28 ms·

How do bank payments actually work?

290 points by alexbilbie 11y ago

jrcii 11y ago
Regarding international payments, I dug into this a little one day out of curiosity and ended up here: https://www.frbservices.org/eventseducation/education/fedwire_chips_swift_format_info.html https://www.frbservices.org/eventseducation/education/fedwir... The PDFs on that page appear to show you precisely how the XML messages that conduct the transfers are formatted There's some interesting stuff I couldn't get to here https://www2.swift.com/uhbonline/books/hub/httoc.htm https://www2.swift.com/uhbonline/books/hub/httoc.htm And some other interesting stuff covering these standards http://project.i20022.com/the-standard http://project.i20022.com/the-standard http://www.c24.biz/c24-io-standards-financial-messaging-libraries http://www.c24.biz/c24-io-standards-financial-messaging-libr...
- ryanjshaw 11y ago
  Cross-border payments are more definitely more interesting. There's a lot of complexity that is outside the scope of the standards - research correspondent (nostro/vostro) accounts and cash management, for instance. Basically, you need to find a path from your bank to the target bank account through the cheapest path of intermediary banks that factors into account fees charged along the path, expected daily transfers at that bank, the payment's impact on liquidity and interest rates of cash left on books in a particular account at a particular time of day vs. alternative options.
  - danieltillett 11y ago
    The thing about international wire payments is you never know what you will receive. I send out an invoice for X and I get some seemingly random value less than X. My bank can't tell me why - the best I can get out of them is some intermediate bank along the way took out some fee. It makes it a nightmare to match up an invoice with a payment. If you wanted to exploits this effect for fun and profit you could always deduct $50 to $100 from every invoice you pay and the recipient would just assume it was some intermediate bank fee.
    - ryanjshaw 11y ago
      Switch banks? If your bank is using SWIFT, the MT103 message has fields to track this information (fields 71F and 71G) and validations to ensure the fields are populated correctly (i.e. 32A and 33B must reflect 71F and 71G correctly). Any decent bank should be able to display the originating payment instruction details for a given cross-border payment ledger entry. (I've implemented SWIFT processing fees for cross-border payments.)
      - danieltillett 11y ago
        Well it is a little more difficult here in Australia. I have asked a few times and the only way they can provide me with the data is to do a trace which they charge me $50 for doing. Paying $50 extra to learn that some bank took out a fee is not too helpful. I more wish I could stop it happening.
tinkerrr 11y ago
There was a discussion a couple of years ago around how ACH works. ACH is the dominant system of money transfer in the US and takes 2-5 business days on average for a transfer, compared to the real-time systems in many other countries. https://news.ycombinator.com/item?id=7636066 https://news.ycombinator.com/item?id=7636066
pc86 11y ago
I was just complaining to my wife about this earlier this morning (we are in the US). I made a credit card payment last Thursday (1/14) in the mid morning, maybe 9:45 AM. Ideally this should happen pretty quickly, but I know in the US the infrastructure just doesn't match my current expectations. Seemingly there was zero movement until my credit account was credited the payment Friday afternoon, but the money was still in my checking account (no holds or pending transactions). The weekend goes by, no movement. Monday (a bank holiday) comes and goes, as does Tuesday. I get a text message early this morning (~6:45 AM) that there was a large withdrawal from my checking account - the payment showed up! Nearly three full business days before the money was actually moved, and as of right now it's still a pending transaction. The cynic in my wants to think that it's so people who don't pay attention to their finances are more likely to overdraw/double-spend the money, but part of me thinks it's just because the US infrastructure around banking and payments is so old it just isn't capable of anything approaching real time transactions. I would love to see a logistical/technical explanation of why it takes so long for this type of thing in the US.
- jrcii 11y ago
  I've asked bankers at the branch about this before and received a vague answer about how they need time to verify things, but I strongly suspect they were just non-technical and didn't know.
  - pc86 11y ago
    Is part of the problem inertia? What I mean is if there are multiple pending transactions on an account, is it even possible from a technical perspective to say "Is there $100 available in this account for immediate withdrawal?" I would suspect it is possible, but I also wouldn't expect the majority of US banking infrastructure to run on AS400s.
    - icebraining 11y ago
      Isn't that the available balance? At least here in Portugal, we have three balances: accounting (based on all non-pending transactions), authorized (accounting plus all pending transactions) and available (like authorized, but just with the pending debits). The latter is the amount actually "yours", which you can use without paying interest on.
kbart 11y ago
Good article. I'd like more technical details, especially security related, as some pretty hard problems must have been solved to implement such system where every error or vulnerability might costs tons of money. Any recommendations?
- simonvc 11y ago
  Disclaimer: I work at Mondo and am the one implementing the way we talk to our agency bank. How it actually works is theres a Message Queue (IBM MQ) that is connected over dedicated lines (MPLS or point to point, but not over the internet). Each side uses a couple of layers of Crypto, including using Hardware Security Modules (HSMs) to actually encrypt and sign the messages. The crypto signatures also have legal standing in a sense, if the message is valid and signed then the counter party or agency bank is authorised to process it.
  - ryanjshaw 11y ago
    Banks are full of great lessons in system design that extend past the realm of purely technical solutions. They regularly make cost vs. risk trade-offs that make technical people nervous, for example, straight-through processing of low value payments with the expectation that material fraud can be detected through regular analysis/reconciliation/auditing and dealt with out of band.
  - kbart 11y ago
    It sounds that you have a very interesting job. Mind if I ask few questions/career advice? If so, please drop me an email (can be found on my profile).
omh 11y ago
This type of system looks like somewhere that a blockchain could be genuinely useful. Each of the trusted banks could be given access to the blockchain (rather than needing proof-of-work) and it would work as a distributed ledger without the need for VocaLink as a trusted intermediary. Of course the question is how the costs of running VocaLink compare to those of running a blockchain type system.
- pmorici 11y ago
  A 'blockchain' without proof of work isn't a blockchain and would be no different than the system described. Someone or something has to arbitrate to prevent cheating. In the case of this system it's Vocalink in the case of Bitcoin it's the proof of work.
- khgvljhkb 11y ago
  While bitcoin is very small compared to banks and credit cards, at this point it is definitely cheaper to send bitcoin than to send Visa money. How it would work if that blockchain was scaled to the level of VocaLink I have no idea about.
  - wsxcde 11y ago
    No, in terms of the overall cost of operation of the system, bitcoin is most definitely not cheaper. Transaction costs paid by the users are low because of the inflation subsidy paid out to the miners. In terms of overall costs, the bitcoin mining network alone (i.e., ignoring the cost associated with running all the full nodes, the underlying network and so on) costs $1MM per day to process a measly 100k transactions.
    - IkmoIkmo 11y ago
