A normal SEPA payment, is a "push" affair. These have (for all intents and purposes, though not technically) been a thing ever since the euro was introduced, whereas SEPA Direct Debit is more recent, replacing many of the existing domestic direct debit schemes.
Then there's the Instant Payments bit: these are a thing but they're not used all that often (yet?). Most banks charge a hefty fee for an instant payment (mine charges €1.25). Some banks don't offer them at all. Adoption will grow and costs will decrease over time.
In most countries, payments within the same bank have been instant (and free) for a very long time. This is one of the reasons why many companies have accounts with multiple banks.
I'm sure some "weaker" european countries may have laxer fraud controls, but that's a temporary problem. ECB reporting is quite strict, and most banks do take fraud detection very seriously. Reputation is important for a bank, and if you're a truly disreputable bank you'll soon find yourself without friendly correspondent banks. Then you'll have a choice: fix your fraud problems, or become a useless island.
I make payments to the benelux, france, germany, spain and poland, and they go all over the push mechanism. Direct debit is for utilities, and that's about it.
For fraud, my bank provides a gui with active agreements. While I can't cancel an agreement there, I can set a maximum frequency and amount. I put them at once per year max 0.0001 Euro until they get removed.
Non recurring payments over direct debit (Or even worse Clarna) is an instant no. I take another payment method. If grabbing money from my bank without my control is the only option, that's a red flag. I consider the company sleazy enough to go find a competitor, even if it raises the cost.
SEPA direct debit is a really really popular thing in Germany. Most utilities prefer (quite understandably) to pull from you instead of waiting for your transfer. Even landlords usually give you an agreement form to pull your rent out of your account.
I got used to that and recently tried to use a Polish bank account to pay on Amazon and surprisingly it didn't work. Amazon has sent me an automated email with a demand for a (push) transfer, sadly with added fee for the trouble.
Most people in Poland actually do transfers manually, direct debit is not really a thing. On the other hand there's this BLIK thing for instant transfers, even across banks.
It gives you a one-time-use 6-digit code that is valid for no more than two minutes. When the code is given to a merchant, either on line or in person, you get a popup with the amount and merchant name which you need to manually approve. You can give that code out over the phone to a family member who's currently at the store buying things for you, or to a child who's trying to get something for themselves. This is extremely convenient while still being secure, and it allows for secure payments on shared, malware-infested computers.
Some online services also give you the option to remember your device for future use. If you decide to do so, you will get a notification the next time you're trying to pay there, which you still need to approve. This is more convenient than typing in a code, while still being as secure.
This system is pretty resistant to fraud (you always need to approve the amount in your banking app), while allowing for irreversible payments, which merchants like.
This sounds like a great system, except that irreversible payment part. That’s only a feature for merchants and usually gets used to harm consumers in my experience.
In fact it's quite jarring when you have companies try to do something in Polish market and they don't do basic research into payment methods.
Take for example Luxxotica - I was buying some glasses as a gift yesterday, and they support two payment methods:
- card payment
Paypal hasn't been popular for years with all the other alternatives, and many people are wary of using cards to buy goods over the internet. In fact my card payment was blocked (which essentially never happens in any other methods) and I went to buy the glasses physically at a reseller.
Since few years banks also provide APIs for redirecting to transfer form prefilled with payment processor details, so you don't have to enter them manually.
That might be a function of Poland not being in the euro zone. AFAIK SEPA Direct Debit is only for transfers in Euro. Even if you tried to use a Euro bank account in Poland, either your bank or Amazon might not have bothered to implement it.
When they launched the SEPA direct debit option a couple years ago I tried it and the debit bounced back.
Eventually I did not have the need for marketplace instances anymore, then I tried it again and it worked.
Landlords benefit from it because it makes it harder for your to lower your rent in case there are issues with the place that warrant it. If they can withdraw the rent directly, you'd have to undo that payment, pay the lowered amount manually etc. which makes it more hassle for you and also increases the risk of screwing up.
You could sign a contract with your landlord, then revoke the so called "SEPA mandate" afterwards and you can forcibly switch to "manual payment" each month, since the SEPA mandate is not necessarily required or a "legally-necessary intrinsic component of the contract" (check for example: https://deutschesmietrecht.de/mietvertrag/662-mietzahlung-ei... )
Tough, depends on which type of relation you want to have to your landlord ;-)
Either way as a tenant it's best to do manual payments (even if they're automated on your end) each month so that lowering rent, if necessary, is straightforward.
It's supported by all major electronics stores. The only exception is Amazon who will do a SEPA pull instead. But there the bank grants you 6 weeks to cancel the deduction if you want to.
Giropay does in fact include fees, though these are usually covered by the seller.
(check for example: https://www.unternehmerportal.info/giropay/)
Lead Payment Engineer at an European Challenger Bank, i'm implementing that stuff in the backend, i'm mainly talking to our central bank.
I think the only party that can draw money directly from my bank account is my bank itself for my mortgage. For everything else, I have e-invoices, where the invoice comes directly to my bank account, so I receive a paper invoice maybe once a year from somewhere. And for e-invoices I can just set auto-accept limits, so any phone bill that is less than 10€ will get automatically accepted and for any phone bills greater than 10€, I need to manually accept it on my bank's website/app.
Actually, I have SEPA Direct Debit disabled on my bank account settings now that I checked it, so I guess I've never used it. I guess my bank just has direct access anyways for mortgage payments.
