6 ms·

This is very clearly what's going on. Fraud is uncommon enough and the cost of fraud to the banks is smaller than the cost of reducing the velocity of money an

This is very clearly what's going on. Fraud is uncommon enough and the cost of fraud to the banks is smaller than the cost of reducing the velocity of money and loan-making, so the problem will never get fixed so long as it depends on the banks to initiate the fix.

adrr 9y ago
Work at a financial firm and have built a bunch of identity theft detection features. Curious what your fix would be. Identity theft and friendly fraud losses are in the tens of billions annually and identity verification services is a huge industry.
- fweespeech 9y ago
  Banks carry the risk like they do for credit cards, consumers carry $100 of the risk and the risk to their credit rating.
- wolco 9y ago
  Change the way checks are issued/redeemed. Right now the customer is on the hook for 7 years because a check isn't cleared until it goes back to the bank that issued the check . The customer thinks by seeing the money in the account the check was good and can clear a sale. The reality is the bank can take that money back if it is later determined to be false/fake.
  - adrr 9y ago
    Paper checks are going away. Some of the online banks don't even support them. ACH allows only 60 days to claw back the money(disputes) and with same day clearing requirement we can get rid of 2 day holds.
    - pfranz 9y ago
      What are they being replaced with? Yeah, as a young renter I went years without using a check. When buying a home last year I had various inspectors during the process. After buying, I've had electricians, plumbers, contractors, locksmiths, and other consultants. I think one gave me a bill and accepted credit card. The rest preferred checks (to be fair, I didn't seek other forms). I've tried all sorts of p2p methods over the years. All of the banks are too confusing, obscure, or too limited (i.e. only within their bank). Paypal and credit cards charge a not-insignificant fee. Venmo or Square Cash work fine if your group of friends accept them--but more than half the time, they don't for me. I often do ACH transfers between my own accounts, but the first time I set it up a cringe a little bit and cross my fingers. It sucks waiting the 2 or 3 days waiting to see something. I can't see small businesses accepting ACH as payment because they want something in hand. If we had the setup I've heard about in Britain or Europe, I can see checks going away, but with as much churn as I've seen in this space in the 20 years since Paypal, nothing seems to stick.
      - thanksgiving 9y ago
        For some, it might be walmart. Previously, on hn https://news.ycombinator.com/item?id=8361329 https://news.ycombinator.com/item?id=8361329
      - djrogers 9y ago
        > I've had electricians, plumbers, contractors, locksmiths, and other consultants. I think one gave me a bill and accepted credit card. The rest preferred checks Try cash? I use cash for almost all transactions like that and have never been turned down :-)
        pfranz 9y ago
        Cash is nice, but the the main point of banks is that I don't have to carry a bunch around. I honestly didn't even use an ATM or carry cash for years. I started carrying cash only when my job reimbursed me for parking (and they only accepted cash). It's also nice for bookkeeping. I can write the account number or purpose on the check itself.
  - DashRattlesnake 9y ago
    > customer is on the hook for 7 years 7 years? Are you sure it's not something like 7 days?
    - thephyber 9y ago
      It takes 7 years for a bankruptcy to clear your credit record in the USA.
      - donarb 9y ago
        Not just bankruptcy. Banks and businesses contract with check verification companies such as ChexSystems. I had a friend who bounced a check and it took him a few weeks to reimburse the bank. By then the bank closed his account and reported him to Chex, who put a 5 year hold on his ability to get another checking account through any bank that used Chex verification (> 90%), essentially blackballed.
      - watersb 9y ago