      No, you're conflating two things. The 'cost' of bitcoin the system, is in the inflation of its money supply. That's indeed about $1m a year. (let's not try to do an equivalent calculation for the many billions of dollars of value that are lost from dollar inflation per year). But recognise that it's $1m a year whether there are 0 transactions or 1 trillion. It's not a transaction cost, it's not related to the amount of transactions. It's a fixed system cost in the form of inflation. Calling it a transaction cost is misleading straight away. The actual transaction costs are a few cents or so on average. Of course, it's still costing money, but not to the person making the transaction. After all, if I send you a bitcoin and you forward it, you pay 5 cents. You don't pay for any inflation, only bitcoin holders do, which don't have to necessarily be those who transact. Similarly I, at times, make payments in dollars on dollar-denominated financial systems. I pay transaction costs, which are completely separate from the cost of dollar-inflation which I don't incur as I don't hold my wealth in dollars (european here). These two things are not the same. Do bitcoin holders lose value due to bitcoin inflation in the form of unrealised gains? Absolutely, but then also recognise it's the best performing currency of the past 5 years, or indeed last year, and that they don't really care. Further also recognise that in the code of bitcoin it's written that the inflation will permanently drop to sub 1% levels pretty soon, a level of inflation lower than any major currency. Actual transaction fees will probably rise somewhat to compensate for mining rewards dropping over time, but not by much. For one miners are deemed to be overcompensated from the perspective of the level of security they offer, and if you scale transactions by 10x or 100x (which from an economics point of view is pretty trivial, although the political ramifications of bigger blocks aren't) you can keep the transaction fee really low while massively scaling fee rewards to miners, further compensating a drop in mining rewards. (and if bitcoin doesn't scale, who cares if it's economically sustainable, if it doesn't grow then it'll stay trivial and I couldn't care less).
jstanley 11y ago
> Sadly, uptake of Paym has been slow. I don't think this is very sad. I don't use Paym. I think account number + sort code is easy enough to deal with and doesn't need to be changed.
- aembleton 11y ago
  My friends know my mobile number. When they want to send me money, then I have to give them my sort code and account number. Having a mapping from mobile number to account credentials seems sensible to me. I'm set up on PayM, but no one else seems to use it.
  - mpclark 11y ago
    I love it, but find it takes around the same amount of effort to send money by PayM as it does to send it by regular bank transfer to somebody already set up in my mobile banking app (my main use case is usually sending smallish amounts of cash to my kids, like a modern-day Al Bundy). PayM could do with a really nice streamlined app of its own, rather than being buried deep within each of my banks' own apps.
- Symbiote 11y ago
  I've only used it once (I no longer live in Britain) but I liked the confirmation. I put in a friend's number, and the bank showed me his name.
  - jamiewildehk 11y ago
    Here in Hong Kong we can make direct account transfers at the ATM, though you still need to know the recipient account number, after you enter the number it will show the recipient account name (with some chars masked) which is always a nice confirmation that you've entered the right digits.
pmorici 11y ago
Anyone who doubts why something like Bitcoin would be of use in banking should read the part about net settlement and counter party risk. This article describes the system for moving money within one country but similar mechanisms exist for moving money internationally. Imagine the counter party risk involved between banks who are governed by different central banks in different countries half way around the world. Bitcoin removes the counter party risk in transfers by making settlement instant per transaction instead of net daily settlement in traditional banking. The reason this is important is that these transfers revolve around credit and when there is a banking crisis and everyone suspects everyone else's credit worthiness then payment systems can break down.
- thinkmoore 11y ago
  "Instant." I just need to wait for the transaction to be finalized in a block, and then wait for enough blocks to be reasonably sure there isn't a longer chain elsewhere. I'm sure that won't take any time at all. /s Don't forget there is still counter-party risk on the side that is sending Bitcoin in exchange for goods as well.
  - pmorici 11y ago
    You illustrate the misunderstanding a lot of people have. You are conflating the completion of payment between end users with the settlement. In Bitcoin they are one in the same. The issue is not whether the payment takes 1 minute or 20 minutes to complete it is whether settlement is incidental to the payment or deferred. Deferred settlement creates credit risk. The issue of risk of non delivery of goods is one that is a insurance service someone provides on top of a payment system and isn't particularly relevant to this discussion. Physical exchange of cash and Bitcoin are the only two payment systems that I've ever heard of that don't have counter party credit risk in some form.
    - joosters 11y ago
      The OP is pointing out that bitcoin can take hours for your transaction to be included in a block. So it's far from 'instant' payment or settlement. You then have to wait for several block confirmations to be sure that your transfer took place. Currently, people are reporting three or more hours wait to get a transaction on to the blockchain, because bit-coin has a capacity problem.
tantalor 11y ago
> Net settlement is used because it’s more efficient - it only requires a few hundred entries in the Bank of England’s ledgers each day for potentially millions of payments. Not a very compelling reason... storage is cheap!
- JshWright 11y ago
  Storage isn't the only consideration when comparing 'millions' of transactions to 'hundreds'.
  - TheOtherHobbes 11y ago
    The banks still have to process millions of payments between them. But they also have to process the BoE payments - which is an added overhead. The only real benefit is confidence, because the BoE effectively acts as escrow for all parties. So no one has to worry that settlement won't happen. From the user's POV, it's not a bad system. It's vastly better than the situation ten years ago, when you literally had to wait a week for a cheque to clear - because the receiver had to validate it, and then post it back by snail mail to the originator. However, some transactions still use that system. I recently closed a savings account and could only transfer the money by physically taking a cheque from one bank to another, and waiting a week. Basic transaction processing should really be part of the national (international?) infrastructure. It would be hugely beneficial to all kinds of businesses to have a simple, secure publicly available service for moving money around, at all scales from microtransactions to many millions - ideally linked to a free no-credit-offered cash account for everyone.
- rdancer 11y ago
  Not storage: volatility.
m_eiman 11y ago
The Swedish equivalent to Paym, called Swish, has been really successful. Probably an interesting case to study for those trying to create the next Paypal.
- kristiandupont 11y ago
  Same for "MobilePay" in Denmark -- everybody has it, you can use it to pay in supermarkets or transfer money to friends. I suspect it is really good for things like flea markets because people like myself who never carry cash can suddenly pay there.
- roymurdock 11y ago
  The reason Swish is successful is because it is owned and maintained by 6 Swedish banks [1]. So the payments network - the hard part - was already in place. The banks just had to brand the app in an attractive way, offer discounts/promotions to get user adoption, and provide good UX/UI. I doubt we'll see a new Paypal until there is a new marketplace (Ebay) on a new communications medium (internet) that attracts enough users that a new solution needs to be created to deal with it. [1] http://ecommercenews.eu/swedish-banks-want-use-swish-ecommerce/ http://ecommercenews.eu/swedish-banks-want-use-swish-ecommer...
  - ucho 11y ago
    > So the payments network - the hard part - was already in place. Similar example: Polish mobile payments company (Blue Media) wanted to speed up most commonly used service - charging prepaid GSM accounts so they created account in pretty much every existing bank as internal transfers are pretty much instant. This also required to integrate with many APIs to fill out/automate transfer details. Thanks to that it was easy for them to offered express transfers (5-15 minutes instead of standard 2-4 hours)
  - nissehulth 11y ago
    Ok, all you need is a good platform, a good brand, good marketing and a nice app? So you're basically saying that the reason Swish is successful is that they are doing a good job and deliver a good product?
SwaroopH 11y ago
India uses something similar – IMPS. http://www.npci.org.in/aboutimps.aspx http://www.npci.org.in/aboutimps.aspx
phkahler 11y ago
So everything seems to go back to money in accounts at the bank of England. Where does that "money" come from? How are there non-zero balances there? What stops someone at BoE from just changing a balance? I guess changing an account balance without a corresponding transaction would make automated checks (accounting verification) fail. But then we get back to the question of how any money got in the system in the first place.
- bboreham 11y ago
  The banks using the system pay money into their BoE accounts if their transactions add up to a net outflow.
  - nhaehnle 11y ago
    No. If their transactions add up to a net outflow, banks use the money that is already in their BoE accounts to make transactions in favour of the BoE accounts of other banks or the FPS (those where the net outflow went to). Since this does not change the total amount of money at BoE accounts, it does not affect the parent's question about where that money originally came from.