In general, "double scheme cards" (MC + Maestro on one card) should offer you the option to choose, while at the POS, which scheme should be used; the thing is, the merchant is not required to offer you this question, and there is a "default scheme" on such cards.
This means, in cases the merchant does not ask you, the default scheme is chosen, which is usually the one that brings in more fees for the bank/PSP.
And: Depending on the contract between you and your bank, it maybe that you couldn't revoke the "lastschrift", yes.
It's getting rarer, though. The cost difference is eroding and signing is too slow for supermarket checkout lanes.
The tables have also turned and some retailers now earn money from the banks for supplying their customers with cash (i. e. you pay by card and get an extra x00 in cash).
SEPA SDD Core + SDD B2B are working crossborder; though you're right that these are not deployed regularly/seldom.
Here in Germany, bigger online stores offered it as well. I used to use it for Amazon several years ago.
Klarna's use of dark patterns on the web for leading people into debt over choosing other payment methods has been outlawed in Sweden, but I've read that they have continued doing it in other countries.
As a European that moved between countries, I was very surprised when I learned that SEPA allows a "pull" mechanism even exists. I lived 30 years in Latvia without knowing this is a feature in SEPA because every single payment is a "push" mechanism. I'm not sure if banks can turn this feature off, or if it just culturally never gained traction.
On the other hand, payments via banks are fairly widespread C2B, because every bank offers a (custom and horrible) API that merchants can implement. So users can authenticate directly with their bank as if it were PayPal, and authorize a SEPA payment to the merchant's bank account.
In fact, services that care about user identity, will often use these bank APIs to perform authentication with a high degree of confidence about the received user information.
Then I moved to France, and every bank interaction is "pull" based. While friction in Latvia came from authenticating before initiating the "push", in France the friction comes from agreeing to direct debiting, and signing various authorization slips. Sometimes electronically, but sometimes you have to send them by mail before you can start paying for a long-running service by bank (this makes it very undesirable for one-off purchases. In fact it is so cumbersome, that I prefer to pay for many services by credit card every month)
> I doubt the claims of very high fraud rate.
If I provide my account number to a service provider, they can debit it without me explicitly authorizing them (I have to sign an authorization usually, but there's nothing "technically" blocking the counterparty). I suppose that could lead to high fraud rates.
- SCT Standard
- SCT Instant
- SDD Core
- SDD B2B
As a bank, you are not forced to support all of them; also, it depends on the local consumer behaviour: in some countries, pull mechanisms are not that widely accepted
Yes, the accounts in my bank (in Finland) default to SEPA Direct Debit off.
For recurring utility payments etc. we instead use Finvoice e-invoicing (https://www.finanssiala.fi/en/topics/finvoice-standard/). The customer enables e-invoices on a per-issuer basis directly from their bank web interface, with an option for auto-pay and payment limits. The payments are processed as regular SEPA payments. The e-invoice goes directly to customer's bank, replacing paper/e-mail invoices.
For paying one-time online purchases the user is redirected to their bank to authorize a one-time SEPA transfer (other non-SEPA payment methods like cards and MobilePay are common, too).
But explaining anything outside of the typically Dutch circumstances is an unfortunate part of life for the not typically Dutch in the Netherlands. Its a deeply cultural thing, this extreme hang towards conformation to a defacto 'normal'.
FYI: millions of Dutch have these kinds of problems. Look up the working poor, its a big group there. IMHO all native Dutch should be forced a few weeks internship with a budget council service, there are so many incorrect preconceptions about poverty. Including who it hits, which definitely includes people who thought they could never possibly be hit, did their finances right, etc.
How your bank presents (or doesn't present) a new SEPA mandate to you for approval is up to them. I'd guess that at least some of them never show you anything, and assume that you will notice and revoke the payment if it was unexpected or fraudulent.
Yes, but how well defined, or how loose, is that "authorization"?
Unfortunately, that depends on the implementation of security the bank adopted. I assume you are mentioning a detail in the PSD2 directive. The banks, especially after national legislation following the directive, may adapt but not overlap it.
Take as an example the rule in the directive, that NFC based payments should require PIN based confirmation every five transactions: not all banks implemented this.
There is also dynamic linking (ie you are shown the amount but also a unique code that the payment requestor also showed you) so you are confident it is the same transaction.
Phone and the gym are the only services that I do not pay by card, but not even by my choosing. Netflix gave me no option. Utilities are bulk included with the rent (transfer) so yeah, just those two.
Oh and I know the card number and codes by heart in case I need to buy anything. Verification is done by SMS.
You have to demand it. (Some of them will propose their solution.)
> if it just culturally never gained traction.
Very few people have read the PSD2 directive. (This friend of mine met a bank consultant who mixed it with a gaming console.)
Belarus, a country in Europe, but outside the EU and eurozone, aren't in SEPA . Romania, inside the EU but not in the eurozone, are in SEPA. Montenegro are outside of the EU and eurozone, use the euro, but aren't in SEPA.
Interesting. In my country (Finland) all banks that have joined the TIPS (SEPA Instant Settlement) always use it automatically if the destination bank supports it as well - at no extra charge to the account holder of course. Are you sure you are talking about TIPS / SCT Inst payments? Either way, your bank is not allowed to charge extra fees for cross-border SEPA transfers (as compared to domestic.)
