8 ms·

‘Stop using paper checks,’ says agency in charge of them

130 points by nols 10y ago

kevincox 10y ago
The banking system is a disaster.
ChuckMcM 10y ago
I like how both the use of ACH by Stripe and Plaid and this story are on the front page at the same time. ACH transactions are interesting but as the article points out reversable as well. All financial organizations agree to reverse them on demand AFAICT. That is why scammers really want you to send them cash via western union or something. That said, its truly annoying to deal with.
rodgerd 10y ago
Why is the US so incredibly backward with day-to-day use of money? As a Kiwi it's like jumping back thirty or forty years in time when I visit.
- zb 10y ago
  It's a scale thing, I think. In NZ if you are a bank wanting to introduce new technology for payments then you have exactly 5 other banks that you need to get on board. In the US there's many thousands. e.g. The NZ banks jointly own the company that processes EFTPOS payments. A system like that could never emerge in the US. Instead, people have debit cards, which are manageable because they go through the credit card companies and there are only a handful of those. But yeah, it's all incredibly primitive and fraud-prone compared to NZ or Europe (I've lived in all three).
  - ido 10y ago
    Scale might explain NZ but not the EU?
    - palunon 10y ago
      Well, the EU isn't a country. Scale might explain it for individual countries situation
      - icebraining 10y ago
        Well, the EU isn't a country. But it still has introduced SEPA over its whole area. If anything, a country should have less of a problem than a still somewhat disjoint union of 28 countries.
  - deadtofu 10y ago
    "Collectively owned" sounds too socialist for most (uniformed) US voters unfortunately.
    - icebraining 10y ago
      US banks, through their American Bankers Association, already collectively own the Corporation for American Banking, which provides services to all banks. The average voter might have misgivings about collective ownership, but banks will hardly let it get in the way of their business.
  - toomanybeersies 10y ago
    You're right there. NZ introduced a new interbank transfer system about 5 years back I think, and by the end of this year, all the banks are going to be on it, ANZ is the only bank that isn't right now. It means that instead of inter-bank transfers being processed once a day at closing, they're now processed hourly.
AjithAntony 10y ago
No actual news, just ACH as it has been for many years. The author was annoyed that credit card companies allow users to pay by "eCheck" without prenote or deposit confirmations. > The good news is that online ACH fraud is relatively uncommon, just because it’s rare to find an online vendor who will allow you to pay using ACH rails instead of your debit card. The case of paying off a credit-card bill is a unique one, because you can’t use a credit card to pay off a credit card.
Matt3o12_ 10y ago
I believe such a system is Safer to use for the average customer because the law is on his side. A routing number is (as far as I know) not considered a secret and very judge will rule that it's the banks fault for authorizing the transaction, not the user's. If the user were to use any kind of authentication (such as typing a pin in a card reader), the bank can claim that it's the user's fault because he used his code carelessly and they are often right, people write the code on cards directly or use their birthdates but even if the pins are random, they can still be easily "cracked" (some people are super skilled in reading them from a distance while others have implemented key loggers in those readers). So you can't really use a password/pin for authentication either (because it is not that secure after all). In my country, debit cards are quite common and debit cards never use a signature – they use a 4 digit pin instead. If your debit card was stolen, and somebody went shopping with it, you have to pay the bills because you did not protect your pin enough and it's not the bank's fault — they had enough proof for authentication. (I know quite a few people who had bills from $300-2000 after their debit cards were stolen and I can tell you for sure that some protected their PIN properly). If you have to authenticate a withdraw in any way, the bank will have a better chance to win a fraud case because they had enough reason to believe the transaction was authentic and it is your fault not for protecting your pin or password enough. The bank might voluntarily rebook the transaction but why even bother if they had to do that anyways (even without a pin). The consumer is not the victim here, the bank who has to get the money back is. So why would you want to fix a system that works in your favor.
- gambler 10y ago
  This is an interesting point. The article complains about checks being zero-factor authentication. Well, in practice, traditional chip-less credit cards are also zero-factor authenticated. The notion that our card numbers are supposed to be "secret" is plain stupid, since we give it to every single vendor we interact with. PIN-based cards are authenticated, but the practical security around those PINs is laughable. So would you rather have obviously insecure but resilient system, or unobviously insecure and fragile system? ... Making checks secure is relatively "easy". Simply have a mechanism for the person to review and authorize every credit/withdrawal via SMS or email. The problem, however, becomes keeping that mechanism secure, especially in the age of easily stealable and hackable mobile phones.
trengrj 10y ago
Does anyone here still use paper checks? I'm 29, living in Australia, and have received maybe 3 paper checks in my entire life.
- gozur88 10y ago
  They're still pretty common in the US for things like utility bills and taxes.
- technion 10y ago
  If you rent an apartment, you'll probably be asked to supply your bond in the form of a paper cheque.
  - skissane 10y ago
    Yes, although they usually demand a bank cheque (which I think is what is called a "cashier's check" in the US), not a personal cheque. You go to the bank teller, you pay them the amount plus a fee (usually out of your bank account), and the teller issues a cheque in the bank's name not yours. I also occasionally get bank cheques in the mail from companies. If you have a utility account, and you close it, and it is in credit, they'll mail you a bank cheque for the credit amount. Actual personal cheques - my grandparents used to give me those for my birthday. That's probably the last time I can ever remember encountering one.
  - trengrj 10y ago
    Usually we do it here with direct transfers. It is cheaper for the landlord.
- ghaff 10y ago
  Yes. In the US, I write one to my housekeeper every few weeks. I just made an estimated tax payment to my state today. I regularly use them for payments on weekend trips I lead--although Paypal is increasingly used. So, yes, I don't use paper checks as commonly as I used to, but they're still pretty common.
- danieltillett 10y ago
Unkechaug 10y ago
Checks can be forged, but passwords can be cracked, and data can be stolen. At the end of the day, it's the responsibility of the company to ensure sensitive information is safeguarded and to minimize fraud. Customers still need to understand and practice good habits, but ultimately this ends up in the hands of one or multiple companies that need to be responsible.
- rm999 10y ago