- nhaehnle 11y ago
  The money in accounts at the Bank of England is created when the BoE buys assets and it is destroyed when they sell the assets again - traditionally, those assets are mostly bonds issued by the treasury (or repurchase agreements or other derived stuff). The BoE does those buys/sells with an eye to ensuring that the inter-bank short term interest rate hits their target interest rate set by policy. The whole connection is pretty well explained by the modern monetary theory school of economics.
- pjc50 11y ago
  What stops someone at BoE from just changing a balance? What stops people from carrying out fraud elsewhere? A system of security controls and reviews. The high-value end-of-day transactions may well be manually confirmed at both ends. How did it get in the first place? Ultimately, deposits; dating back to the establishment of the bank as a credit management vehicle for the government when it would have been deposited in gold. The BoE may also issue loans, in its "lender of last resort" role.
TamDenholm 11y ago
By the way, Mondo are doing a hack weekend this weekend and i'll be attending, if anyone else on HN is, please shoot me a mail (see profile).
stanmancan 11y ago
In Canada we have something called an Interact E-Transfer that the major banks all support. You add a recipients email address and create a "secret question" they can answer. Then, you simply fill our a form that says "Send $X From Account Y to Recipient Z". Depending on the bank the email is sent between 0-60 minutes later, the recipient clicks the link, logs in, and picks which account to deposit it to. The whole process is super easy to use. Most banks charge about $1 per Interact E-Transfer, but some accounts will get a certain number of free transfers. With all that being said, I just received an email from TD Canada Trust (One of the major banks) stating that they are now imposing a $5 fee to cancel an E-Transfer (previously free). I can't remember the last time I cancelled an E-Transfer, but I'm still most likely going to close all my accounts with them over it. I find it absolutely outrageous that they would charge you $5 to cancel a completely automated process. The only explanation I can think of is to nickle and dime their customers.
- IkmoIkmo 11y ago
  In the Netherlands I take my phone and send money to friends, companies, tax services etc, for free in about 15 seconds... arrives within minutes usually. Then there's iDeal which is nice, too. Creditcard payments are a different story, also pretty quick but not as seamless, and not as popular either. I only have a CC to buy some stuff from other countries, or when I leave the continent although my regular debitcard worked in 4 different continents so far, too... Tbh my CC is pretty much collecting dust.
  - warp 11y ago
    In 15 seconds? Between which banks is that? My experience is quite different, sending from Rabobank to ABN AMRO seems to take a few hours. From Rabobank to ING at least a day. From Rabobank to a bank in Ecuador is usually faster (within 30 minutes), but not reliably so.
    - ricardobeat 11y ago
      Transfers between ABN accounts are effectively instant, one to three seconds before the money pops up on the recipients account in the app. Even abroad (South America) I still see my debit payments a few seconds after completing them.
jxm262 11y ago
This reminds me a bit of Prudio http://www.prudio.com/ http://www.prudio.com/ Saw that project on the old assembly site (was a cool idea).
petke 11y ago
I'm disappointed there isn't a guy moving a small gold coin from one vault to another at the central bank every time I buy something with my debit card. "looks like bob is getting drunk on cheap beer at the local pub again. If he'd just order a bottle of wiskey instead I wouldnt have to run back and forth all damn night. Maybe id get to go home and see my kids for once"
- daveguy 11y ago
  Gringots? :)
- mikeash 11y ago
  You just need to work harder at anthropomorphizing computers.
- zhte415 11y ago
  This is actually how it works (or did work, recalling the stories of gold manager at a bank) when central banks move gold deposited from one bank (usually other central banks, not necessarily) to another. The gold bar is moved from one pile or trolley to another. The clipboard list is updated, and the daily tally is done at the end of the day to make sure nothing's been done incorrectly. Banks in stressed/developing countries may do cash transactions with each other where there are issues of trust. And then to abstract it a bit, there's the cash van moving money deposited at larger, more trusted banks, to smaller commercial banks that have more business customers (again, a much bigger differentiation in banking business in developing/emerging countries), creating a long term net flow of cash (but, if the commercial banks hopefully don't go bankrupt) not of money as credits come electronically.
lucaspiller 11y ago
I never thought I'd say this, but banks in the UK are actually pretty good. Over the last few years I've lived in a few different countries and banks just dont compare. In the UK you can open a bank account for free, with no minimum balance and no stupid charges (i.e. ATM withdrawals, even at your own bank).
- gambiting 11y ago
  In comparison to where I'm from(Poland), UK banks seem to be stuck in middle ages and it's infuriating. - cannot get two separate cards for the same account(unless it's a joint account). Why would I want to? I'll explain in a second. In Poland I have a visa debit + mastercard debit cards for the same account. - the cards have a limit of 300 pounds for ATM withdrawals. There is not way to change that limit, I've asked at a few banks and that's just what it is, even in an emergency. With my Polish bank, I can log in online and change it on their website - I can set it to any amount, 100k a day if I want to. I used my Polish card to withdraw few thousand pounds out of an ATM in UK and it worked fine(the ATM itself had a limit of 400 pounds per transaction but I just used it a few times and it worked fine). I can also set a separate limit for internet transactions - which is why I have two cards. One card that I carry with me all the time but which has 0 limit on internet transactions, and another card which always stays at home but which has 0 limit on ATM and over the counter transactions. If someone steals the card that is on me they can't use it on the internet, and if someone steals the card at home they can't use it to withdraw cash or to pay for stuff. - No ability to see pending transactions online on my debit cards until they clear. This one is absolutely crazy to me. How can I know if someone hasn't stolen my money if I can't see pending transactions? The only way to do that is to call the bank. As far as I know, only lloyds shows pending transactions online, Barclays had it as a "suggestion" for ages now. - Credit cards. In Poland, I apply for a certain limit when applying for a card and I either get it or I don't. In UK, you apply for a card, have to sign all the documents for the card, and only after the card arrives I can see what sort of limit was given me. If I don't like it, there's nothing I can do - well, I could ring the bank and ask, but they don't have to increase it. I could close the account and apply somewhere else but that negatively impacts my credit score, what a nightmare. - can't change the pin for my card online. - most UK banks won't send any of my documents to a foreign address even if I ask for "security reasons" but my Polish banks sends all theirs to my UK address no problem.
gambiting 11y ago
"The transaction limit has recently been raised to £250,000 per payment" So what happens if you want to send more? Do you need to make a personal trip to the bank or is there some other system in place?
- jon-wood 11y ago
  You can still do it electronically, it'll just take more than a few minutes as it has to run through the bank's daily reconciliation process. That's probably OK though, I doubt many people have the need to transfer > £250,000 and the entirety to be available immediately.
  - rikkus 11y ago
    Actually it can be quite stressful waiting for the transfer when buying a house!
    - rconti 11y ago
      In the US, anyway, I had to do such big transfers via wire transfer, and while it happens (almost) immediately, you have to catch the 10am or 11am (Pacific) deadline, depending on the bank, or else you're waiting another whole day.
- perlgeek 11y ago
  Unless you do that sort of thing regularly, you'll likely get a phone call from your bank, asking if the transfer is legit. At least that's how I've seen it done in Germany.
- sveiss 11y ago
  You'd usually make a CHAPS payment for high value payments, instead of through Faster Payments. (There's mention of this in the article, in the Net Settlement section). CHAPS costs a little bit of money (~£30), and for that sort of value your bank may want to see you in person and check ID, etc.
Animats 11y ago
All the fast payment systems outside the US are Government-run. In the US, online payments are run by private enterprise. The US doesn't have enough socialism for this to work. The US Fed has been pushing for faster payment processing, but the big banks don't want it.
- akhatri_aus 11y ago