So, TIPS is just one of the available clearing mechanisms available for the SEPA Inst scheme. (The other one is RT1, which is live a little bit longer)
Currently, there is no "regulatory forced" interoperability between RT1 and TIPS, though the 4CB are discussing it. (Esp. since RT1 is a private clearing mechanism, while TIPS is the one operated by the 4CB)
And, regarding fee: You are wrong - depending on the local jurisdiction (esp. consumer rights), a bank may for sure charge for processing SEPA SCT Instant messages. Over here, SEPA Instant transactions are around 0,50EUR - 1,00EUR, currently; some are also offering them for free.
They didn't say that banks cannot charge for SCT Instant.
They said that banks can't charge more for international than they do for domestic.
for sure i can charge you more for a SWIFT or T2 EU-transaction than i do for a SEPA EU-transaction.
Email seems at best no better to me, since why would I assume the address I use to speak to someone is the same one they use for their bank account? Or the particular bank account they want the money sent to?
So you enter an email address/phone number for them, and they receive a (presumably one time use, pre-set amount) link to retrieve money from you. That seems good. Ceteris paribus though (i.e. if both broadly implemented) I think I'd rather the recipient have the link where you go to pay, seems a bit odd to shift the onus on to the person you owe money to action it.
They’re free to send and receive.
Source: I worked on implementing Instant Payments at the biggest Dutch bank.
iDeal is of course the default for webshops, it’s big too.
But the 90% I referred to are “person to person” payments.
Did that two times already. They act real quick, out of a sudden :)
I think the claim is that because SEPA direct debits can be revoked within a very long window after settlement, it's more common that payments are revoked after goods/services have been provided (leaving businesses holding the bag). Whether this fits the precise definition of fraud I'm not sure, the payment was valid and successful, but later reversed. It would be a more interesting claim if there were some empirical comparisons included, but it certainly matches my experience.
Edited to add: another common form of fraud is somebody providing legitimate bank details of an unwitting victim. At least for some banks in Germany, the bank does not actually enforce authorisation from the account holder when a new direct debit mandate is introduced. The fraudster receives goods/services for free as long as the victim doesn't notice the charges.
From the consumers perspective though, at least where I live, direct debit is regarded as a secure and convenient method for recurring payments. A consumer can revoke a fraudulent payment within 8 weeks. It's as easy as clicking a button in your online banking. If the counterparty can not prove that it was explicitly authorized by the consumer to make SEPA Direct Debits, the payment can be revoked for up to 13 months.
it's fucking cheap for the merchant :-)
and with cheap, i mean, reeeeeaaalllyyyy cheap (well, depending on your PSP/etc.)
for a bank, the "purchasing costs" per one SEPA SDD at your central bank is in the fractions of the fractions of a cent. (you can check the rates on your local central bank website)
SEPA has several message types:
- SCT Standard is a push
- SCT Inst is a push
- SDD Core is a pull
- SDD B2B is a pull
With SEPA payments fraud would cost the banks money so any company abusing it would be blacklisted.
Which is quite simple:
First, its internaly only an exchange of liabilites in your balanace sheet.
Second, it does not involve any outgoing gateways/interfaces.
Third, if you are using a SaaS-corebanking-solution, those types of transactions are usually excluded in your contract.
From that perspective, it is absolutely useful.
Push Payment fraud presumably subsided enormously after they changed the rules so it's interactive. Now you provide account number and name, the banks algorithmically decide if the name you provided is correct and if not tell the sender there is a problem. So push fraudsters need a fake account name and that's harder. Passing KYC checks for some random mule is do-able but good luck persuading the bank your name is Big Corp Electricity so that the push fraud works.
In exchange, it saves a lot of time both for the customer and utility provider as the risks of mistakes are reduced considerably. Invoices get paid on time.
That said canceling a direct debit on your end even if it’s fraudulent isn’t something you should do as it can wreck your credit score in the UK since you’ll be in debt and depending on the account it can show up as a missed payment immediately even before it going to debt collector/judgement.
If there is a fraudulent transaction you have to contact the bank and file a claim.
(So that you have time to notice that someone has breached your account and stop them from emptying your accounts ?)
In essence; financial institutions are legislated to add customer friendly UX and fraud prevention on top of standard bank to bank transfers. It's effectively a set of APIs that orchestrate it all, with things like dynamic linking to the payment and secure authentication rules for anti fraud.
The idea is for commercial offerings to build on top of the standard APIs (for example, to offer bank transfers in checkouts). In practice it's taking a bit to get off the ground - but providers like Tink (sold to Visa for a lot of money) and Truelayer and starting to get traction.
Australia and MENA region are heading down the same route.
Edit; for clarity, SEPA was the early moves to normalise what the European banks were doing from around 2008 onwards - and ended up with PSD1 rationalising it. As others have said this blog mostly only actually focuses on the direct debit element of SEPA not the credit payment side.
I think it's basically solving a very widespread and local use case - which is very low value transactions which are normally done in cash. The AVG value of transactions look to be around $2.
Anything of reasonable value (say $10 still tends to be card-based. This makes sense; fees on cards make anything under $5 cost ineffective, plus you need relatively (to the margin) costly hardware. Margin-based street sellers like those in India can't afford the overhead.
Looking at the implementation; it's interesting there is very little shared about fraud (I couldn't find any specific numbers but based on lots of articles it seems widespread).
