Happens in US too, of course. It’s always the shady places that are cash only and everyone else is digital.

That's a bit cynical. While I'm not saying that doesn't happen, I would say that smaller businesses typically accept cash-only to avoid the fees of accepting card payments. And this is not only the 1-2% transaction fee charged by (e.g.) Visa/Mastercard, these fees also include things like

* Fees for the rental and maintenance of payment card terminals.

* Gateway fees.

* Cost of fraud prevention services.

* Fees or premiums to insure against ‘forward delivery risk’

All of this erodes the already thin margins that small businesses typically operate at.

And then you have cash: no fees, instant payment, private.

Most of those fees don't apply to e.g. Europe. It's pretty much just hardware (starts at 30 euro or so for the cheap versions) and some transaction costs (1.5% or less, depending on volume). It's often cheaper to accept electronic payments than cash. Handling cash costs money (bank deposits, buying change, vaults, cash registers, higher insurance cost).

Even street and marker vendors in The Netherlands accept electronic payments.

Or it's Germany. They prefer cash over plastic for privacy reasons.


>Happens in US too, of course. It’s always the shady places that are cash only and everyone else is digital.

The US is a big place. Maybe where you are it's like that, but that's not at all accurate where I am.

It's either mom and pop places, or places that have been around for decades that "charmingly" never added support for cards. Both of which are probably less shady than average.

Although the pandemic has forced some of those places to start accepting cards now.

Your local Walmart/Chain Restaurant/$FRANCHISE is going to be just as shady, but less obvious.

Source: Know people who have recently worked across a variety of franchise type locations, they definitely still have _plenty_ of things go below board.

> This is mostly for tax evasion reasons and sometimes for employees skimming off the top

What are your reasons to state that so strongly as if it's a fact?

>> the most innovative startups, and yet the worse infrastructure.

Nobody in the US wants to pay for infrastructure. It's the governments role, but political figures want to spend our money in less critical ways.

This isn't unique to the US of course: the US is spending a higher share of its GDP on infrastructure than the EU is at this point. The welfare state in both Europe and the US is consuming all available resources, and that's only going to get far worse over the next 20-30 years due to aging and contracting workforces. Most of Europe outside of Germany has zero available resources for big infrastructure spend. The US could divert $200 billion from its military spending (requiring a near total retreat from the rest of the world, including Europe, Japan and South Korea), however that would merely lessen the extreme budget deficit that already exists thanks to entitlement spending. That budget gap will grow dramatically over the coming decade. The US needs to raise taxes by $1.5 trillion just to break even.

Its because a generation or two of Americans were propagandized heavily that anything socialized will immediately lead to Soviet communism. If we build infrastructure Lenin will rise from the dead and transform into a giant mech warrior and wade across the Atlantic to destroy us all.

I would watch this movie

It's called Red Dawn and it's awesome.


It always feels like going back in time whenever an American requests a cheque. I haven't filled one in for over 15 years at this stage.

One thing about checks that perhaps doesn't get touched on a lot...plenty of businesses use them as part of their accounts payable process wherein they are invoiced on some type of payment terms (whether it's due on receipt or commonly within 30/60/90 days). An unintended but extremely (ab)used feature here is being able to pad out the actual time between receipt of invoice and when the money actually leaves your bank account because 'check is in the mail, should be there in a few days' is an acceptable answer when accounts receivable on the other end inquires about your overdue payment, effectively turning net 30 into net 40. Now, same could in theory be said for ACH since it takes up to a few days to settle depending on the hops between banks, but setting up each vendor's ACH details in a system that may or may not be set up to even do so is overhead compared to cutting checks. All in, the massive inefficiency leads to a vicious cycle of everyone in the chain getting paid late and then doing the same forward. Which sucks.

I never understood why businesses give out free loans to other businesses like this. You used the service or got the product so you pay immediately.

And whenever a company - even overseas ones - request a check/cheque to "verify ownership" of a checking or current account.

I'm like -- what century do you live in? Since when a) is that an appropriate way to verify an account, and b) does anyone even use cheques anymore?! Most banks don't even issue them anymore and most people don't have them.

I am curious, what did you use to make significant one-time payments? E.g. house, or car.

Where I'm from (Italy) we still use cheques, and where I live (Hungary) they never used them. This was odd for me.

This resulted in people here buying expensive items by going around with a literal bag of money, or people having to walk into a bank together.

Possibly now it's solved with instant payments and everyone having a mobile banking app, I don't know.

Here in The Netherlands, instant electronic payments with your debit card (pinnen) has been widely available since 1990. People sometimes used cheques before that, but even then it was rare. Most large payments happened by "Acceptgiro". It's a form that the sender would mail to the bank to authorize a payment to another bank account. Not sure if there's a proper English name for it.