  The system listed in the article is also run by a private company in the UK, Vocalink. The government isn't involved in it. Systems in most non US countries are run by associations run by the banks. More examples include APCA (Australia), PASA (South Africa). Not too sure where the socialism comes in. In the US there is also Fedwire, which works in real time. It just costs a bit more.
  - Animats 11y ago
    The UK system is now private, but the Payments Council, which set it up, was sort of a quango. The UK has a history of organizations which are semi-private but have close ties to the government.
    - chimeracoder 11y ago
      > The UK has a history of organizations which are semi-private but have close ties to the government. That statement applies to the US as well.
  - sveiss 11y ago
    It did take some moderately heavy leaning on the UK banks by government before the Faster Payments System finally got introduced, though.
- fefifofu 11y ago
  It's less about private vs. public. It is more about national banks vs. regional banks. In Canada, the "Big 5" banks span the entire country. In the US, there are so many of these tiny regional banks. Harder to get everyone on board with a new bank-to-bank service. Especially with banking IT that is so rigid and every bank wanting to do their own thing. As an example, all the Big 5 Canadian use the following account number system: 123 12348 7234561. "123" is the Bank Number. "12348" is the Branch number (the last digit, eg. 8, specifies which province). "7234561" is the account number. If your account number starts with "7" then it's a US dollar account. Standardization helps!
cmurf 11y ago
I think the main reason is all seems pretty stupid is because the system, even within one country, is so f'n goddamn huge with a lot of legacy stuff in it, that bad UX is just inevitable, rather than being incompetent. But an exception to incompetence is the EMV's decision in the U.S. to transition from swipe & sign, to chip & sign, and later (2018?) to chip & PIN. That really is just stupid. In the U.S. my debit card I never sign for whether chip or swipe, I always use PIN. In Europe, that same card when swiped I'm asked for PIN, if I use the chip it wants sign! WTF? The delays of ACH seem less between friends at least if you use Venmo or Google Wallet since that's effectively private currency (within that system) and then only periodically use a "sweep" action if that balance gets higher than you want.
- otakucode 11y ago
  Do you happen to know if when the US gets chip and PIN it's also going to put the responsibility for fraud on the consumer when the PIN is used?
jslampe 11y ago
Source: I one of the elected tech-reps on the The Faster Payment Task Force,a Fed-chartered initiative to create a real-time improved bank transfer system, like the one in the UK. I also work at Dwolla, a payment platform that has exclusively focused on modernizing the backend ACH system for over 5 years, as well as created our own real-time system for banks (See: FiSync). There's a lot of good, and bad, information here. It's all impossible to tackle, so I'm going to point to the good things the US has going for it. (Worth getting other Fed Fast members and doing an AMA? Let me know): 1) As many mentioned, Same-Day ACH is coming (slowly but surely). Although not real-time, it will be a helpful stopgap as more real-time systems come online at financial institutions (see: #3). Combined with new Payment API Platforms, like Dwolla, many of us are enabling meaningful access and adding flexibility to an otherwise outdated platform. This will position platforms to take advantage of these new timeframes when they start arriving late 2016 and 2017. 2) The major ACH operators, The Federal Reserve and the bank-owned The Clearing House, are both making significant investments in their tech stack to enable real-time capabilities (The Fed just inked a $17M deal with IBM to update their software and capabilities, and TCH signed a deal with UK Faster Payments Provider, VocaLink). 3) The Faster Payment Task Force is an unprecedented market-led initiative, which despite all odds, that actually making meaningful progress on aligning the criteria and expectations for an interoperable real-time system. This is HUGE. Imagine cramming +300 lifelong competitors, embattled legal adversaries, entrenched interests, and long-standing rivalries in one room to debate the future of a trillion dollar landscape. Now imagine them to agreeing to create a better system. And I'm not just talking about improvements in speed, but better security, flexibility, and capabilities that could enable the next wave of commerce. Keep your eyes on https://fedpaymentsimprovement.org/ https://fedpaymentsimprovement.org/, big news is coming in the next few weeks.
- otakucode 11y ago
  You've made me terribly jealous of the UK. I'm in the US and see our current situation with regard to money transfer as an extremely dangerous one. Aside from the annoyance of money transfers needing to go through a bank, the fact that payment networks charge a PERCENTAGE drives me mad. It does not cost more to move a larger number over the wire. There is no justification whatsoever in charging a fee which gets larger when more money changes hands. And as more and more of our economy moves away from cash and toward payments that flow through these networks that skim percentages, we are quickly getting to a point where banks and credit card companies are getting to skim a percentage off of each and every single transaction that ever takes place in our entire economy. That is madness. We are setting them up as de-facto tax collectors, with the ability to levy and collect taxes with no public involvement. People fought wars over that in the past. I've had an account with Dwolla for ages, and absolutely love what they provide. Flat fee money transfer. It saddens me that I can't use Dwolla everywhere. Are the advances in the ACH system going to do away with fees that include a percentage component? I would be very surprised if banks simply decided to voluntarily step back from a system that will enable them to have more control over the US economy than the federal government (there are many tax-free transactions in our economy that the banks will still get to 'tax' with their transfer fees, giving them more control). Most people probably don't realize what a herculean effort you are involved in. During college I worked in a data center for a bank as a mainframe operator (this was 1997-2001), and processing the ACH data was one of my responsibilities. The system the bank used was an NCR mainframe. It was so old that during my time there, the company (it was actually a separate company from the bank for some reason) received a call and was told that the only other organization in the country still running that model of mainframe, a restaurant in North Carolina, was getting rid of it and would give it to us for free if we would haul it away. We setup a Disaster Recovery system with it. I left the data center shortly before graduating college, and the bank was being acquired by a larger bank which was going to bring all of the processing into their own data center. However, about a decade later I ran into my old boss and learned that the transition never happened. Moving away from that ancient mainframe was apparently deemed too problematic/expensive so it persisted. I would not be surprised if that mainframe was still running the show for half a dozen bank branches, with its antiquated tape drives (the kind where the tape is a big reel, 9-track I think, like the things you see in films of mainframes from the 1960s). Banks are, as far as I understand it, the pinnacle of 'if its working, don't upgrade it'. My hats off to you sir for being involved with trying to move us forward!
capex 11y ago
Do we have something like FPS in Australia?
- bbody 11y ago
  End of next year we should have NPP(https://en.wikipedia.org/wiki/New_Payments_Platform https://en.wikipedia.org/wiki/New_Payments_Platform)
abcampbell 11y ago
The US ACH system is actually what killed bitcoin as a currency fwiw. It's like the system acting in self-defense
- otakucode 11y ago
  You mean that's what made it so hard to get into bitcoin in the first place, preventing its wider adoption? I know when I originally bought some bitcoin (back when it was ~$3/btc) it took WEEKS. The US govt hadn't yet said 'we won't kill you if you follow the rules and work as a money-handling institution' so I had to create an account with Dwolla (badass service that needs to see more adoption), which required the 3-day wait to verify my bank account, then transfer money into the Dwolla account, which took another 3 days, then transfer from Dwolla to the exchange (MtGox but I luckily did not let MtGox hold my coins). Not too long ago, there were companies formed that used bitcoins faster payment clearing to offer faster processing to some sort of trading companies, I remember reading about their IPO. That was before the time for bitcoin transactions to clear started growing significantly... according to an article I found on HN a week or so ago, that's what's going to finally kill off bitcoin. Due to not increasing the block size, either wait times or processing fees will keep growing steeply.