Low financial literacy coupled with a system that encourages you to enter your PIN in various interfaces probably makes this something you wouldn't allow high value transactions. Hence the continued dominance of card networks.
If is neat though, although it feels like it's quite a local use case.
> say $10 still tends to be card-based.
What's your source for this info? People here don't use cards if they don't have to. It's a payment mode of last resort. Credit cards do not provide fraud protection here, so there is no point in using it.
I found a source from July that says AVG transactions are now up to around $20 equiv. And the total transaction value is above card transactions now. Although the volume of transactions is 10x which is indicative.
My understanding is India is a very cash-based culture? So the idea of UPI replacing that seemed uncontentious?
Looks like there are 3/4 Billion dollars worth of card transactions each month though, so that's not insignificant. I wonder how much bigger the cash culture is in value, I'd assume quite large.
This is correct. This leads to a lot of black money floating in the market. I am not sure what's the volume of cash transactions though.
Shit! We promised investors that Stripe will be the sh*t, the Global Payment Network. Now banks and regulators have woken up and we are commoditised in India, Japan and EU. Sure hope FedNow won't follow suit. Sorry VCs. Please exit Stripe before it's too late.
I assume there is a Stripe echo chamber which might explain the focus (I've read several of his money articles and most of them suffer from an incomplete picture).
Also; I'm not sure Stripe and Open Banking are incompatible. Realistically it eases stripes integrations in the EU (Ive not checked if they are a registered payments provider under the legislation but I assume they must be).
In addition; the thing that springs out of this article is how incompatible we are on a global scale. So there is a market there for them.
In the end, SEPA for all it's faults drove European standardisation. Global legislation on that scale is not gonna happen (it's sort of a shame he didn't draw that conclusion)
EUR is sort of out side of these because vast majority of transactions has always been Direct Debit. Credit Card spending just isn't as much a thing. And they use Direct Debit for everything. They also have very good consumer protection in place so using a credit card for delayed payment ( in case of dispute ) doesn't happen as often compare to US.
As far as I can tell there isn't a one size fit all solution to every one in the world.
For instance, in Sweden, "Swish" has quickly taken over the market for casual payments, with free, instant, irreversible bank transfers between individuals using only the recipients phone number (or a QR code).
They are a bunch of these systems, but currently they are all fractured into national systems, although work has started on adding interoperability
Promises aren't worth zilch. (We now do have additional features that some altcoins actually deliver on, the most famous one being of course Ethereum with its smart contracts... but trying to beat the ease of use and speed of in-country traditional banking is a lost cause.)
I desperately need something that works at least in the entire Eurozone.
I bought concert tickets last week, for almost 1000DKK (130€). I'd already entered my phone number, so paying by MobilePay was faster and easier. I usually use this if I have the option.
To use it, I pressed the MobilePay button on the website, pressed continue since my phone number is already present and correct. I unlocked my phone, and there was a notification waiting for me, with the amount and recipient stated. Fingerprint and swipe to approve.
I didn't need to type in any card details, or authenticate within the web browser. A 1000kr debit or credit card purchase would require me to enter my 20+ digit bank password, then do a similar process to unlock the phone for 2FA.
Overall it's not free, the receiving party will still pay the fee (so, probably not that different from Debit/Credit Cards for merchants), and shops might increase the price preemptively to account for that.
See this drama for more: https://www.twint.ch/en/press/digitec-galaxus-spreading-fals...
PS: However, it's probably free for user2user payments, using phone no as identifiers. And it's useful to settle lunch debts among friends. I guess they (banks) want users to install twint apps for that, make it then easy to pay at businesses.
On a side note, I wonder if something like this could be built in the web3 space. A totally decentralised public blockchain implementation of the payment network using UPI-esque interoperability between payment providers and banks.
UPI was built around mobile phones, and a significant part of the trust comes from the KYC that was enforced from the beginning for mobile connections. I'm not sure how well that process will scale across countries and across currencies. Still, with the international partnerships coming up, I'm excited for the possibilities that are presenting in the payments space.
I bet it's seriously harder to get two countries agree on the lists of undesirables, and streamline e.g. court protection across jurisdictions.
I have multiple clients in Europe who use my webshop system with simple bank transfers as the only payment method. It's so easy. No setting up shit like iDeal or Stripe or anything like that, no fees, just paying from one bank to the other. It comes so close to paying with cash. It's not instant so you can't really program against it (as with iDeal here in The Netherlands, your country has probably something similar), so it's not really suitable for big automated webshops. But for small businesses and/or freelancers who want to make money online it's such a game changer.
Let's say you just started a small business selling digital or physical goods, the only thing you need to do is enter your IBAN bank account number and you can get paid within a workday or two. Customers place an order, click a button that says 'I just paid', you as the business owner check your bank account on a daily basis (just from your smartphone) to see if you received their money, if you receive their money you click another button and can fullfill the order.
From experience I know I'll receive money from Germany within one business day, and from the rest of EU within two business days. It depends on the banks I guess, because sometimes even customers from EU with IBAN bank accounts tell me they can't make the payment. Still, it's so easy.
Even for filing your VAT as a business it's stupidly easy in EU, because whatever you sell to Spain or Poland or Ireland, if you stay under a certain threshold (which is pretty high for a one person company) you can just do the taxes in your own country according to the rules you know.
I just really miss the UK, stupid Brexit. I have to quadruple the amount of paperwork if I want to sell to the UK. It's not worth the hassle. Just not worth it.