  I used to work in bank fraud detection/prevention. In general, adding a small barrier is often enough to cut crime rate drastically. This is why people lock their doors even though a robber can break a window, or why people hide their phones in their shoes at the beach even though a thief can just check under everyone's shoes. These small barriers are actually very effective because they increase effort and the risk of being caught. Checks are by far the most frauded financial instrument and at the highest dollar amounts. It's basically the financial equivalent of keeping your door unlocked or your phone laying around unattended. http://www.stopcheckfraud.com/statistics.html http://www.stopcheckfraud.com/statistics.html No one should use checks, and no one should accept them.
AjithAntony 10y ago
> The physical check itself – the piece of paper – has to be genuine, This is wrong, right? There is no such thing as a genuine check outside of conventions for repudiation(out of order check numbers, not on my check paper). Whether it came from the checkbook my bank sent, or out of my printer, it is just as good. Legally, writing it on a napkin would probably work, but draw lots of scrutiny becuase it looks suspicious and can't be processed automatically.
- dalerus 10y ago
  That's correct. I worked at a bank for years and once a month I would get a check written from the same older gentleman on half a sheet of yellow legal pad. He apparently thought buy checks were a scam and he saw no reason to buy them when he could just use a sheet of paper.
  - tamana 10y ago
    And he was exactly right! How do you know who wrote the check? You should only see the recipient.
    - cmdrfred 10y ago
      I presume the account number would inform you of this? Perhaps he had to call and confirm?
    - dalerus 10y ago
      The first couple of times I called and confirmed that he did write the check. Also the banking systems keep copies of signatures so I checked the signatures as well. Once it became a regular thing, we made a note on his account.
  - burfog 10y ago
    Consider yourself lucky. I've heard of checks being written on the side of a cow. I expect this works out better for people who get physical checks returned to them. Shredding the cow is a no-no.
i22 10y ago
I'm not sure ACH is so much less secure than debit. You hand your card out to far more people than you ever send a check to and it has the info they need to use it online unless avs restrictions are enforced by the merchant, which is less secure than a merchant enforcing ACH micro-deposits imho. With both of these authentication methods it is up to the merchant to enforce and they are liable in the end for the most part when they don't. American express doesn't feel the need to enforce micro-deposits because they've already lent you the money so if a payment fails they're not at more risk than they were before the payment was made. In the end, it's easy to obtain the information for both and both have systems for reversing.
seanmccann 10y ago
At my first startup, checks were the industry standard and we naively thought that we could change behavior by introducing modern payment tools to our customers. It turned out that our customers used checks because it helped with their cash flow. They could tell us they "cut a check" on Friday, mail it on Monday, we'd receive it on Wednesday, and the money would be in our bank account Thursday. They basically were able to hold onto that cash for an extra 5 days, compared to a wire transfer.
- DINKDINK 10y ago
  It would seem this is only helpful if you have more outflow of payments than inflow. If other customers/suppliers are using the same tactic, all it does is slow down delivering products and services.
  - zhte415 10y ago
    Accounts Payable and Accounts Receivable: Generally, for services provided, Accounts Payable aim for 60 days after service provided, and Accounts Receivable aim for 30 days since service provided. I dislike it, and have a far nicer relationship with companies that pay on-the-spot. Indeed, I bend over backwards for such clients.
    - cmdrfred 10y ago
      I've seen this as well and assume it is pretty common. Complete bullshit, but common bullshit.
    - kyllo 10y ago
      I've seen companies in B2B contracts ask for 90 day or even 120 day payment terms. It's just part of the negotiation.
- tamana 10y ago
  Have you tried moving your pay deadlines up 5 days, or raising your prices to cover the interest?
zaroth 10y ago
A computer generated check is absolutely as valid as a paper check from your checkbook. I routinely generate images of checks which I then snap a picture of right off the monitor in order to remote deposit. Of course this is always done with the written and signed consent of the account holder. Since you can't ACH outside of the US (I think) and any bank in the US has pretty strict "Know Your Customer" requirements, you will know for sure at least the first hop of where the money went. I've heard of "work from home" schemes to include people acting as a middle-man for funds like this. They receive the ACH funds, and then they wire them overseas or send them via Western Union. These people, whether they were honestly duped or not, have committed a felony. So when people worry about checks containing all the data you need for someone to empty your account, the first thing to consider is deterrence is very strong in this area because the penalty is massive, and tracking where the money was sent via ACH is easy. That said, it would be nice if they could phase in a new standard which used one-time codes and provided real-time validation for this sort of thing. ACH transfer fees are extremely low compared to credit cards after all.
- patmcc 10y ago
  >>>I routinely generate images of checks which I then snap a picture of right off the monitor in order to remote deposit. Of course this is always done with the written and signed consent of the account holder. This is clever on your part, but holy cow there should be a better system than this.
- cperciva 10y ago
  you can't ACH outside of the US (I think) Sort of. There are "International ACH Transfers", but they're not exactly like domestic ACH transfers; I believe they need extra AML information added, for one thing. Being able to make domestic ACH transfers does not imply being able to make international ACH transfers.
- sievebrain 10y ago
  Relying entirely on KYC to identify abusers is very fragile. Not only does the USA not have a modern banking system but it also lacks robust ID verification procedures.
cperciva 10y ago
I use paper checks a lot these days. It costs me about $1 to clear a check, and $25 to send a wire transfer. I'd much prefer to do everything electronically, but I'm not going to pay an extra $24 to do it...
- gruez 10y ago
  >I use paper checks a lot these days. It costs me about $1 to clear a check, and $25 to send a wire transfer. Is ACH not an option?
  - cperciva 10y ago
    Not within Canada, and it's nontrivial (both in terms of paperwork and cost) for moving money from the USA to Canada. I inquired at my bank about electronic funds transfer (think ACH, but in Canada) and it would have cost around $100/month to sign up for that.
    - tempestn 10y ago
      Ya, I sometimes feel like Canada is the only developed country with a more insane banking system than the US. But in reality I think we're both about equally insane, in different ways.
      - cperciva 10y ago
        Canada is about 15 years behind the US in terms of banking. (But about 3 years ahead in terms of credit cards, interestingly enough.) We avoided the mortgage securitization nightmare literally because Canadian banks hadn't gotten around to it yet. If the market crash had taken a year longer before happening, Canadian banks would have been along for the ride.
        tempestn 10y ago