        Ten, I think. Ten years. Or should I dispute that with the credit-reporting agencies?
        toomuchtodo 9y ago
        Negative credit information falls off after 7 years from date of first delinquency. Always dispute negative credit items; more likely than not, it won't be verified and is usually removed. Otherwise, wait 7 years and then dispute again.
      - DashRattlesnake 9y ago
        That may be so, but the GP was talking about the time it takes checks to clear. IIRC, uncashed checks aren't even valid after 180 days, let alone 7 years.
    - deleted 9y ago
      [deleted]
- hyperpape 9y ago
  I've never talked about this with anyone who knows the industry so it may be stupid in some obvious way, but I would gladly accept the inconvenience of having to go to my bank in person, carrying official ID, when opening lines of credit, if it would make the whole process secure. Banks could serve the process of relatively slow but reliable authentication for specific financial transactions, and communicate those authorizations to each other. Individuals who need more flexibility could opt out or do something more complicated, at the cost of some risk. There's some cost to this, but I still suspect quite a few people would accept it.
  - ac29 9y ago
    >carrying official ID It's probably not hard to forge a social security card and birth certificate if you have the relevant information. From there, a state ID (or maybe even passport) should be possible to get. I don't believe there is any biometric security on either. A determined identity thief might go that far.
    - rphlx 9y ago
      The thief would have to physically resemble the victim's photo, height, age, gender, etc, which is some added defense in depth. For instance it would be hard for most males to pass themselves off as a typical female.
      - munin 9y ago
        > The thief would have to physically resemble the victim's photo Why? Show up to a government station with your birth certificate, SSN, some telephone and utility bills, and they'll take the thiefs picture and put it on an identity card with your name on it.
        zo1 9y ago
        That sounds incredibly bad for a first-world country. If that was the case, I'd argue that the entire country is in collapse. As you then have no control over foreigners impersonating locals and manipulating something as serious as elections, never-mind bank-fraud. Edit: Point being, this needs to be fixed ASAP if you are to move your country into the future. Fix the regulatory/state hurdles that prevent it from happening, and get yourselves National Identification that's secure. Things will flow positively from there.
- zo1 9y ago
  Verify that person's biometrics against the national database? I know that's what's happening in South Africa, a third-world country: http://www.htxt.co.za/2015/09/16/this-is-how-banks-and-home-affairs-smartcards-will-use-fingerprint-id/ http://www.htxt.co.za/2015/09/16/this-is-how-banks-and-home-...
- Simon_says 9y ago
  The big architectural flaw is that when I as a consumer prove my identity to company A, that gives company A enough information to impersonate me to company B. Or equivalently, it can give a rogue employee at company A that power, or anybody who hacks company A's database. The solution is asymmetric cryptography, wherein identity is tied to a public/private keypair, and I can prove I have the corresponding private key without giving the other party the ability to impersonate me. Ideally, the government wouldn't know my private key, either, rather they would just give their own attestation that a given public key is owned by a person with a given name, DoB, SSN, and biometrics. Along similar lines, any financial account would have its own keypair, with moving money out of the account requiring signing with the private key. The state of cryptography today is way too obtuse for this to work right now, but I think it could be made more user friendly with specialized hardware to hold the keys and perform the encryption. The idea that SSNs are secret, but we hand it out to half a dozen organizations is absolutely ludicrous.