While true, the friction with iDeal or Stripe is a lot lower than with bank-transfers.
I've helped set up such payment systems (backends): the rate of non-paying (send reminders, etc) is far higher with bank-transfers than with iDeal. So much, that for many freelancers who send just a few dozens of invoices per year, it pays off (pun intended) to include an iDeal QR code and link in that invoice.
People are so much more likely to click and link and pay than when they have to type over payment details. The latter often ends on the "TODO pile" the former is often payed within minutes after emailing.
(Do note that in Western-Europe it is common business(to-business) practice to send an invoice after the goods or services are delivered. This invoice acts as a payment-request.)
If I’m sharing a bill with friends, I’ll just generate the QR codes, the friends scan them, click pay, verify with biometrics, and are done.
If you want to go bare bones, spend as little money as possible (on fees, setup costs and setup time, brain cycles) then I just want everybody to know that - at least in Europe - that's possible. Even with only a personal bank account (and some good bookkeeping, that is)!
> that for many freelancers who send just a few dozens of invoices per year
Let me be clear I'm not talking about invoices from freelancers who already did the work, I'm talking real webshop stuff (you buy and pay for goods and/or digital services on the spot).
The only 'problem' is that you have to wait one or two days (and three when there's a weekend) before you can start fullfilling an order. That's not for every use case, but definitely can work for a lot of use cases I think.
And yes! I've set-up webshops that work exactly this way: both B2C, and B2B. I even encounter them regularly in NL, where iDeal is the norm and dead-easy to implement: e.g. yesterday when ordering special seeds for coming years vegetable-garden:
"Please email us the product-numbers and quantities, the bank-account from where you send the money and your postal address"
Having no PSP is always easier than the easiest PSP. Having no webshop is always easier than the simplest webshop. Apparently such businesses can get away with it. Or, more in y-combinator-speak: by far the leanest webshop is a simple email-inbox.
Had the same conclusion for a while for my webshop. It bothered me to say no to people from the UK, so ended up setting up a reseller account and chose to use that for the UK.
Which - while not free - has now changed to my main payment system as it reduced my overhead drastically. Plus now all my sales is compliant with all tax laws everywhere. Not just VAT within the EU, but also sales tax in the US etc.. without the additional overhead as the reseller is the one who handles all the taxes.
Agree. I'm in a very lean situation now and can use my time better, otherwise it's worth looking into. There's a lot of good customers there, who also didn't ask for this Brexit thing.
- payments above coffee-shop prices often happen by EFT.
- it arrives within 2 days, bank sends proof of payment instantly and sellers accept that as sufficient proof.
- can opt to send instantaneously which reflects within seconds to minutes (for a small fee, like ~$1).
- non reversible
- need bank account number and bank name
That’s for push, for pull, debit orders exist, but they are luckily easily reversible. Unfortunately fraud on this is super high.
Always strange when in the US and the landlord asks me to pay by cheque. Something we havent seen in SA in ~15 years.
To access their money they go to an ATM and a challenge response is sent to their phone number.
Rich elites living roughly Western lifestyles and everyone else super poor.
This means that a private player's implementation does not become defacto standard.
Multiple factors are aligning to make UPI successful:
1. Massive Mobile (smart phones) & Internet penetration
2. Cheap mobile data from telcos
3. Low cost of payment infrastructure to the banks and shops.
4. Fast clearing of payments (< 5-8 seconds)
5. Neutral standardisation body with blessings from the central bank
Let me add one thing here though.
> Low cost of payment infrastructure to the banks
The cost is low primarily because it's is borne by tax payers  and the issuing banks. Issuing banks aren't too happy with forgoing a good chunk of their profits that they earn through issuing charges and also having to maintain the infrastructure free of cost.
A new for-profit payment consortium  has been proposed to compete with NPCI. Will be interesting to see how this plays out.
It obviously costs money to banks to maintain the infra that makes UPI possible. It still costs nothing for end users to use UPI. You know why is that? Because the Reserve Bank of India has mandated that. A central authority that grants banking licenses and oversees all banks in the country. Banks have to factor in the cost of supporting UPI as a regular cost of business. Banks actually may be saving money by supporting UPI because they don't have to deal with cash. They need less branches and ATMs, less people to handle all the cash.
You remove the central authority, and it becomes anarchy.
1. Change ownership structure. It was 75% owned by 10 banks in India, with no seats for other players in the industry.
2. Allow competition to NPCI. This got envisioned in the recent push for a NUE, but with a lot of caveats. RBI ended up deferring the plan
3. NPCI also is pushing heavily to move from a non-profit to a for-profit model: https://www.livemint.com/news/india/npci-turning-for-profit-.... This will significantly change the current incentives it holds.
As an example of this conflict, RBI runs NEFT and RTGS for free as near-realtime transaction platforms for free, and now 24x7 (The 24x7 was a recommendation in the report). RBI does not charge banks for interchange on NEFT, but NPCI does charge for IMPS.
This is unlikely to end well.
Cash printing, distribution, and handling is super expensive. Replacing a big chunk of that with some servers and data costs would be a huge win.
Plus they get all that valuable data about what everyone is doing...
Don't know about India's central bank but US Fed plays with interest rates, bails out risk taking companies or their close friends creating moral hazard, prints money recklessly destroying your savings.