        I'm counting credit cards as part of "banking". Financial services would maybe be a better name. As far as insanity, I mean more little things. I can't speak for most US banks, as I only have accounts at BMO Harris. But for one thing, the statements I get from them are nuts. They list deposits, and withdrawals - the amounts, but not the dates, and not the resulting balance. And then separately they list a record of the balance throughout the month - not the amounts of the changes, but the new balance after each change, along with the date. So in order to determine wtf actually happened, you have to compare the (potentially long!) list of undated transactions with the changes in balance throughout the month (which you have to calculate yourself) to find out what happened when. I mean... it's seriously like it's intentionally as convoluted as possible. My statements from BMO Canada on the other hand show a sane account listing with transactions, dates, amounts, and resulting balance. On the other hand, BMO Harris will mail a physical check (not a cheque! :P ) to anyone in the US for me, for free. Coming from Canadian banking, I was shocked that such a service existed, let alone on regular accounts with no usage fee. It's hilarious that you can do that but you can't send electronic transfers, but it's still extremely convenient, especially when doing business remotely from Canada!
syphilis2 10y ago
I would love to move away from checks, but (ironically) they're the cheapest, quickest, most robust way for me to transfer money digitally between family and friends. Write a check, endorse the back, take a photo with a banking app, and money is moved from one account to another without any additional fees.
- sundvor 10y ago
  Wow, what a massively convoluted process. So you don't have the concept of bank account numbers in the US? Speaking as a Scandinavian expat, in Norway, a bank account number is all that's required for an IB transaction - whether to a private individual or an institution for paying bills etc (which will also require a reference, typically). The account number incorporates all required processing information. In Australia it's slightly more complex by the availability of options; the routing info is split out into a BSB (bank branch identifier) so you need that as well as account number - and account name - for a payment to an individual. For bills you have BPay through your Internet Banking (very similar to a BSB+Account No payment yet a different method, and it doesn't require you to enter a name as the BPay number will resolve to a named organisation). There are typically no transaction fees. Outside of Internet Banking there is also a similar Australia Post system, as well as credit card payment methods. Anyway I thought the Australian system was a bit hard or confusing at first, but the concept of creating digital images of cheques sounds outdated and painful.
  - obsurveyor 10y ago
    Yep, it's pretty antiquated. Wells Fargo only added the ability to transfer money to an account number online a couple years ago and I think it still only works with some banks.
  - dahart 10y ago
    > So you don't have the concept of bank account numbers in the US? Was that really called for? Checks have account numbers on them. And checks aren't the only way to pay for things. The signature is a security measure. Not a very good one, but in terms of the process is the same as your password or whatever authentication you use. You do authenticate, right? You do need more than a single bank account number to complete your transaction, no? By comparing the security procedure of US checks to the information needed without security elsewhere, you're exaggerating the difference. It is easier like you say, and checks should die as fast a death as possible, but the process you replied to takes 30 seconds to perform, not massively longer or more difficult than authenticating with your bank and doing it online.
mariodiana 10y ago
Donald Knuth was saying this how many years ago? It's got to be something like 10 years now. This is why he stopped sending out checks for people finding bugs in his books. http://www-cs-faculty.stanford.edu/~uno/news08.html http://www-cs-faculty.stanford.edu/~uno/news08.html
- stephengillie 10y ago
  Most of Retail stopped accepting checks about 15-20 years ago, iirc. It was about the time laser printers and copiers came about that everyone realized how insecure they were. Now, banks are one of the few places that accept that form of currency. Edit: Judging from the replies, my personal memories are incorrect.
  - obsurveyor 10y ago
    Not in the US they haven't. I've certainly watched it enough to know the hoops they can jump through, the long method: Check is scanned by a machine at the register and a modem or network check happens to make sure the account is in good standing, they get the person's id and write things down on the check from it and then ask for a phone number. Makes me appreciate self checkout a lot. Some times they just scan the check and give it back which typically confused the heck out of the person who just wasted 2 minutes filling it out.
  - vidarh 10y ago
    The security of checks have never depended on difficulty of duplication. Most places checks at least used to be valid if you simply wrote the right information down on an arbitrary piece of paper.
    - deleted 10y ago
      [deleted]
MichaelBurge 10y ago
Business accounts are even worse - they're governed by the Uniform Commercial Code rather than consumer law, and you only get 24 hours to report fraud. If someone sucks $200k out of your account and you don't catch it in 24 hours, there's a possibility you'll never see that money again. What a lot of people do is set up an 'incoming payments' account, an 'outgoing payments' account, and a 'storage' account. Have your bank block all external withdrawals from the incoming account, block all external deposits to the outgoing account, and automatically move money once-a-day from the incoming account to storage and from storage to outgoing(keep say $10,000 in there at all times). Never write checks against the storage account, or give the number out in any way. On one hand, ACH is technically insecure. On the other hand, if a scammer can get away with the money a terrorist could get funded with the money, so money laundering and anti-terrorism laws have the side effect of making it hard for people to get away with it. And then you just throw the scammer in jail. The article mentions handing a check to your landlord. Personally, as a landlord I set up an incoming rent checking account, hand out the checking account information to tenants, and let the tenant deposit the money electronically or by driving to the bank. I've asked my bank to reject withdrawals but accept deposits from that account, and use a debit card to pay for maintenance and utilities. I'm considering using SaaS software to collect this, mainly to ease accounting; I'm not worried about security here.
- crzwdjk 10y ago
  As a fellow landlord, I agree that checks are a giant pain. I'm actually working on making a mini-SaaS just for myself to use, using Stripe to handle ACH payments.
mattmcknight 10y ago
I don't understand why people set up automatic payments on the payee's site. If you initiate the payment from the bank, you have more control over when it goes it out, can review the bill before authorizing the withdrawal, can see all of your pending payments and their effect on your balance, etc. I don't like giving anyone access to one of my accounts. Credit cards are a decent buffer against this, as you get time to review the bill before paying.
- tamana 10y ago
  Because paying bills manually is a laborious time suck and vendors are reliable or else I wouldn't pay them every month.
  - deleted 10y ago
    [deleted]
- Merad 10y ago