290 points by alexbilbie 11y ago

jrcii 11y ago

Regarding international payments, I dug into this a little one day out of curiosity and ended up here: https://www.frbservices.org/eventseducation/education/fedwire_chips_swift_format_info.html https://www.frbservices.org/eventseducation/education/fedwir... The PDFs on that page appear to show you precisely how the XML messages that conduct the transfers are formatted There's some interesting stuff I couldn't get to here https://www2.swift.com/uhbonline/books/hub/httoc.htm https://www2.swift.com/uhbonline/books/hub/httoc.htm And some other interesting stuff covering these standards http://project.i20022.com/the-standard http://project.i20022.com/the-standard http://www.c24.biz/c24-io-standards-financial-messaging-libraries http://www.c24.biz/c24-io-standards-financial-messaging-libr...

ryanjshaw 11y ago
Cross-border payments are more definitely more interesting. There's a lot of complexity that is outside the scope of the standards - research correspondent (nostro/vostro) accounts and cash management, for instance. Basically, you need to find a path from your bank to the target bank account through the cheapest path of intermediary banks that factors into account fees charged along the path, expected daily transfers at that bank, the payment's impact on liquidity and interest rates of cash left on books in a particular account at a particular time of day vs. alternative options.
- danieltillett 11y ago
  The thing about international wire payments is you never know what you will receive. I send out an invoice for X and I get some seemingly random value less than X. My bank can't tell me why - the best I can get out of them is some intermediate bank along the way took out some fee. It makes it a nightmare to match up an invoice with a payment. If you wanted to exploits this effect for fun and profit you could always deduct $50 to $100 from every invoice you pay and the recipient would just assume it was some intermediate bank fee.
  - ryanjshaw 11y ago
    Switch banks? If your bank is using SWIFT, the MT103 message has fields to track this information (fields 71F and 71G) and validations to ensure the fields are populated correctly (i.e. 32A and 33B must reflect 71F and 71G correctly). Any decent bank should be able to display the originating payment instruction details for a given cross-border payment ledger entry. (I've implemented SWIFT processing fees for cross-border payments.)
    - danieltillett 11y ago
      Well it is a little more difficult here in Australia. I have asked a few times and the only way they can provide me with the data is to do a trace which they charge me $50 for doing. Paying $50 extra to learn that some bank took out a fee is not too helpful. I more wish I could stop it happening.

tinkerrr 11y ago

There was a discussion a couple of years ago around how ACH works. ACH is the dominant system of money transfer in the US and takes 2-5 business days on average for a transfer, compared to the real-time systems in many other countries. https://news.ycombinator.com/item?id=7636066 https://news.ycombinator.com/item?id=7636066

pc86 11y ago

I was just complaining to my wife about this earlier this morning (we are in the US). I made a credit card payment last Thursday (1/14) in the mid morning, maybe 9:45 AM. Ideally this should happen pretty quickly, but I know in the US the infrastructure just doesn't match my current expectations. Seemingly there was zero movement until my credit account was credited the payment Friday afternoon, but the money was still in my checking account (no holds or pending transactions). The weekend goes by, no movement. Monday (a bank holiday) comes and goes, as does Tuesday. I get a text message early this morning (~6:45 AM) that there was a large withdrawal from my checking account - the payment showed up! Nearly three full business days before the money was actually moved, and as of right now it's still a pending transaction. The cynic in my wants to think that it's so people who don't pay attention to their finances are more likely to overdraw/double-spend the money, but part of me thinks it's just because the US infrastructure around banking and payments is so old it just isn't capable of anything approaching real time transactions. I would love to see a logistical/technical explanation of why it takes so long for this type of thing in the US.

jrcii 11y ago
I've asked bankers at the branch about this before and received a vague answer about how they need time to verify things, but I strongly suspect they were just non-technical and didn't know.
- pc86 11y ago
  Is part of the problem inertia? What I mean is if there are multiple pending transactions on an account, is it even possible from a technical perspective to say "Is there $100 available in this account for immediate withdrawal?" I would suspect it is possible, but I also wouldn't expect the majority of US banking infrastructure to run on AS400s.
  - icebraining 11y ago
    Isn't that the available balance? At least here in Portugal, we have three balances: accounting (based on all non-pending transactions), authorized (accounting plus all pending transactions) and available (like authorized, but just with the pending debits). The latter is the amount actually "yours", which you can use without paying interest on.

kbart 11y ago

Good article. I'd like more technical details, especially security related, as some pretty hard problems must have been solved to implement such system where every error or vulnerability might costs tons of money. Any recommendations?

simonvc 11y ago
Disclaimer: I work at Mondo and am the one implementing the way we talk to our agency bank. How it actually works is theres a Message Queue (IBM MQ) that is connected over dedicated lines (MPLS or point to point, but not over the internet). Each side uses a couple of layers of Crypto, including using Hardware Security Modules (HSMs) to actually encrypt and sign the messages. The crypto signatures also have legal standing in a sense, if the message is valid and signed then the counter party or agency bank is authorised to process it.
- ryanjshaw 11y ago
  Banks are full of great lessons in system design that extend past the realm of purely technical solutions. They regularly make cost vs. risk trade-offs that make technical people nervous, for example, straight-through processing of low value payments with the expectation that material fraud can be detected through regular analysis/reconciliation/auditing and dealt with out of band.
- kbart 11y ago
  It sounds that you have a very interesting job. Mind if I ask few questions/career advice? If so, please drop me an email (can be found on my profile).

omh 11y ago

This type of system looks like somewhere that a blockchain could be genuinely useful. Each of the trusted banks could be given access to the blockchain (rather than needing proof-of-work) and it would work as a distributed ledger without the need for VocaLink as a trusted intermediary. Of course the question is how the costs of running VocaLink compare to those of running a blockchain type system.

pmorici 11y ago
A 'blockchain' without proof of work isn't a blockchain and would be no different than the system described. Someone or something has to arbitrate to prevent cheating. In the case of this system it's Vocalink in the case of Bitcoin it's the proof of work.
khgvljhkb 11y ago
While bitcoin is very small compared to banks and credit cards, at this point it is definitely cheaper to send bitcoin than to send Visa money. How it would work if that blockchain was scaled to the level of VocaLink I have no idea about.
- wsxcde 11y ago
  No, in terms of the overall cost of operation of the system, bitcoin is most definitely not cheaper. Transaction costs paid by the users are low because of the inflation subsidy paid out to the miners. In terms of overall costs, the bitcoin mining network alone (i.e., ignoring the cost associated with running all the full nodes, the underlying network and so on) costs $1MM per day to process a measly 100k transactions.
  - IkmoIkmo 11y ago
    No, you're conflating two things. The 'cost' of bitcoin the system, is in the inflation of its money supply. That's indeed about $1m a year. (let's not try to do an equivalent calculation for the many billions of dollars of value that are lost from dollar inflation per year). But recognise that it's $1m a year whether there are 0 transactions or 1 trillion. It's not a transaction cost, it's not related to the amount of transactions. It's a fixed system cost in the form of inflation. Calling it a transaction cost is misleading straight away. The actual transaction costs are a few cents or so on average. Of course, it's still costing money, but not to the person making the transaction. After all, if I send you a bitcoin and you forward it, you pay 5 cents. You don't pay for any inflation, only bitcoin holders do, which don't have to necessarily be those who transact. Similarly I, at times, make payments in dollars on dollar-denominated financial systems. I pay transaction costs, which are completely separate from the cost of dollar-inflation which I don't incur as I don't hold my wealth in dollars (european here). These two things are not the same. Do bitcoin holders lose value due to bitcoin inflation in the form of unrealised gains? Absolutely, but then also recognise it's the best performing currency of the past 5 years, or indeed last year, and that they don't really care. Further also recognise that in the code of bitcoin it's written that the inflation will permanently drop to sub 1% levels pretty soon, a level of inflation lower than any major currency. Actual transaction fees will probably rise somewhat to compensate for mining rewards dropping over time, but not by much. For one miners are deemed to be overcompensated from the perspective of the level of security they offer, and if you scale transactions by 10x or 100x (which from an economics point of view is pretty trivial, although the political ramifications of bigger blocks aren't) you can keep the transaction fee really low while massively scaling fee rewards to miners, further compensating a drop in mining rewards. (and if bitcoin doesn't scale, who cares if it's economically sustainable, if it doesn't grow then it'll stay trivial and I couldn't care less).