UPI is getting from 1st December a way to send payments by phone number or random number(key) which I believe are partly inspired from Pix. Earlier phone number lookup was a layer on top of the UPI built by the fintech companies and now it will be part of the base system.
Now that UPI's operator NPCI is focusing on cross border transactions, some day Pix and UPI can interoperate. UPI is already integrated with Singapore's payment system and similarly in discussions with few other countries.
What’s exactly the catch with SEPA?
- first, SEPA has several message types
- SEPA SCT: A standard transfer, usually settled the next day - SEPA SCT Inst: a realtime transfer, to be settled within 10 seconds max (check rulebook on ECB website) - SEPA SDD Core: Direct debit, this can be used to pay your utility bills e.g.; though you can revert this one up to a couple of month - SEPA SDD B2B: Direct debit for businesses, this one can't be reverted as you gave an explicitly signed permission to execute those (this one is used between businesses)
So, my idea here would be that COINBASE is supporting/using a partnerbank/PSP which allows SEPA SCT Instant.
Regarding fraud: - if one gets aware of your IBAN, the other party can try to pull an SDD, thats right. But: you can claim this one at your bank and you will be refunded immediately. (with SEPA SDD B2B, this wouldn't be possible as you would have a signed a permission) Though, unless a fraudster is counterfeiting your signature, no one will pull a SEPA SDD B2B. But, sure: Check your accounts regulary.
- regarding SEPA SCT Instant: To execute such transaction, you need to verify it by 2FA. If you give permission on your 2FA device, the money is send out.
- what if you do a typo with SEPA SCT Instant or if someone get somehow around your 2FA? In this case, you could reach out to the other bank with a so called R-Transaction, though if a fraudster is aware of all this, i'm pretty sure the person is capable of managing the rest of the track to pull the money out by doing additional subsequent transfers to other banks
P.S.: As far as i can see, Coinbase is not running through us, you may check your bank statement to see which way the money went ;-)
> the bank basically said I can’t do that.
For the shop? I think it's mostly that software solutions are incredibly US centric (or more accurately, not EU centric enough) meaning SEPA always stays an afterthought.
I also want to mention SEPA direct debits. They're great from a the customer's perspective, especially for subscriptions and the like.
It goes in the "direct debt" way as described, so your electricity or broadband supplier can charge you every month automatically
But you can also "push" a payment to someone else (or yourself, of course)
Not sure about fraud, from what I know, everyone that does a direct debt has an identifier that can be revoked in case of fraud. So it can happen, but there are ways to block fraudulent chargers.
SEPA push, whose are, by definition, manual actions from yourself via the web interface of your bank are not reversible. But that’s probably not the most frictionless method so it’s rarely used other than people to people transactions, between your own bank accounts, or for really big purchases like buying a car.
It surely can be an issue but I'm not familiar with people refusing to share their IBAN number because they're afraid of random charges, which is a thing for ACH numbers.
A lot of people go: they're so much richer than us, why don't they have space lasers and flying cars and instant bank transfers now???
I guess at the end of the day we remember we're all only human, after all :-)
- IFSC code and account number combination, resolved directly by NPCI, is
represented as firstname.lastname@example.org (e.g. 12345@HDFC0000001.ifsc.npci)
- RuPay card number, resolved directly by NPCI, is represented as email@example.com
The following were proposed, but didn't take off
- Aadhaar number, resolved directly by NPCI using existing Aadhaar to bank mapper,
is represented as firstname.lastname@example.org (e.g. email@example.com)
- Mobile number, resolved directly by NPCI using proposed mobile to account
mapper, is represented as firstname.lastname@example.org (e.g. email@example.com). Instead of this, many PSPs (PhonePe/BHIM most notably) ended up using mobilenumber@psp by default because of the usability benefit, and this "centralized mobile mapper" was never built afaik.
The following are implemented at some banks:
- When bank itself is the PSP, any account identifier, resolved directly by bank as the
PSP, is represented as account-id@bank-psp-code (e.g. 12345678@icici)
- A one time or time/amount limited tokens issued by a PSP, resolved directly by that
PSP, is represented as token@psp-code (e.g. ot123456@mypsp)
PPIs (Prepaid Payment Instrument - wallets in India) were added to the UPI system quite late, but there's very few who've actually started working. This was also in the original plan:
- A PPI provider issued card number, resolved directly by PPI provider, is represented
as ppi-card-no@ppi-psp-code (e.g. 000012346789@myppi)
There's also some credit card providers that let you pay off your card by using a special VPA (cardnumber@card-issuer). See https://www.wishfin.com/credit-card-payment/how-to-pay-credi... for a list of supported issuers. Unfortunately, this makes compliance a huge hassle because every one must treat VPAs as hazardous (because they can now contain complete card numbers).
Scroll to page 20 for the complete list: https://www.mygov.in/digidhan/pages/pdf/sbi/NPCI%20Unified%2...
I recently found out that every FASTAG (highway toll payments) has its own VPA handle for convenient top-us.
There’s been a recent development on this front: interoperable mobile number payments are coming to UPI in the next few months. The special VPA format for it is firstname.lastname@example.org.
I’ve seen it for web payments but it’s not ideal because of the delay (usually like next business day) in processing.
Interestingly, Osko, the user-facing part of the NPP (as far as I understand it), is owned by BPAY. I'm still getting my head around the definitions of NPP, PayID, and Osko.