  I used to work for the largest provider of bank bill pay in the US (contracted with ~80% of banks, IIRC). I would say that 95% of customers using the service had no clue how it actually works. In fact, the default payment method of bank bill pay is to mail a paper check. Sometimes they cut a check with your account information, sometimes they will go ahead and pull the money from your account, but send a check drawn from their corporate account. Sometimes they mail the check 2-3 days before your payment date, so that (in theory) it has time to get there, sometimes not. The only time they send electronic payments is of the payee has set up electronic payments with them, and even then they may decide to switch your payment to a check at any time for any reason. What makes it even worse is that they try very hard to make sure customers have no way to tell how their payments will be processed, and there's never any kind of warning that something has gone wrong until you get a call about a late bill. For example, even your payment should be sent electronically, something as simple as a typo in the account number so it doesn't match the expected length or format might result in them sending a check to your payee (with the wrong account number), meaning that your payment sort of vanishes... Personally I always set up payments through the payee's site, using a credit card whenever possible. If they screw up the payment then it's their problem to fix.
gizi 10y ago
We already have good alternatives to these things. My financial life runs entirely in bitcoin, except for the shrinking list of payees who are still allowed to request payment in fiat money. Of course, I had to move out, live elsewhere, and continue trading from there, to make it happen. But then again, everything is so much cheaper here ...
- colejohnson66 10y ago
  > who are still allowed to request payment in fiat money Is Bitcoin not a form fiat money itself? It has nothing physical backing its value...
tehabe 10y ago
Always when it is about payments in the US I understand more and more why fintech startups are so successful in the US. In Germany I don't really see the point. Wire transfers and deposit entries are cheap, reliable and they work with every bank. So fintech startups here have a much harder time to explain, what is different about them. BTW. The case what is describe in the article sounds for me like some kind of deposit entry fraud. Something I feared for a while in Germany, because deposit entries are very common for e.g. phone bills. But they seem to be one difference, in Germany you can simply cancel it and get your money back, usually 6 weeks but courts already ruled that this is just the minimum time.
zippergz 10y ago
> By using a debit card, you’re moving money over the relatively secure Visa or Mastercard rails, rather than over the ACH rails. Well... Someone who has your Debit card number and expiration date can remove money directly from your checking account just as someone who has your routing number and account number can. I never use ANYTHING connected directly to my checking account to pay, unless it's the only option. There are a few things I need to pay with a check, but I see literally zero reason to use my debit card. My credit cards are accepted in all the same places and they provide me with more protection (in the sense that there's a buffer between them and my cash - even if I get reimbursed for fraudulent debit usage, the money is gone from my account for some period of time, allowing checks to bounce and other bad things to happen).
- BlackFly 10y ago
  This is more an issue with your bank being too lazy to do 2-factor authentication properly than the network itself, which supports authentication mode for almost all channels. My company provides tools for testing payment terminals/networks and I always make sure I use my actual debit card when I demonstrate our tools. My bank will not authorize transactions without proper authentication, so it really doesn't matter if people see my PAN/expiry date. Even using my credit card online requires proper authentication when the site supports 3D Secure.
spc476 10y ago
I remember reading about Patrick Combs [1] depositing a "sample check" from some junk mail and it ended up clearing, despite it saying "not negotiable" on it. I wish his original story was still on the web because it included a ton of detail about what happened, but alas ... Previous mentions of Patrick Combs on Hacker News: https://news.ycombinator.com/item?id=4344720 https://news.ycombinator.com/item?id=4344720 https://news.ycombinator.com/item?id=2020631 https://news.ycombinator.com/item?id=2020631 [1] The best link I could find today: https://www.reddit.com/r/todayilearned/comments/37b74g/til_that_a_man_called_patrick_combs_deposited_a/crlgqcn https://www.reddit.com/r/todayilearned/comments/37b74g/til_t... EDIT: added additional Ycombinator links.
- weirdkid 10y ago
  I remembered reading this on bored.com back in the 90's when, well, I was bored. Here the original story from the Archive: http://web.archive.org/web/19971210082324/http://www.dnai.com/~pcombs/$$tablecontents.html http://web.archive.org/web/19971210082324/http://www.dnai.co...
makeset 10y ago
The only time I write paper checks anymore is for larger charitable contributions, where I assume the organization would prefer the handling burden over processing fees.
chafir 10y ago
Anyone coming to the US from most of the world is painfully aware of how antiquated the whole system is. For a business accepting relatively few large payments, a major issue is the cost of payment. For all their absurdity, paper checks are the only universally accepted almost-costless way to transfer money. ACH, wire transfer, card payments all come with an added cost of up to 3%, and every single proposed replacement system we've seen comes with new fees attached. For a payment of $10,000, payment by check costs perhaps $1. Payment by a 1% fee wire transfer system (most of them cost more) would be $100. Flat fee wire transfers range from $30 / transfer up. Given how big and archaic ACH is now, and how expensive replacing it would be, I can't see a way out of this unless banks are required by regulation to provide an aggressively low-cost transfer mechanism.
- BlackFly 10y ago
  Banking regulations in Europe require electronic transfers within Europe* to be processed for free within one business day. I've ordered computer hardware, international flights, and paid lawyer fees this way. *Specifically, I believe any country within SEPA.
  - Symbiote 10y ago
    I don't think that's quite right. I think they require SEPA transfers (roughly, transfers to other euro countries) to cost no more than domestic transfers. Banks charge around 5-75 cents to business customers for electronic transfers, depending on the customer.
    - deleted 10y ago
      [deleted]
- driverdan 10y ago
  ACH transfers do not have a percentage fee.
imgabe 10y ago
The percentage based fees for electronic transactions are absurd. We're talking about moving a number from one database to another. The effort doesn't scale with the size of the number. It's not like we have to move a truckload of gold. There's absolutely no reason it should be based on a percentage of the money being moved.
ryanackley 10y ago
I work in a business that provides ACH services. This article over dramatizes the risk of fraud. First, for a business to even use ACH, they need a bank account to receive payments. This involves an underwriting process and a cash reserve for any returns. Second, businesses have daily limits they can process. This is usually well below their cash reserve. Finally, any hint of fraud will cause the bank to drop them like a hot potato and seize their reserves for a period of time to ensure sufficient funds to process any returns. One example of fraud indication is a high return rate
wilde 10y ago
For those interested in a more technical dive into the system, see this blog: http://engineering.gusto.com/how-ach-works-a-developer-perspective-part-1/ http://engineering.gusto.com/how-ach-works-a-developer-persp...

