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This reminds me of a question I've had for the longest time (+): why is it that in the US wiring money between accounts is so expensive or difficult? Whole ecos

This reminds me of a question I've had for the longest time (+): why is it that in the US wiring money between accounts is so expensive or difficult? Whole ecosystems of companies have sprung up (PayPal and Stripe come to mind, and apps such as TransferWise) to reduce the friction when the banks could easily set up a way cheaper system that would actually be better (privacy etc.) for the consumer. The EU seems to be much better at this .. ? (+) Partial answer found here, but not satisfying https://money.stackexchange.com/questions/27474/why-are-wire-transfers-and-other-financial-services-in-canada-so-much-more-expen https://money.stackexchange.com/questions/27474/why-are-wire...

grecy 7y ago
Moving from Australia to Canada/US felt like going back in time 20 years when it came to banking. Even ten years ago in Australia I could do more with my online banking than I can today in North America. Checks are for what now?
- lettergram 7y ago
  I use checks all the time actually. Every other form of payment online is “pull”, I only want to “push” my funds to external people.
  - fernandotakai 7y ago
    i've never used a check in my entire life. when i need to pay someone i just do an online transfer.
  - loeber 7y ago
    That's not actually correct. By giving an external person a check, you give them the ABILITY to PULL funds from you. It looks like a push, but it's actually not. https://www.bankrate.com/financing/banking/writing-checks-increasingly-risky/ https://www.bankrate.com/financing/banking/writing-checks-in...
    - mindslight 7y ago
      More importantly you're giving them the authorization. Everyone already has the basic ability to pull funds from arbitrary checking accounts. heh.
    - bsder 7y ago
      Knuth had to quit giving out real checks (which nobody actually ever cashed, anyway) for exactly this reason.
    - emiliobumachar 7y ago
      They probably meant a fire-and-forget method to pay untrusted parties without giving them the ability to charge more than agreed. Chargebacks are a thing, but they require constant vigilance and the occasional bureaucratic task.
      - TylerE 7y ago
        Checks have substantially less security there. Not more - and even if/when it gets fixed the money comes out immediately.
  - kolinko 7y ago
    That’s what wire transfers are for in EU. Same day/instant, either free or with a flat fee of $0.25-0.5. In Poland if you’re going out with friends and someone paid for you bc you forgot a card, you just wire them money from your phone. For my whole adult life (36 yo) I only used and saw an actual check once. Wire transfers since I can remember.
    - iokanuon 7y ago
      Since a few years ago, you were also able to use the BLIK system to transfer money instantly for free between most banks, by only knowing the recipient's phone number. To be fair I can't imagine anything more convenient.
      - eythian 7y ago
        In NL we have "Tikkie", where you just have to give them a link, whether it's by whatsapp, email, IRC, whatever. Sounds slightly more convenient as it's not based around a phone number (but can be if that's what you have :)
  - itcrowd 7y ago
    > Every other form of payment online is “pull" Sorry, but if I transfer funds to a friend from my banking app, how is that "pull"? If I send you money with PayPal, that's not "pull". If we settle our debt using e.g. TransferWise, that's not "pull"..? I don't get your point. There are plenty of "push" methods.
    - layoutIfNeeded 7y ago
      If PayPal decided to charge you a $10 per month for “maintenance costs”, how would you stop them from doing so?
      - pjc50 7y ago
        Well, if they're not authorised, dispute it with the bank? https://www.directdebit.co.uk/DirectDebitExplained/Pages/DirectDebitGuarantee.aspx https://www.directdebit.co.uk/DirectDebitExplained/Pages/Dir...
    - mattmcknight 7y ago
      Can you pay your electric bill with those?
      - itcrowd 7y ago
        Yes, I pay all my bills by bank transfer (house, electric, internet, settlements with friends etc). It's the most common payment method here (I'm in Europe). PayPal et al are barely used here because the bank transfer system is free and frictionless.
        Symbiote 7y ago
        I'm guessing, but I think most people probably give the electric company permission to pull the money from their account (direct debit) rather than reviewing the bill and "pushing" the money every time. There are very strong guarantees in the individual's favour if the company makes a mistake.