I think the biggest barrier to adoption for retail payments is a visibility issue - most people I've spoken to have no idea what Osko or PayID are.
I had to cancel the transaction (by lying and saying it was fraudulent), drove to the bank, withdrew the money in cash, and paid the good-old-fashioned way. headdesk.
PayID is useless as a payment system if you can't actually rely on it to make a payment in a timely manner.
In Germany for example most German stores have the following payment options:
1 You get an invoice and transfer money before shipping
2 lastschrift - vendor pulls money directly from your bank
3 Invoice ( rechnungskauf) - you order, get the product together with an invoice and you got 14days or 30days to pay.
6 Credit Card
Amazon for example send me an invoice once a month for all the products I bought.
The Lastschrift 99 percent of the cases does not check authenticity, since banks are required to get you the money back in case of fraud, and since only German banks support Lastschrift, the vendor using lastschrift will be also using a German banks. This making unrecoverable fraud impossible.
And about option 3, package theft is no problem, since DHL FedEx ups, etc. All require a signature and are not allowed to leave the package on the door step. DHL brings the package to the post office or neighbour if your not home. Of course you can designated drop locations as well but they are not allowed to be in plain sight e.g. put it in the shed or something.
Bigger problem is here that people use your name with a fake address for purchases, and after the vendor contacts the police they give them your address based on name. Don't know how often it happens but it is not on scale to be scared off.
Oh and in case your login data for a shop gets stolem by scammers, if they change the delivery address German stores require that you reenter payment info to prevent fraud.
In my experience (UK) the only services accepting bank transfers are financial institutions (Coinbase, Revolut).
Most stores prefer to pay CC fees and have a smoother checkout experience, probably to grab those extra % points of customer converting.
A lot of e-commerces online even offer Paypal (even more ridiculous fees and infinite hassles for sellers) just because it's more user friendly and can help conversions a bit more.
A couple of years ago, I even opened 2 cash isa saving account for 20k each paying by credit card because that was the only option the bank accepted.
Account transfers bring more flexibility and convenience and costs almost nothing.
Of the 2.9% that Stripe (or any other processor) charges, a majority of the fee goes to the credit card issuer, i.e. bank. You probably chose to use a particular credit card because of the rewards offered by that particular bank. So, practically, a majority of the 2.9% fees goes to the issuing bank and a major portion is returned as rewards to the credit card user, i.e. the payer. Since the merchant, i.e. the seller, probably raised the prices by ~3% in order to afford the processing fees and credit card users get back most of it in rewards, people that use any other mode of payment end-up paying extra for the same product practically.
'Credit' cards are going to cost money for the foreseeable future. Issuing banks charge anywhere from 1.8% to 3% or higher for processing credit their cards. Processors add a markup on top of this fees to their merchants. 'Debit' cards issued by the major banks on the other hand, cost less than 0.5% for the processors. Stripe charges 2.9% for both debit as well as credit cards, YES but their costs to them are not the same.
The actual itemized fees inside of that Interchange fee are mind boggling.
Cryptocurrency was considered a way to simplify the problem, but probably didn’t work in this aspect
Intra-bank transfers are always free and instant because bank is just changing numbers on two accounts in the same database.
It has been so easy to move money between banks in India that we don't even think about it.
A decentralized system like crypto which uses pointless proof-of-work to remove trust providing intermediaries are just too slow, expensive and overall inefficient by design. They won't work in real world.
2. Nobody uses proof of work anymore (besides bitcoin)
And Ethereum and...
The caveat is that the money transfer cannot be undone for almost any reason. There's zero customer/purchase protection. The Consumer Financial Protection Bureau, however, has instructed banks that part of the Electronic Transfer Act requires banks to refund people if the transfer was a result of them being tricked into giving up their account details (it's not clear if this means the money would be yoinked from the recipient.)
I kind of would like the option to enable some sort of confirmation and/or 2FA for a Zelle payment (mainly this means disabling it via the website; my phone provides bio 2FA), and confirmations for receiving a payment. Those are my only complaints with the system.
But that means it can be trusted by people who want to know, for certain, that they've been paid "for real." It's instantly settled, unlike damn near every other form of money transfer system where even if the money seems to be in your account, there's still a days or WEEKS long delay until the transaction can't be yoinked back.
This makes it great for if you're selling a car and about to sign & hand over the title to the other person, for example.
I miss Monzo.
Also the etiquette that’s emerged around using Zelle is funny too. If I’m paying someone new, they’ll normally have me send $1 as a test to make sure we all have the right contact info before sending the rest.
I do not see these options on BoA's website though, which is a dumb inconsistency.
Very, very annoying. One of the many reasons I prefer crypto currencies. No one restricts me about what I can do with my money
Through the website, transfers with similar speed are limited to 1,000,000DKK a day ($150k).
In person (showing identification at the bank) I don't think there's a limit.
You will note the restrictions apply also to anyone who has successfully stolen your credentials, or is holding you at gunpoint, etc.
It is not just much cheaper than card payments, it is also dramatically more reliable. If you lived in a parallel universe where all of these payment methods had emerged at once and you described a payment method so unreliable that people would actually give a name to the hack of retrying each failed charge automatically, they would think you were joking.