130 points by nols 10y ago

The banking system is a disaster.

I like how both the use of ACH by Stripe and Plaid and this story are on the front page at the same time. ACH transactions are interesting but as the article points out reversable as well. All financial organizations agree to reverse them on demand AFAICT. That is why scammers really want you to send them cash via western union or something. That said, its truly annoying to deal with.

rodgerd 10y ago

Why is the US so incredibly backward with day-to-day use of money? As a Kiwi it's like jumping back thirty or forty years in time when I visit.

zb 10y ago
It's a scale thing, I think. In NZ if you are a bank wanting to introduce new technology for payments then you have exactly 5 other banks that you need to get on board. In the US there's many thousands. e.g. The NZ banks jointly own the company that processes EFTPOS payments. A system like that could never emerge in the US. Instead, people have debit cards, which are manageable because they go through the credit card companies and there are only a handful of those. But yeah, it's all incredibly primitive and fraud-prone compared to NZ or Europe (I've lived in all three).
- ido 10y ago
  Scale might explain NZ but not the EU?
  - palunon 10y ago
    Well, the EU isn't a country. Scale might explain it for individual countries situation
    - icebraining 10y ago
      Well, the EU isn't a country. But it still has introduced SEPA over its whole area. If anything, a country should have less of a problem than a still somewhat disjoint union of 28 countries.
- deadtofu 10y ago
  "Collectively owned" sounds too socialist for most (uniformed) US voters unfortunately.
  - icebraining 10y ago
    US banks, through their American Bankers Association, already collectively own the Corporation for American Banking, which provides services to all banks. The average voter might have misgivings about collective ownership, but banks will hardly let it get in the way of their business.
- toomanybeersies 10y ago
  You're right there. NZ introduced a new interbank transfer system about 5 years back I think, and by the end of this year, all the banks are going to be on it, ANZ is the only bank that isn't right now. It means that instead of inter-bank transfers being processed once a day at closing, they're now processed hourly.

AjithAntony 10y ago

No actual news, just ACH as it has been for many years. The author was annoyed that credit card companies allow users to pay by "eCheck" without prenote or deposit confirmations. > The good news is that online ACH fraud is relatively uncommon, just because it’s rare to find an online vendor who will allow you to pay using ACH rails instead of your debit card. The case of paying off a credit-card bill is a unique one, because you can’t use a credit card to pay off a credit card.

Matt3o12_ 10y ago

I believe such a system is Safer to use for the average customer because the law is on his side. A routing number is (as far as I know) not considered a secret and very judge will rule that it's the banks fault for authorizing the transaction, not the user's. If the user were to use any kind of authentication (such as typing a pin in a card reader), the bank can claim that it's the user's fault because he used his code carelessly and they are often right, people write the code on cards directly or use their birthdates but even if the pins are random, they can still be easily "cracked" (some people are super skilled in reading them from a distance while others have implemented key loggers in those readers). So you can't really use a password/pin for authentication either (because it is not that secure after all). In my country, debit cards are quite common and debit cards never use a signature – they use a 4 digit pin instead. If your debit card was stolen, and somebody went shopping with it, you have to pay the bills because you did not protect your pin enough and it's not the bank's fault — they had enough proof for authentication. (I know quite a few people who had bills from $300-2000 after their debit cards were stolen and I can tell you for sure that some protected their PIN properly). If you have to authenticate a withdraw in any way, the bank will have a better chance to win a fraud case because they had enough reason to believe the transaction was authentic and it is your fault not for protecting your pin or password enough. The bank might voluntarily rebook the transaction but why even bother if they had to do that anyways (even without a pin). The consumer is not the victim here, the bank who has to get the money back is. So why would you want to fix a system that works in your favor.

gambler 10y ago
This is an interesting point. The article complains about checks being zero-factor authentication. Well, in practice, traditional chip-less credit cards are also zero-factor authenticated. The notion that our card numbers are supposed to be "secret" is plain stupid, since we give it to every single vendor we interact with. PIN-based cards are authenticated, but the practical security around those PINs is laughable. So would you rather have obviously insecure but resilient system, or unobviously insecure and fragile system? ... Making checks secure is relatively "easy". Simply have a mechanism for the person to review and authorize every credit/withdrawal via SMS or email. The problem, however, becomes keeping that mechanism secure, especially in the age of easily stealable and hackable mobile phones.

trengrj 10y ago

Does anyone here still use paper checks? I'm 29, living in Australia, and have received maybe 3 paper checks in my entire life.

gozur88 10y ago
They're still pretty common in the US for things like utility bills and taxes.
technion 10y ago
If you rent an apartment, you'll probably be asked to supply your bond in the form of a paper cheque.
- skissane 10y ago
  Yes, although they usually demand a bank cheque (which I think is what is called a "cashier's check" in the US), not a personal cheque. You go to the bank teller, you pay them the amount plus a fee (usually out of your bank account), and the teller issues a cheque in the bank's name not yours. I also occasionally get bank cheques in the mail from companies. If you have a utility account, and you close it, and it is in credit, they'll mail you a bank cheque for the credit amount. Actual personal cheques - my grandparents used to give me those for my birthday. That's probably the last time I can ever remember encountering one.
- trengrj 10y ago
  Usually we do it here with direct transfers. It is cheaper for the landlord.
ghaff 10y ago
Yes. In the US, I write one to my housekeeper every few weeks. I just made an estimated tax payment to my state today. I regularly use them for payments on weekend trips I lead--although Paypal is increasingly used. So, yes, I don't use paper checks as commonly as I used to, but they're still pretty common.
danieltillett 10y ago

Unkechaug 10y ago

Checks can be forged, but passwords can be cracked, and data can be stolen. At the end of the day, it's the responsibility of the company to ensure sensitive information is safeguarded and to minimize fraud. Customers still need to understand and practice good habits, but ultimately this ends up in the hands of one or multiple companies that need to be responsible.

rm999 10y ago
I used to work in bank fraud detection/prevention. In general, adding a small barrier is often enough to cut crime rate drastically. This is why people lock their doors even though a robber can break a window, or why people hide their phones in their shoes at the beach even though a thief can just check under everyone's shoes. These small barriers are actually very effective because they increase effort and the risk of being caught. Checks are by far the most frauded financial instrument and at the highest dollar amounts. It's basically the financial equivalent of keeping your door unlocked or your phone laying around unattended. http://www.stopcheckfraud.com/statistics.html http://www.stopcheckfraud.com/statistics.html No one should use checks, and no one should accept them.