jstanley 11y ago

> Sadly, uptake of Paym has been slow. I don't think this is very sad. I don't use Paym. I think account number + sort code is easy enough to deal with and doesn't need to be changed.

aembleton 11y ago
My friends know my mobile number. When they want to send me money, then I have to give them my sort code and account number. Having a mapping from mobile number to account credentials seems sensible to me. I'm set up on PayM, but no one else seems to use it.
- mpclark 11y ago
  I love it, but find it takes around the same amount of effort to send money by PayM as it does to send it by regular bank transfer to somebody already set up in my mobile banking app (my main use case is usually sending smallish amounts of cash to my kids, like a modern-day Al Bundy). PayM could do with a really nice streamlined app of its own, rather than being buried deep within each of my banks' own apps.
Symbiote 11y ago
I've only used it once (I no longer live in Britain) but I liked the confirmation. I put in a friend's number, and the bank showed me his name.
- jamiewildehk 11y ago
  Here in Hong Kong we can make direct account transfers at the ATM, though you still need to know the recipient account number, after you enter the number it will show the recipient account name (with some chars masked) which is always a nice confirmation that you've entered the right digits.

pmorici 11y ago

Anyone who doubts why something like Bitcoin would be of use in banking should read the part about net settlement and counter party risk. This article describes the system for moving money within one country but similar mechanisms exist for moving money internationally. Imagine the counter party risk involved between banks who are governed by different central banks in different countries half way around the world. Bitcoin removes the counter party risk in transfers by making settlement instant per transaction instead of net daily settlement in traditional banking. The reason this is important is that these transfers revolve around credit and when there is a banking crisis and everyone suspects everyone else's credit worthiness then payment systems can break down.

thinkmoore 11y ago
"Instant." I just need to wait for the transaction to be finalized in a block, and then wait for enough blocks to be reasonably sure there isn't a longer chain elsewhere. I'm sure that won't take any time at all. /s Don't forget there is still counter-party risk on the side that is sending Bitcoin in exchange for goods as well.
- pmorici 11y ago
  You illustrate the misunderstanding a lot of people have. You are conflating the completion of payment between end users with the settlement. In Bitcoin they are one in the same. The issue is not whether the payment takes 1 minute or 20 minutes to complete it is whether settlement is incidental to the payment or deferred. Deferred settlement creates credit risk. The issue of risk of non delivery of goods is one that is a insurance service someone provides on top of a payment system and isn't particularly relevant to this discussion. Physical exchange of cash and Bitcoin are the only two payment systems that I've ever heard of that don't have counter party credit risk in some form.
  - joosters 11y ago
    The OP is pointing out that bitcoin can take hours for your transaction to be included in a block. So it's far from 'instant' payment or settlement. You then have to wait for several block confirmations to be sure that your transfer took place. Currently, people are reporting three or more hours wait to get a transaction on to the blockchain, because bit-coin has a capacity problem.

tantalor 11y ago

> Net settlement is used because it’s more efficient - it only requires a few hundred entries in the Bank of England’s ledgers each day for potentially millions of payments. Not a very compelling reason... storage is cheap!

JshWright 11y ago
Storage isn't the only consideration when comparing 'millions' of transactions to 'hundreds'.
- TheOtherHobbes 11y ago
  The banks still have to process millions of payments between them. But they also have to process the BoE payments - which is an added overhead. The only real benefit is confidence, because the BoE effectively acts as escrow for all parties. So no one has to worry that settlement won't happen. From the user's POV, it's not a bad system. It's vastly better than the situation ten years ago, when you literally had to wait a week for a cheque to clear - because the receiver had to validate it, and then post it back by snail mail to the originator. However, some transactions still use that system. I recently closed a savings account and could only transfer the money by physically taking a cheque from one bank to another, and waiting a week. Basic transaction processing should really be part of the national (international?) infrastructure. It would be hugely beneficial to all kinds of businesses to have a simple, secure publicly available service for moving money around, at all scales from microtransactions to many millions - ideally linked to a free no-credit-offered cash account for everyone.
rdancer 11y ago
Not storage: volatility.

m_eiman 11y ago

The Swedish equivalent to Paym, called Swish, has been really successful. Probably an interesting case to study for those trying to create the next Paypal.

kristiandupont 11y ago
Same for "MobilePay" in Denmark -- everybody has it, you can use it to pay in supermarkets or transfer money to friends. I suspect it is really good for things like flea markets because people like myself who never carry cash can suddenly pay there.
roymurdock 11y ago
The reason Swish is successful is because it is owned and maintained by 6 Swedish banks [1]. So the payments network - the hard part - was already in place. The banks just had to brand the app in an attractive way, offer discounts/promotions to get user adoption, and provide good UX/UI. I doubt we'll see a new Paypal until there is a new marketplace (Ebay) on a new communications medium (internet) that attracts enough users that a new solution needs to be created to deal with it. [1] http://ecommercenews.eu/swedish-banks-want-use-swish-ecommerce/ http://ecommercenews.eu/swedish-banks-want-use-swish-ecommer...
- ucho 11y ago
  > So the payments network - the hard part - was already in place. Similar example: Polish mobile payments company (Blue Media) wanted to speed up most commonly used service - charging prepaid GSM accounts so they created account in pretty much every existing bank as internal transfers are pretty much instant. This also required to integrate with many APIs to fill out/automate transfer details. Thanks to that it was easy for them to offered express transfers (5-15 minutes instead of standard 2-4 hours)
- nissehulth 11y ago
  Ok, all you need is a good platform, a good brand, good marketing and a nice app? So you're basically saying that the reason Swish is successful is that they are doing a good job and deliver a good product?

SwaroopH 11y ago

India uses something similar – IMPS. http://www.npci.org.in/aboutimps.aspx http://www.npci.org.in/aboutimps.aspx

phkahler 11y ago

So everything seems to go back to money in accounts at the bank of England. Where does that "money" come from? How are there non-zero balances there? What stops someone at BoE from just changing a balance? I guess changing an account balance without a corresponding transaction would make automated checks (accounting verification) fail. But then we get back to the question of how any money got in the system in the first place.

bboreham 11y ago
The banks using the system pay money into their BoE accounts if their transactions add up to a net outflow.
- nhaehnle 11y ago
  No. If their transactions add up to a net outflow, banks use the money that is already in their BoE accounts to make transactions in favour of the BoE accounts of other banks or the FPS (those where the net outflow went to). Since this does not change the total amount of money at BoE accounts, it does not affect the parent's question about where that money originally came from.
nhaehnle 11y ago
The money in accounts at the Bank of England is created when the BoE buys assets and it is destroyed when they sell the assets again - traditionally, those assets are mostly bonds issued by the treasury (or repurchase agreements or other derived stuff). The BoE does those buys/sells with an eye to ensuring that the inter-bank short term interest rate hits their target interest rate set by policy. The whole connection is pretty well explained by the modern monetary theory school of economics.
pjc50 11y ago
What stops someone at BoE from just changing a balance? What stops people from carrying out fraud elsewhere? A system of security controls and reviews. The high-value end-of-day transactions may well be manually confirmed at both ends. How did it get in the first place? Ultimately, deposits; dating back to the establishment of the bank as a credit management vehicle for the government when it would have been deposited in gold. The BoE may also issue loans, in its "lender of last resort" role.