  - mantasm 7y ago
    The numbers at the bottom of the check are all that someone needs to initiate an ACH transfer out of your account!
  - wereHamster 7y ago
    > Every other form of payment online is “pull”, […] Wat? When I transfer money to another account via my bank's ebanking app that is very much "push". The transfer is executed either immediately or at the end of the business day. Nobody is pulling anything.
    - anonymouz 7y ago
      I assume you live in the EU (or somewhere else outside the US), where it is the most natural thing to just send money from your account to another one. This simply isn't a thing in the US, as I discovered when moving to there for a time. They use third-party apps, cheques, and wire transfers (which are expensive and seem to work via ACH, a pull type system). It's simply not possible to go into your ebanking app and transfer money to someone elses account. (With very restrictive exceptions, e.g. same bank, or maybe the bank has integrated a third party service...) As inconceivable as the American system is in the beginning for somebody coming from the EU, I guess for many people from the US it's similarly non-obvious that a push system can (and does) exist somewhere else.
      - iagovar 7y ago
        But why? It just doesn't make sense to not have a push system. I, honestly, don't get it.
      - watersb 7y ago
        Lived in the USA all my life, have always wanted to have direct transfer as you describe.
  - mixmastamyk 7y ago
    Nope, "online push" is ubiquitous in civilized countries. Don't get me started on filing taxes!
  - mattmcknight 7y ago
    I think the point here is that the various bills I have to pay don't give me their bank account number, but they ask for me to give them our account information so they can automatically subtract whatever amount. If they would give me their account numbers, I would gladly send them funds. Instead, I use my bank's online bill pay to generate a check for them.
    - jpindar 7y ago
      >I use my bank's online bill pay to generate a check which has your account information on it (I do the same thing, though.)
      - mattmcknight 7y ago
        I am not so much worried about the fraud aspect, as I am explicitly giving them permission to take amounts of their determination from my account without my explicit agreement to the amount of each transaction and on their schedule.
  - emiliobumachar 7y ago
    Sorry if I'm out-of-date, but how do checks work online?
    - falsedan 7y ago
      Like, to pay for something remotely? I’ve emailed a picture of the check to sellers who refuse to use PayPal and then they use their bank’s online deposit system to drop it into their account (a couple of times for second-hand board games).
      - emiliobumachar 7y ago
        Thanks for the reply. But, that sounded very unsecure. What happens if a third party cashes it first, you say you didn't share the picture, the merchant says they didn't share the picture?
        falsedan 7y ago
        You’re stuffed, you’re supposed to only exchange the physical instrument so you’d be liable for fraud.
- reaperducer 7y ago
  Checks are for what now? For me this week: Paid for a city license, paid the cat sitter, paid for a small magazine subscription, made a charitable donation, and paid the rent. The cat sitter and the charity were check only. No other option. The magazine has a PayPal option, but I don't trust PayPal. The city license could have been done with a card online, but I'm not interested in setting up yet another account with yet another third party to mishandle my information. Paying the rent by check is free, but paying with a credit card is a $74 fee. And this is with a very large company that almost everyone knows. People do abandon checks when possible. But for the most part it's the businesses that put up barriers. Or, in my case, a lack of trust, which has caused me to use checks more. I like the paper trail. I check my bank statement every month and at least once a year there is an error. I am coming around somewhat on the trust thing. If I can use a virtual credit card number, I will. But not if I have to make yet another account with yet another password and yet more gathering of information that is nobody's business. Edit: I forgot that I also had to send a check to a county recorder out if state to file some legal documents. But that was a cashier's check, not a bank draft. Still, the only form of payment accepted by that county government is cash if you live there, or a cashier's check if you're out of state. Also, my accountant only takes cash and checks. I consider it a virtue since it indicates that she watches every penny. But I didn't put that payment in the list because it was a couple of months ago. When your life is simple, banking is simple. As you get older and your life becomes more complicated, banking gets more complacated.