AjithAntony 10y ago

> The physical check itself – the piece of paper – has to be genuine, This is wrong, right? There is no such thing as a genuine check outside of conventions for repudiation(out of order check numbers, not on my check paper). Whether it came from the checkbook my bank sent, or out of my printer, it is just as good. Legally, writing it on a napkin would probably work, but draw lots of scrutiny becuase it looks suspicious and can't be processed automatically.

dalerus 10y ago
That's correct. I worked at a bank for years and once a month I would get a check written from the same older gentleman on half a sheet of yellow legal pad. He apparently thought buy checks were a scam and he saw no reason to buy them when he could just use a sheet of paper.
- tamana 10y ago
  And he was exactly right! How do you know who wrote the check? You should only see the recipient.
  - cmdrfred 10y ago
    I presume the account number would inform you of this? Perhaps he had to call and confirm?
  - dalerus 10y ago
    The first couple of times I called and confirmed that he did write the check. Also the banking systems keep copies of signatures so I checked the signatures as well. Once it became a regular thing, we made a note on his account.
- burfog 10y ago
  Consider yourself lucky. I've heard of checks being written on the side of a cow. I expect this works out better for people who get physical checks returned to them. Shredding the cow is a no-no.

i22 10y ago

I'm not sure ACH is so much less secure than debit. You hand your card out to far more people than you ever send a check to and it has the info they need to use it online unless avs restrictions are enforced by the merchant, which is less secure than a merchant enforcing ACH micro-deposits imho. With both of these authentication methods it is up to the merchant to enforce and they are liable in the end for the most part when they don't. American express doesn't feel the need to enforce micro-deposits because they've already lent you the money so if a payment fails they're not at more risk than they were before the payment was made. In the end, it's easy to obtain the information for both and both have systems for reversing.

seanmccann 10y ago

At my first startup, checks were the industry standard and we naively thought that we could change behavior by introducing modern payment tools to our customers. It turned out that our customers used checks because it helped with their cash flow. They could tell us they "cut a check" on Friday, mail it on Monday, we'd receive it on Wednesday, and the money would be in our bank account Thursday. They basically were able to hold onto that cash for an extra 5 days, compared to a wire transfer.

DINKDINK 10y ago
It would seem this is only helpful if you have more outflow of payments than inflow. If other customers/suppliers are using the same tactic, all it does is slow down delivering products and services.
- zhte415 10y ago
  Accounts Payable and Accounts Receivable: Generally, for services provided, Accounts Payable aim for 60 days after service provided, and Accounts Receivable aim for 30 days since service provided. I dislike it, and have a far nicer relationship with companies that pay on-the-spot. Indeed, I bend over backwards for such clients.
  - cmdrfred 10y ago
    I've seen this as well and assume it is pretty common. Complete bullshit, but common bullshit.
  - kyllo 10y ago
    I've seen companies in B2B contracts ask for 90 day or even 120 day payment terms. It's just part of the negotiation.
tamana 10y ago
Have you tried moving your pay deadlines up 5 days, or raising your prices to cover the interest?

zaroth 10y ago

A computer generated check is absolutely as valid as a paper check from your checkbook. I routinely generate images of checks which I then snap a picture of right off the monitor in order to remote deposit. Of course this is always done with the written and signed consent of the account holder. Since you can't ACH outside of the US (I think) and any bank in the US has pretty strict "Know Your Customer" requirements, you will know for sure at least the first hop of where the money went. I've heard of "work from home" schemes to include people acting as a middle-man for funds like this. They receive the ACH funds, and then they wire them overseas or send them via Western Union. These people, whether they were honestly duped or not, have committed a felony. So when people worry about checks containing all the data you need for someone to empty your account, the first thing to consider is deterrence is very strong in this area because the penalty is massive, and tracking where the money was sent via ACH is easy. That said, it would be nice if they could phase in a new standard which used one-time codes and provided real-time validation for this sort of thing. ACH transfer fees are extremely low compared to credit cards after all.

patmcc 10y ago
>>>I routinely generate images of checks which I then snap a picture of right off the monitor in order to remote deposit. Of course this is always done with the written and signed consent of the account holder. This is clever on your part, but holy cow there should be a better system than this.
cperciva 10y ago
you can't ACH outside of the US (I think) Sort of. There are "International ACH Transfers", but they're not exactly like domestic ACH transfers; I believe they need extra AML information added, for one thing. Being able to make domestic ACH transfers does not imply being able to make international ACH transfers.
sievebrain 10y ago
Relying entirely on KYC to identify abusers is very fragile. Not only does the USA not have a modern banking system but it also lacks robust ID verification procedures.

cperciva 10y ago

I use paper checks a lot these days. It costs me about $1 to clear a check, and $25 to send a wire transfer. I'd much prefer to do everything electronically, but I'm not going to pay an extra $24 to do it...

gruez 10y ago
>I use paper checks a lot these days. It costs me about $1 to clear a check, and $25 to send a wire transfer. Is ACH not an option?
- cperciva 10y ago
  Not within Canada, and it's nontrivial (both in terms of paperwork and cost) for moving money from the USA to Canada. I inquired at my bank about electronic funds transfer (think ACH, but in Canada) and it would have cost around $100/month to sign up for that.
  - tempestn 10y ago
    Ya, I sometimes feel like Canada is the only developed country with a more insane banking system than the US. But in reality I think we're both about equally insane, in different ways.
    - cperciva 10y ago
      Canada is about 15 years behind the US in terms of banking. (But about 3 years ahead in terms of credit cards, interestingly enough.) We avoided the mortgage securitization nightmare literally because Canadian banks hadn't gotten around to it yet. If the market crash had taken a year longer before happening, Canadian banks would have been along for the ride.
      - tempestn 10y ago
        I'm counting credit cards as part of "banking". Financial services would maybe be a better name. As far as insanity, I mean more little things. I can't speak for most US banks, as I only have accounts at BMO Harris. But for one thing, the statements I get from them are nuts. They list deposits, and withdrawals - the amounts, but not the dates, and not the resulting balance. And then separately they list a record of the balance throughout the month - not the amounts of the changes, but the new balance after each change, along with the date. So in order to determine wtf actually happened, you have to compare the (potentially long!) list of undated transactions with the changes in balance throughout the month (which you have to calculate yourself) to find out what happened when. I mean... it's seriously like it's intentionally as convoluted as possible. My statements from BMO Canada on the other hand show a sane account listing with transactions, dates, amounts, and resulting balance. On the other hand, BMO Harris will mail a physical check (not a cheque! :P ) to anyone in the US for me, for free. Coming from Canadian banking, I was shocked that such a service existed, let alone on regular accounts with no usage fee. It's hilarious that you can do that but you can't send electronic transfers, but it's still extremely convenient, especially when doing business remotely from Canada!