Ironically, despite in theory having a more generous reversal policy to protect consumers from fraud, these direct payment methods are also much less likely to result in inappropriate reversals that harm legitimate merchants, at least in our experience. Perhaps this is because banks will typically only reverse in cases of real fraud whereas card chargebacks are widely abused to commit fraud themselves or applied inappropriately as a blanket measure after an event like a stolen or lost card, and the incentives favour granting the refunds even if the customer just says for the flimsiest of reasons that they want their money back.
Legit crypto users should let you pay with TransferWise.
 ie online research chemical stores
Wise is also a great solution, but its speed is going to be dependent on a lot of factors: does it have a partnership with your bank, how long is the route it'll take, and how long each node will take to process a transfer on the route. It is streamlined though so the user experience is top notch, security wise it's a centralized system so the more people use it the more it becomes a single point of failure.
As part of the purchase process after picking Giropay as the payment method you get asked what bank you're at and then get redirected to a special version of the bank site (for my bank it is giropay.normal-bank-domain.de instead of the usual www.normal-bank-domain.de) where you log in using 2FA etc as usual and proceed with the bank transfer. Once you are finished you get redirected back to the merchant. In the background, Giropay confirms your payment with the merchant so that the merchant knows she will receive the money soon.
I think it's a good system. Not all banks participate in it, however.
No. It involves anyone billing me giving me their bank account (IBAN) number, and usually some reference number too, along with the amount and due date.
> The Single Europe Payment Area (SEPA) offers free, instant transactions between European banks. They’re pull based; a user communicates their banking information to a business, which debits the user’s account, rather than the business communicating their banking information to the user in order to send them money.
Sure, maybe that also exists -- but why would anyone accept doing it that ass-backwards way around?!?
All in all, one wonders whether this guy just doesn't know what he's talking about (when it comes to Europe), or if perhaps he has some reason to outright lie.
> My employer Stripe...
Oh. Well, I guess that answers that, then.
The Amazon VISA announcement shows that maybe card providers and their payment service providers are next on the disrupt list. They might go the way of the dodo.
They probably don't get as much money as CC payments though. Revolut topups / Nectar / Chip are now all using TrueLayer.
On the cons side, it doesn't work so well on all devices (I had problems going from app -> browser -> app on older devices, probably because of RAM limits).
Ideally, we could just have a free open-source wallet application that connects to all the different banks via Open Bank API (same as TrueLayer) and then just have a special walletOS://revolut/topup/250/gbp link in the app which opens up your wallet and allow you to send an instant bank transfer.
Zero fees, zero middlemen.
I've been toying with the idea of building it but it's not immediate to monetise, so I'll do it once I'm rich and bored and keep selling simpler services to business for now.
You could potentially upsell a saving / personal analytics premium service once you have enough adoption or resell transaction data (even if the latter won't probably be a very popular model, given modern concerns with muh privacy)
The main problem it would solve for me is that I have something like 8 different banking apps on my phone which I hate with a passion and I hate Credit/Debit Cards: sharing your single secret everytime you're paying for something is just plain retarded plus we're just enriching Visa and Mastercards, which produce zero innovation in FinTech.
Smaller transaction size sites and apps that struggle with payment fees might interested in that as TrueLayer seem to focus on major players.
- Customer UX: crypto wallets built into browsers and phones. Connect your wallet to any webpage to pay. Or, tap your phone to pay via a crypto payment
- Certainty: crypto transactions are, by default, instant and irreversible. Any kind of chargeback scheme, refund policy, or time-delay may be built into the crypto app layer
- Settlement time: per previous remark, crypto transactions settle instantly on a global basis, unless a slower speed is built into the app layer
- Reversibility: again, crypto transactions are irreversible by default, and any kind of reversibility scheme or policy may be built into the app layer
Doubters or critics of ethereum's ability to handle global-scale payments may find the following items to be of interest:
- Scale: ethereum has adopted a rollup scaling architecture where separate physical networks settle on ethereum. These separate networks are known as rollups aka Layer-2s aka L2s aka execution layers,. Some of the most important L2s are Arbitrum, Optimism, StarkNet, zkSync 2.0, and Miden. These L2s will help grow ethereum to billions of daily active users
- Cost: ethereum's rollups may be expected to be cheap enough for everyone in the world, especially using a technology known as "zero-knowledge rollups with off-chain data"
- Environmental impact: ethereum is five and a half years into a six-year upgrade to completely eliminate any negative environmental impact. Ie. Ethereum will stop using proof of work mining
- Settlement/Certainty time: Blockchains combine these into one. They depends heavily on the specific chain. For some networks, its basically instant. Eth seems to be around a minute or so. Bitcoin is around 60 minutes.
- Reversibility: Agreed, although whether this is good or bad depends on the user.
I like the way it was said in the article, these are all axes of comparison. Consumers choose products based on a set of criteria. For many, irreversibility or the risk of loosing everything due to a lost wallet is a dealbreaker, even if transfers may be much faster than other methods.
At scale people will want to use custodians for large amounts of money. So basically banks will always be a thing. Only the backbone is changing.
Reduce, not eliminate. Maybe, maybe it would stop having additional negative over regular money transfers but "completely eliminate" requires magic (negating effects with credible offsets is viable).
A lot of people have expressed the sentiment that "the GAS price is too damn high". It is so high that interacting with "useful" stuff like swap contracts or liquidity pools costs $50 - $100 per shot and lots of interesting use cases are shut out because network fees render them uneconomic. It is sort of a burning problem that leaves the ETH of today as a network mainly for purists and whales.
I agree with parent that long term the future looks much brighter.