Please note that "pin" transactions are not settled instantly. It's just that when you pay via pin, the vendor of the machine (most likely CCV or similar) guarantees the shop they get the money.

The actual money transfers (the €5 you paid at some shop from your account to the pin terminal vendor, and the hourly or daily total for that shop from the vendor to the shop's internal account) take place hours after the fact.

So for all parties involved it seems instant, but technology wise it's still more or less batched, but seems instant based on trust.

Of course in The Netherlands, we have SEPA Instant Payments now (based on but not entirely the same as the European IP scheme). These are actually instant; when you pay, account balances of you and the creditor (at the other bank) are updated within 5 seconds.

You are right. I meant "instant" as in, I can pay and the merchant has immediate feedback that the transaction is approved. As opposed to things like bank transfers which take one or more business days to be confirmed.

When I bought my apartment I was at the notary, with the previous owners, a bank representantive and me. The bank person gave me a paper payment for which she had filled already and I had to sign it.

Here in Estonia, or northern europe.. or even eastern europe, nobody uses cheques, nobody has ever seen one I guess.

I haven't bought a car yet, but I guess I would just get the payment details for the car and go to a bank office, give them the seller's bank account information and tell them to transfer the money.

Big purchases won't be helped by instant transactions or mobile banking because there are daily limits on your account, for your protection, so that when someone somehow manages to get into your account (though it should be impossible.. they would need to get my mobile phone, and get my 2 pin numbers that I have memorised. Maybe when someone is forced to go to their internet bank by threat of violence? and transfer money then), then they couldn't take all the money in the account in one day.

Similar experience for me in The Netherlands while buying the house. Except that the banker wasn’t present, they had wired money to the notary’s escrow account ahead of the purchase meeting.

The bank didn’t even issue me a check book when I opened my account. Tells you something about the use of check payment here.

Interestingly, it’s been two years since I used cash. I even stopped carrying it in my wallet. And close to an year since I last used my debit card. Apple Pay is incredibly convenient.

In Germany, we use the same transfer orders (“Überweisung”) that we use for smaller payments for things up to about 50k EUR. These used to be paper forms printed by your bank, but I’ve been exclusively used them online the 15 years I’ve had a German bank account.

When we bought our cars, we just upped the daily transfer limit. I’m not sure how my husband transferred the down payment for our house, though — it was all in his savings account, and was above that 50k EUR maximum daily transfer limit. The proceeds of the mortgage we took for the rest was transferred by the bank to the seller once the bank was satisfied with the purchase contract and that the Grundbuch (city property registry) was clear.

I don't use them very often but they still serve a purpose. You don't have to know the payment details for the receiving party, just their name. You don't need an electronic device or an internet connection.

Of course you have to be more mindful about fraud when accepting one but in many scenarios they prove quite useful.

As the physical buildings are closed for Covid-19, the US Consulates in Germany are renewing passports by mail, with cheque as the only accepted payment method.

Germany doesn't have cheques.

There is SEPA instant in Europe which is quite recent. But most banks charge to send money through it or have not implemented the sending part yet.

SEPA instant started November 2017. I have 3 banks in 2 SEPA countries, none of them is participating. Not that I would need it, because SEPA transfers which are "free", mandatorily offered by every bank and take only 1 banking day. But there could be use cases for instantaneously.


Not until 2019 did central banks started to ask banks to implement SEPA instant.

Normal SEPA does not work in weekends just like ACH even though the core process is moving XML files to an shared FTP server.

SEPA instant could be starting point for mobile based payments in Eurozone which is currently not present in anyway.

A whole day? That's absolute madness. Why does it take a day when money is electronic and nothing has to physically move?

The basic working is this,

you give a SEPA transfer order to your bank in the afternoon.

Your bank consolidates all the transfers for the day in a big XML file and puts it in an ftp server in the evening.

Bundesbank pull it from there and puts the XML file in other banks ftp server.

Other bank pull it from there and completes the transaction.

In case the account does not exist or something happens the whole thing has to happen again to get your money back.

This is similar to BACS in UK.

Man the EU really needs to mandate compliance with SEPA Instant. Quite tragic that three years later and customers are still waiting on batch processes. FPS really is lush.

In Estonia all the large banks have implemented it, and they don't charge for sending the payments either. All payments are by default instant.

Not to mention potentially malicious rent-seeking third parties inserted and selling financial info.

Why is this downvoted? We have three major credit bureaus, and only just recently one got hacked and leaked everyone's info. Finance in the US is full of third-party jackasses that make money by doing nothing other than acting as gatekeepers. It's the definition of rent-seeking.

Yes, was also thinking unnecessary players like venmo or mobile pay. Weren't needed in places with modern banking.

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