syphilis2 10y ago

I would love to move away from checks, but (ironically) they're the cheapest, quickest, most robust way for me to transfer money digitally between family and friends. Write a check, endorse the back, take a photo with a banking app, and money is moved from one account to another without any additional fees.

sundvor 10y ago
Wow, what a massively convoluted process. So you don't have the concept of bank account numbers in the US? Speaking as a Scandinavian expat, in Norway, a bank account number is all that's required for an IB transaction - whether to a private individual or an institution for paying bills etc (which will also require a reference, typically). The account number incorporates all required processing information. In Australia it's slightly more complex by the availability of options; the routing info is split out into a BSB (bank branch identifier) so you need that as well as account number - and account name - for a payment to an individual. For bills you have BPay through your Internet Banking (very similar to a BSB+Account No payment yet a different method, and it doesn't require you to enter a name as the BPay number will resolve to a named organisation). There are typically no transaction fees. Outside of Internet Banking there is also a similar Australia Post system, as well as credit card payment methods. Anyway I thought the Australian system was a bit hard or confusing at first, but the concept of creating digital images of cheques sounds outdated and painful.
- obsurveyor 10y ago
  Yep, it's pretty antiquated. Wells Fargo only added the ability to transfer money to an account number online a couple years ago and I think it still only works with some banks.
- dahart 10y ago
  > So you don't have the concept of bank account numbers in the US? Was that really called for? Checks have account numbers on them. And checks aren't the only way to pay for things. The signature is a security measure. Not a very good one, but in terms of the process is the same as your password or whatever authentication you use. You do authenticate, right? You do need more than a single bank account number to complete your transaction, no? By comparing the security procedure of US checks to the information needed without security elsewhere, you're exaggerating the difference. It is easier like you say, and checks should die as fast a death as possible, but the process you replied to takes 30 seconds to perform, not massively longer or more difficult than authenticating with your bank and doing it online.

mariodiana 10y ago

Donald Knuth was saying this how many years ago? It's got to be something like 10 years now. This is why he stopped sending out checks for people finding bugs in his books. http://www-cs-faculty.stanford.edu/~uno/news08.html http://www-cs-faculty.stanford.edu/~uno/news08.html

stephengillie 10y ago
Most of Retail stopped accepting checks about 15-20 years ago, iirc. It was about the time laser printers and copiers came about that everyone realized how insecure they were. Now, banks are one of the few places that accept that form of currency. Edit: Judging from the replies, my personal memories are incorrect.
- obsurveyor 10y ago
  Not in the US they haven't. I've certainly watched it enough to know the hoops they can jump through, the long method: Check is scanned by a machine at the register and a modem or network check happens to make sure the account is in good standing, they get the person's id and write things down on the check from it and then ask for a phone number. Makes me appreciate self checkout a lot. Some times they just scan the check and give it back which typically confused the heck out of the person who just wasted 2 minutes filling it out.
- vidarh 10y ago
  The security of checks have never depended on difficulty of duplication. Most places checks at least used to be valid if you simply wrote the right information down on an arbitrary piece of paper.
  - deleted 10y ago
    [deleted]

MichaelBurge 10y ago

Business accounts are even worse - they're governed by the Uniform Commercial Code rather than consumer law, and you only get 24 hours to report fraud. If someone sucks $200k out of your account and you don't catch it in 24 hours, there's a possibility you'll never see that money again. What a lot of people do is set up an 'incoming payments' account, an 'outgoing payments' account, and a 'storage' account. Have your bank block all external withdrawals from the incoming account, block all external deposits to the outgoing account, and automatically move money once-a-day from the incoming account to storage and from storage to outgoing(keep say $10,000 in there at all times). Never write checks against the storage account, or give the number out in any way. On one hand, ACH is technically insecure. On the other hand, if a scammer can get away with the money a terrorist could get funded with the money, so money laundering and anti-terrorism laws have the side effect of making it hard for people to get away with it. And then you just throw the scammer in jail. The article mentions handing a check to your landlord. Personally, as a landlord I set up an incoming rent checking account, hand out the checking account information to tenants, and let the tenant deposit the money electronically or by driving to the bank. I've asked my bank to reject withdrawals but accept deposits from that account, and use a debit card to pay for maintenance and utilities. I'm considering using SaaS software to collect this, mainly to ease accounting; I'm not worried about security here.

crzwdjk 10y ago
As a fellow landlord, I agree that checks are a giant pain. I'm actually working on making a mini-SaaS just for myself to use, using Stripe to handle ACH payments.

mattmcknight 10y ago

I don't understand why people set up automatic payments on the payee's site. If you initiate the payment from the bank, you have more control over when it goes it out, can review the bill before authorizing the withdrawal, can see all of your pending payments and their effect on your balance, etc. I don't like giving anyone access to one of my accounts. Credit cards are a decent buffer against this, as you get time to review the bill before paying.