TamDenholm 11y ago

By the way, Mondo are doing a hack weekend this weekend and i'll be attending, if anyone else on HN is, please shoot me a mail (see profile).

stanmancan 11y ago

In Canada we have something called an Interact E-Transfer that the major banks all support. You add a recipients email address and create a "secret question" they can answer. Then, you simply fill our a form that says "Send $X From Account Y to Recipient Z". Depending on the bank the email is sent between 0-60 minutes later, the recipient clicks the link, logs in, and picks which account to deposit it to. The whole process is super easy to use. Most banks charge about $1 per Interact E-Transfer, but some accounts will get a certain number of free transfers. With all that being said, I just received an email from TD Canada Trust (One of the major banks) stating that they are now imposing a $5 fee to cancel an E-Transfer (previously free). I can't remember the last time I cancelled an E-Transfer, but I'm still most likely going to close all my accounts with them over it. I find it absolutely outrageous that they would charge you $5 to cancel a completely automated process. The only explanation I can think of is to nickle and dime their customers.

IkmoIkmo 11y ago
In the Netherlands I take my phone and send money to friends, companies, tax services etc, for free in about 15 seconds... arrives within minutes usually. Then there's iDeal which is nice, too. Creditcard payments are a different story, also pretty quick but not as seamless, and not as popular either. I only have a CC to buy some stuff from other countries, or when I leave the continent although my regular debitcard worked in 4 different continents so far, too... Tbh my CC is pretty much collecting dust.
- warp 11y ago
  In 15 seconds? Between which banks is that? My experience is quite different, sending from Rabobank to ABN AMRO seems to take a few hours. From Rabobank to ING at least a day. From Rabobank to a bank in Ecuador is usually faster (within 30 minutes), but not reliably so.
  - ricardobeat 11y ago
    Transfers between ABN accounts are effectively instant, one to three seconds before the money pops up on the recipients account in the app. Even abroad (South America) I still see my debit payments a few seconds after completing them.

jxm262 11y ago

This reminds me a bit of Prudio http://www.prudio.com/ http://www.prudio.com/ Saw that project on the old assembly site (was a cool idea).

petke 11y ago

I'm disappointed there isn't a guy moving a small gold coin from one vault to another at the central bank every time I buy something with my debit card. "looks like bob is getting drunk on cheap beer at the local pub again. If he'd just order a bottle of wiskey instead I wouldnt have to run back and forth all damn night. Maybe id get to go home and see my kids for once"

daveguy 11y ago
Gringots? :)
mikeash 11y ago
You just need to work harder at anthropomorphizing computers.
zhte415 11y ago
This is actually how it works (or did work, recalling the stories of gold manager at a bank) when central banks move gold deposited from one bank (usually other central banks, not necessarily) to another. The gold bar is moved from one pile or trolley to another. The clipboard list is updated, and the daily tally is done at the end of the day to make sure nothing's been done incorrectly. Banks in stressed/developing countries may do cash transactions with each other where there are issues of trust. And then to abstract it a bit, there's the cash van moving money deposited at larger, more trusted banks, to smaller commercial banks that have more business customers (again, a much bigger differentiation in banking business in developing/emerging countries), creating a long term net flow of cash (but, if the commercial banks hopefully don't go bankrupt) not of money as credits come electronically.

lucaspiller 11y ago

I never thought I'd say this, but banks in the UK are actually pretty good. Over the last few years I've lived in a few different countries and banks just dont compare. In the UK you can open a bank account for free, with no minimum balance and no stupid charges (i.e. ATM withdrawals, even at your own bank).

gambiting 11y ago
In comparison to where I'm from(Poland), UK banks seem to be stuck in middle ages and it's infuriating. - cannot get two separate cards for the same account(unless it's a joint account). Why would I want to? I'll explain in a second. In Poland I have a visa debit + mastercard debit cards for the same account. - the cards have a limit of 300 pounds for ATM withdrawals. There is not way to change that limit, I've asked at a few banks and that's just what it is, even in an emergency. With my Polish bank, I can log in online and change it on their website - I can set it to any amount, 100k a day if I want to. I used my Polish card to withdraw few thousand pounds out of an ATM in UK and it worked fine(the ATM itself had a limit of 400 pounds per transaction but I just used it a few times and it worked fine). I can also set a separate limit for internet transactions - which is why I have two cards. One card that I carry with me all the time but which has 0 limit on internet transactions, and another card which always stays at home but which has 0 limit on ATM and over the counter transactions. If someone steals the card that is on me they can't use it on the internet, and if someone steals the card at home they can't use it to withdraw cash or to pay for stuff. - No ability to see pending transactions online on my debit cards until they clear. This one is absolutely crazy to me. How can I know if someone hasn't stolen my money if I can't see pending transactions? The only way to do that is to call the bank. As far as I know, only lloyds shows pending transactions online, Barclays had it as a "suggestion" for ages now. - Credit cards. In Poland, I apply for a certain limit when applying for a card and I either get it or I don't. In UK, you apply for a card, have to sign all the documents for the card, and only after the card arrives I can see what sort of limit was given me. If I don't like it, there's nothing I can do - well, I could ring the bank and ask, but they don't have to increase it. I could close the account and apply somewhere else but that negatively impacts my credit score, what a nightmare. - can't change the pin for my card online. - most UK banks won't send any of my documents to a foreign address even if I ask for "security reasons" but my Polish banks sends all theirs to my UK address no problem.

gambiting 11y ago

"The transaction limit has recently been raised to £250,000 per payment" So what happens if you want to send more? Do you need to make a personal trip to the bank or is there some other system in place?

jon-wood 11y ago
You can still do it electronically, it'll just take more than a few minutes as it has to run through the bank's daily reconciliation process. That's probably OK though, I doubt many people have the need to transfer > £250,000 and the entirety to be available immediately.
- rikkus 11y ago
  Actually it can be quite stressful waiting for the transfer when buying a house!
  - rconti 11y ago
    In the US, anyway, I had to do such big transfers via wire transfer, and while it happens (almost) immediately, you have to catch the 10am or 11am (Pacific) deadline, depending on the bank, or else you're waiting another whole day.
perlgeek 11y ago
Unless you do that sort of thing regularly, you'll likely get a phone call from your bank, asking if the transfer is legit. At least that's how I've seen it done in Germany.
sveiss 11y ago
You'd usually make a CHAPS payment for high value payments, instead of through Faster Payments. (There's mention of this in the article, in the Net Settlement section). CHAPS costs a little bit of money (~£30), and for that sort of value your bank may want to see you in person and check ID, etc.