adrr 9y ago

Work at a financial firm and have built a bunch of identity theft detection features. Curious what your fix would be. Identity theft and friendly fraud losses are in the tens of billions annually and identity verification services is a huge industry.

fweespeech 9y ago
Banks carry the risk like they do for credit cards, consumers carry $100 of the risk and the risk to their credit rating.
wolco 9y ago
Change the way checks are issued/redeemed. Right now the customer is on the hook for 7 years because a check isn't cleared until it goes back to the bank that issued the check . The customer thinks by seeing the money in the account the check was good and can clear a sale. The reality is the bank can take that money back if it is later determined to be false/fake.
- adrr 9y ago
  Paper checks are going away. Some of the online banks don't even support them. ACH allows only 60 days to claw back the money(disputes) and with same day clearing requirement we can get rid of 2 day holds.
  - pfranz 9y ago
    What are they being replaced with? Yeah, as a young renter I went years without using a check. When buying a home last year I had various inspectors during the process. After buying, I've had electricians, plumbers, contractors, locksmiths, and other consultants. I think one gave me a bill and accepted credit card. The rest preferred checks (to be fair, I didn't seek other forms). I've tried all sorts of p2p methods over the years. All of the banks are too confusing, obscure, or too limited (i.e. only within their bank). Paypal and credit cards charge a not-insignificant fee. Venmo or Square Cash work fine if your group of friends accept them--but more than half the time, they don't for me. I often do ACH transfers between my own accounts, but the first time I set it up a cringe a little bit and cross my fingers. It sucks waiting the 2 or 3 days waiting to see something. I can't see small businesses accepting ACH as payment because they want something in hand. If we had the setup I've heard about in Britain or Europe, I can see checks going away, but with as much churn as I've seen in this space in the 20 years since Paypal, nothing seems to stick.
    - thanksgiving 9y ago
      For some, it might be walmart. Previously, on hn https://news.ycombinator.com/item?id=8361329 https://news.ycombinator.com/item?id=8361329
    - djrogers 9y ago
      > I've had electricians, plumbers, contractors, locksmiths, and other consultants. I think one gave me a bill and accepted credit card. The rest preferred checks Try cash? I use cash for almost all transactions like that and have never been turned down :-)
      - pfranz 9y ago
        Cash is nice, but the the main point of banks is that I don't have to carry a bunch around. I honestly didn't even use an ATM or carry cash for years. I started carrying cash only when my job reimbursed me for parking (and they only accepted cash). It's also nice for bookkeeping. I can write the account number or purpose on the check itself.
- DashRattlesnake 9y ago
  > customer is on the hook for 7 years 7 years? Are you sure it's not something like 7 days?
  - thephyber 9y ago
    It takes 7 years for a bankruptcy to clear your credit record in the USA.
    - donarb 9y ago
      Not just bankruptcy. Banks and businesses contract with check verification companies such as ChexSystems. I had a friend who bounced a check and it took him a few weeks to reimburse the bank. By then the bank closed his account and reported him to Chex, who put a 5 year hold on his ability to get another checking account through any bank that used Chex verification (> 90%), essentially blackballed.
    - watersb 9y ago
      Ten, I think. Ten years. Or should I dispute that with the credit-reporting agencies?
      - toomuchtodo 9y ago
        Negative credit information falls off after 7 years from date of first delinquency. Always dispute negative credit items; more likely than not, it won't be verified and is usually removed. Otherwise, wait 7 years and then dispute again.
    - DashRattlesnake 9y ago
      That may be so, but the GP was talking about the time it takes checks to clear. IIRC, uncashed checks aren't even valid after 180 days, let alone 7 years.
  - deleted 9y ago
    [deleted]
hyperpape 9y ago
I've never talked about this with anyone who knows the industry so it may be stupid in some obvious way, but I would gladly accept the inconvenience of having to go to my bank in person, carrying official ID, when opening lines of credit, if it would make the whole process secure. Banks could serve the process of relatively slow but reliable authentication for specific financial transactions, and communicate those authorizations to each other. Individuals who need more flexibility could opt out or do something more complicated, at the cost of some risk. There's some cost to this, but I still suspect quite a few people would accept it.
- ac29 9y ago
  >carrying official ID It's probably not hard to forge a social security card and birth certificate if you have the relevant information. From there, a state ID (or maybe even passport) should be possible to get. I don't believe there is any biometric security on either. A determined identity thief might go that far.
  - rphlx 9y ago
    The thief would have to physically resemble the victim's photo, height, age, gender, etc, which is some added defense in depth. For instance it would be hard for most males to pass themselves off as a typical female.
    - munin 9y ago
      > The thief would have to physically resemble the victim's photo Why? Show up to a government station with your birth certificate, SSN, some telephone and utility bills, and they'll take the thiefs picture and put it on an identity card with your name on it.
      - zo1 9y ago
        That sounds incredibly bad for a first-world country. If that was the case, I'd argue that the entire country is in collapse. As you then have no control over foreigners impersonating locals and manipulating something as serious as elections, never-mind bank-fraud. Edit: Point being, this needs to be fixed ASAP if you are to move your country into the future. Fix the regulatory/state hurdles that prevent it from happening, and get yourselves National Identification that's secure. Things will flow positively from there.
zo1 9y ago
Verify that person's biometrics against the national database? I know that's what's happening in South Africa, a third-world country: http://www.htxt.co.za/2015/09/16/this-is-how-banks-and-home-affairs-smartcards-will-use-fingerprint-id/ http://www.htxt.co.za/2015/09/16/this-is-how-banks-and-home-...
Simon_says 9y ago
The big architectural flaw is that when I as a consumer prove my identity to company A, that gives company A enough information to impersonate me to company B. Or equivalently, it can give a rogue employee at company A that power, or anybody who hacks company A's database. The solution is asymmetric cryptography, wherein identity is tied to a public/private keypair, and I can prove I have the corresponding private key without giving the other party the ability to impersonate me. Ideally, the government wouldn't know my private key, either, rather they would just give their own attestation that a given public key is owned by a person with a given name, DoB, SSN, and biometrics. Along similar lines, any financial account would have its own keypair, with moving money out of the account requiring signing with the private key. The state of cryptography today is way too obtuse for this to work right now, but I think it could be made more user friendly with specialized hardware to hold the keys and perform the encryption. The idea that SSNs are secret, but we hand it out to half a dozen organizations is absolutely ludicrous.