tamana 10y ago
Because paying bills manually is a laborious time suck and vendors are reliable or else I wouldn't pay them every month.
- deleted 10y ago
  [deleted]
Merad 10y ago
I used to work for the largest provider of bank bill pay in the US (contracted with ~80% of banks, IIRC). I would say that 95% of customers using the service had no clue how it actually works. In fact, the default payment method of bank bill pay is to mail a paper check. Sometimes they cut a check with your account information, sometimes they will go ahead and pull the money from your account, but send a check drawn from their corporate account. Sometimes they mail the check 2-3 days before your payment date, so that (in theory) it has time to get there, sometimes not. The only time they send electronic payments is of the payee has set up electronic payments with them, and even then they may decide to switch your payment to a check at any time for any reason. What makes it even worse is that they try very hard to make sure customers have no way to tell how their payments will be processed, and there's never any kind of warning that something has gone wrong until you get a call about a late bill. For example, even your payment should be sent electronically, something as simple as a typo in the account number so it doesn't match the expected length or format might result in them sending a check to your payee (with the wrong account number), meaning that your payment sort of vanishes... Personally I always set up payments through the payee's site, using a credit card whenever possible. If they screw up the payment then it's their problem to fix.

gizi 10y ago

We already have good alternatives to these things. My financial life runs entirely in bitcoin, except for the shrinking list of payees who are still allowed to request payment in fiat money. Of course, I had to move out, live elsewhere, and continue trading from there, to make it happen. But then again, everything is so much cheaper here ...

colejohnson66 10y ago
> who are still allowed to request payment in fiat money Is Bitcoin not a form fiat money itself? It has nothing physical backing its value...

tehabe 10y ago

Always when it is about payments in the US I understand more and more why fintech startups are so successful in the US. In Germany I don't really see the point. Wire transfers and deposit entries are cheap, reliable and they work with every bank. So fintech startups here have a much harder time to explain, what is different about them. BTW. The case what is describe in the article sounds for me like some kind of deposit entry fraud. Something I feared for a while in Germany, because deposit entries are very common for e.g. phone bills. But they seem to be one difference, in Germany you can simply cancel it and get your money back, usually 6 weeks but courts already ruled that this is just the minimum time.

zippergz 10y ago

> By using a debit card, you’re moving money over the relatively secure Visa or Mastercard rails, rather than over the ACH rails. Well... Someone who has your Debit card number and expiration date can remove money directly from your checking account just as someone who has your routing number and account number can. I never use ANYTHING connected directly to my checking account to pay, unless it's the only option. There are a few things I need to pay with a check, but I see literally zero reason to use my debit card. My credit cards are accepted in all the same places and they provide me with more protection (in the sense that there's a buffer between them and my cash - even if I get reimbursed for fraudulent debit usage, the money is gone from my account for some period of time, allowing checks to bounce and other bad things to happen).

BlackFly 10y ago
This is more an issue with your bank being too lazy to do 2-factor authentication properly than the network itself, which supports authentication mode for almost all channels. My company provides tools for testing payment terminals/networks and I always make sure I use my actual debit card when I demonstrate our tools. My bank will not authorize transactions without proper authentication, so it really doesn't matter if people see my PAN/expiry date. Even using my credit card online requires proper authentication when the site supports 3D Secure.

spc476 10y ago

I remember reading about Patrick Combs [1] depositing a "sample check" from some junk mail and it ended up clearing, despite it saying "not negotiable" on it. I wish his original story was still on the web because it included a ton of detail about what happened, but alas ... Previous mentions of Patrick Combs on Hacker News: https://news.ycombinator.com/item?id=4344720 https://news.ycombinator.com/item?id=4344720 https://news.ycombinator.com/item?id=2020631 https://news.ycombinator.com/item?id=2020631 [1] The best link I could find today: https://www.reddit.com/r/todayilearned/comments/37b74g/til_that_a_man_called_patrick_combs_deposited_a/crlgqcn https://www.reddit.com/r/todayilearned/comments/37b74g/til_t... EDIT: added additional Ycombinator links.

weirdkid 10y ago
I remembered reading this on bored.com back in the 90's when, well, I was bored. Here the original story from the Archive: http://web.archive.org/web/19971210082324/http://www.dnai.com/~pcombs/$$tablecontents.html http://web.archive.org/web/19971210082324/http://www.dnai.co...

makeset 10y ago

The only time I write paper checks anymore is for larger charitable contributions, where I assume the organization would prefer the handling burden over processing fees.

chafir 10y ago

Anyone coming to the US from most of the world is painfully aware of how antiquated the whole system is. For a business accepting relatively few large payments, a major issue is the cost of payment. For all their absurdity, paper checks are the only universally accepted almost-costless way to transfer money. ACH, wire transfer, card payments all come with an added cost of up to 3%, and every single proposed replacement system we've seen comes with new fees attached. For a payment of $10,000, payment by check costs perhaps $1. Payment by a 1% fee wire transfer system (most of them cost more) would be $100. Flat fee wire transfers range from $30 / transfer up. Given how big and archaic ACH is now, and how expensive replacing it would be, I can't see a way out of this unless banks are required by regulation to provide an aggressively low-cost transfer mechanism.

BlackFly 10y ago
Banking regulations in Europe require electronic transfers within Europe* to be processed for free within one business day. I've ordered computer hardware, international flights, and paid lawyer fees this way. *Specifically, I believe any country within SEPA.
- Symbiote 10y ago
  I don't think that's quite right. I think they require SEPA transfers (roughly, transfers to other euro countries) to cost no more than domestic transfers. Banks charge around 5-75 cents to business customers for electronic transfers, depending on the customer.
  - deleted 10y ago
    [deleted]
driverdan 10y ago
ACH transfers do not have a percentage fee.

imgabe 10y ago

The percentage based fees for electronic transactions are absurd. We're talking about moving a number from one database to another. The effort doesn't scale with the size of the number. It's not like we have to move a truckload of gold. There's absolutely no reason it should be based on a percentage of the money being moved.

ryanackley 10y ago

I work in a business that provides ACH services. This article over dramatizes the risk of fraud. First, for a business to even use ACH, they need a bank account to receive payments. This involves an underwriting process and a cash reserve for any returns. Second, businesses have daily limits they can process. This is usually well below their cash reserve. Finally, any hint of fraud will cause the bank to drop them like a hot potato and seize their reserves for a period of time to ensure sufficient funds to process any returns. One example of fraud indication is a high return rate

wilde 10y ago

For those interested in a more technical dive into the system, see this blog: http://engineering.gusto.com/how-ach-works-a-developer-perspective-part-1/ http://engineering.gusto.com/how-ach-works-a-developer-persp...