Animats 11y ago

All the fast payment systems outside the US are Government-run. In the US, online payments are run by private enterprise. The US doesn't have enough socialism for this to work. The US Fed has been pushing for faster payment processing, but the big banks don't want it.

akhatri_aus 11y ago
The system listed in the article is also run by a private company in the UK, Vocalink. The government isn't involved in it. Systems in most non US countries are run by associations run by the banks. More examples include APCA (Australia), PASA (South Africa). Not too sure where the socialism comes in. In the US there is also Fedwire, which works in real time. It just costs a bit more.
- Animats 11y ago
  The UK system is now private, but the Payments Council, which set it up, was sort of a quango. The UK has a history of organizations which are semi-private but have close ties to the government.
  - chimeracoder 11y ago
    > The UK has a history of organizations which are semi-private but have close ties to the government. That statement applies to the US as well.
- sveiss 11y ago
  It did take some moderately heavy leaning on the UK banks by government before the Faster Payments System finally got introduced, though.
fefifofu 11y ago
It's less about private vs. public. It is more about national banks vs. regional banks. In Canada, the "Big 5" banks span the entire country. In the US, there are so many of these tiny regional banks. Harder to get everyone on board with a new bank-to-bank service. Especially with banking IT that is so rigid and every bank wanting to do their own thing. As an example, all the Big 5 Canadian use the following account number system: 123 12348 7234561. "123" is the Bank Number. "12348" is the Branch number (the last digit, eg. 8, specifies which province). "7234561" is the account number. If your account number starts with "7" then it's a US dollar account. Standardization helps!

cmurf 11y ago

I think the main reason is all seems pretty stupid is because the system, even within one country, is so f'n goddamn huge with a lot of legacy stuff in it, that bad UX is just inevitable, rather than being incompetent. But an exception to incompetence is the EMV's decision in the U.S. to transition from swipe & sign, to chip & sign, and later (2018?) to chip & PIN. That really is just stupid. In the U.S. my debit card I never sign for whether chip or swipe, I always use PIN. In Europe, that same card when swiped I'm asked for PIN, if I use the chip it wants sign! WTF? The delays of ACH seem less between friends at least if you use Venmo or Google Wallet since that's effectively private currency (within that system) and then only periodically use a "sweep" action if that balance gets higher than you want.

otakucode 11y ago
Do you happen to know if when the US gets chip and PIN it's also going to put the responsibility for fraud on the consumer when the PIN is used?

jslampe 11y ago

Source: I one of the elected tech-reps on the The Faster Payment Task Force,a Fed-chartered initiative to create a real-time improved bank transfer system, like the one in the UK. I also work at Dwolla, a payment platform that has exclusively focused on modernizing the backend ACH system for over 5 years, as well as created our own real-time system for banks (See: FiSync). There's a lot of good, and bad, information here. It's all impossible to tackle, so I'm going to point to the good things the US has going for it. (Worth getting other Fed Fast members and doing an AMA? Let me know): 1) As many mentioned, Same-Day ACH is coming (slowly but surely). Although not real-time, it will be a helpful stopgap as more real-time systems come online at financial institutions (see: #3). Combined with new Payment API Platforms, like Dwolla, many of us are enabling meaningful access and adding flexibility to an otherwise outdated platform. This will position platforms to take advantage of these new timeframes when they start arriving late 2016 and 2017. 2) The major ACH operators, The Federal Reserve and the bank-owned The Clearing House, are both making significant investments in their tech stack to enable real-time capabilities (The Fed just inked a $17M deal with IBM to update their software and capabilities, and TCH signed a deal with UK Faster Payments Provider, VocaLink). 3) The Faster Payment Task Force is an unprecedented market-led initiative, which despite all odds, that actually making meaningful progress on aligning the criteria and expectations for an interoperable real-time system. This is HUGE. Imagine cramming +300 lifelong competitors, embattled legal adversaries, entrenched interests, and long-standing rivalries in one room to debate the future of a trillion dollar landscape. Now imagine them to agreeing to create a better system. And I'm not just talking about improvements in speed, but better security, flexibility, and capabilities that could enable the next wave of commerce. Keep your eyes on https://fedpaymentsimprovement.org/ https://fedpaymentsimprovement.org/, big news is coming in the next few weeks.

otakucode 11y ago
You've made me terribly jealous of the UK. I'm in the US and see our current situation with regard to money transfer as an extremely dangerous one. Aside from the annoyance of money transfers needing to go through a bank, the fact that payment networks charge a PERCENTAGE drives me mad. It does not cost more to move a larger number over the wire. There is no justification whatsoever in charging a fee which gets larger when more money changes hands. And as more and more of our economy moves away from cash and toward payments that flow through these networks that skim percentages, we are quickly getting to a point where banks and credit card companies are getting to skim a percentage off of each and every single transaction that ever takes place in our entire economy. That is madness. We are setting them up as de-facto tax collectors, with the ability to levy and collect taxes with no public involvement. People fought wars over that in the past. I've had an account with Dwolla for ages, and absolutely love what they provide. Flat fee money transfer. It saddens me that I can't use Dwolla everywhere. Are the advances in the ACH system going to do away with fees that include a percentage component? I would be very surprised if banks simply decided to voluntarily step back from a system that will enable them to have more control over the US economy than the federal government (there are many tax-free transactions in our economy that the banks will still get to 'tax' with their transfer fees, giving them more control). Most people probably don't realize what a herculean effort you are involved in. During college I worked in a data center for a bank as a mainframe operator (this was 1997-2001), and processing the ACH data was one of my responsibilities. The system the bank used was an NCR mainframe. It was so old that during my time there, the company (it was actually a separate company from the bank for some reason) received a call and was told that the only other organization in the country still running that model of mainframe, a restaurant in North Carolina, was getting rid of it and would give it to us for free if we would haul it away. We setup a Disaster Recovery system with it. I left the data center shortly before graduating college, and the bank was being acquired by a larger bank which was going to bring all of the processing into their own data center. However, about a decade later I ran into my old boss and learned that the transition never happened. Moving away from that ancient mainframe was apparently deemed too problematic/expensive so it persisted. I would not be surprised if that mainframe was still running the show for half a dozen bank branches, with its antiquated tape drives (the kind where the tape is a big reel, 9-track I think, like the things you see in films of mainframes from the 1960s). Banks are, as far as I understand it, the pinnacle of 'if its working, don't upgrade it'. My hats off to you sir for being involved with trying to move us forward!

capex 11y ago

Do we have something like FPS in Australia?

bbody 11y ago
End of next year we should have NPP(https://en.wikipedia.org/wiki/New_Payments_Platform https://en.wikipedia.org/wiki/New_Payments_Platform)

abcampbell 11y ago

The US ACH system is actually what killed bitcoin as a currency fwiw. It's like the system acting in self-defense

otakucode 11y ago
You mean that's what made it so hard to get into bitcoin in the first place, preventing its wider adoption? I know when I originally bought some bitcoin (back when it was ~$3/btc) it took WEEKS. The US govt hadn't yet said 'we won't kill you if you follow the rules and work as a money-handling institution' so I had to create an account with Dwolla (badass service that needs to see more adoption), which required the 3-day wait to verify my bank account, then transfer money into the Dwolla account, which took another 3 days, then transfer from Dwolla to the exchange (MtGox but I luckily did not let MtGox hold my coins). Not too long ago, there were companies formed that used bitcoins faster payment clearing to offer faster processing to some sort of trading companies, I remember reading about their IPO. That was before the time for bitcoin transactions to clear started growing significantly... according to an article I found on HN a week or so ago, that's what's going to finally kill off bitcoin. Due to not increasing the block size, either wait times or processing fees will keep growing steeply.