  - scarejunba 7y ago
    I know. In America, it's such a bloody nightmare with the cheques everywhere. This should obviously be first-class supported by banks. If I could just set up direct debit that would be so much better. It would all show up on one screen, I could see what this months aggregate direct debits are, what they are to each account. You could even just use the 'Transfer Money' functionality to one-time things if you don't want to give repeat access. And to top it all off, the American bank cheque system is so insecure.
    - thfuran 7y ago
      Yeah, it's hard to secure a system where paying someone involves giving them your name, address, bank account and routing number, and signature.
- djmips 7y ago
  Canada has Interac E-transfer which is convenient and free depending on which bank you bank with. I pay my rent with it for example.
- Scoundreller 7y ago
  I use checks to pay vendors I don’t like, like the for-profit power utility my building forces me to use. I have stamps to use up, and it costs them probably $7-$10 to handle it.
  - lotsofpulp 7y ago
    There is no way depositing a check costs $7 to $10 for any decent size business as they’re already probably handling checks. If anything, a check payment is cheaper as it’s more secure for the recipient in case of a dispute.
    - Scoundreller 7y ago
      Someone has to open it. Someone has to key it into a billing system. Someone has to scan it. Someone has to archive it. Some process needs to occur to verify that the payment indeed went through. I doubt their remote deposit app is any less clunky than the consumer one they give me. If it’s better, they’re paying for it. Someone needs to manage those people. And they need space to do their work. I could see it taking 15 minutes in total labour costs.
      - deleted 7y ago
        [deleted]
      - lotsofpulp 7y ago
        Those people likely do many other tasks. Removing checks from the equation would not eliminate their jobs.
      - cosmie 7y ago
        It's entirely possible that all of those someones are outsourced. If they're using a lockbox service[1], the entire cost of processing your mailed check can come out to less than $1 (substantially less with sufficient volume). And at the same time, many lockbox services will expose your data to offshore contractors doing the manual components. [1] https://en.wikipedia.org/wiki/Lock_box https://en.wikipedia.org/wiki/Lock_box
- brongondwana 7y ago
  Moving from Norway back to Australia felt like going back in time 20 years when it came to banking! In Norway I'd get a new bill and enter the code into my banking and it would offer me an option to "automatically approve up to X per month for this vendor". Automatically approved bills didn't get auto paid - but they appeared in the "upcoming bills" when issued, with a pay date of the due date on the bill. I could go an hit "pause" or "stop" on any bill - and it either wouldn't pay or would be removed entirely. Anything that wasn't auto-approved would start in paused mode and I'd have to manually approve it - but that was a single click. Still, I agree that when I'm in the states it feels crazy old tech. They still require signatures on credit cards!
  - girvo 7y ago
    BPay gets you close with that. Had that for years and years at this point. Now we have Osko and PayID which is immediate free payments without needing to remember bank account details. It’s neat!
    - brongondwana 7y ago
      Yeah, PayID is pretty cool.
  - grecy 7y ago
    I was doing that 10 years ago in Australia with BPay...
leetcrew 7y ago
isn't it usually free to transfer money between accounts if you're willing to wait? I've never paid a fee to transfer money, but it usually takes 2-3 days to clear. now wires (near instant transfers) have usually been about $25 sometimes plus a certain percent of the transaction amount. I always assumed that was the cost of having a real human audit the request and perform it in realtime.
- edubs25 7y ago
  If you schedule the transfer via the bank that is receiving the funds, they will usually eat the cost and not pass it onto you as the consumer. Smaller banks [which are most] will submit ACH files up to larger banks [like Wells Fargo or Bank of America] that will actually run the ACH requests through the network. The smaller bank itself is usually being charged either per file fee or some data transmission rate by the bigger bank. I think there are less than 20 banks in the US that can actually run ACH directly but it's been a while since I had to know any of this and it evolves over time.
designium 7y ago
ACH transfer itself is charged by batches from the banks like BofA. As an example, they might charge $5 for each NACHA file transfer but you can have hundreds or even thousand transactions of many different types. From that perspective of cost per value transfer, it is going to be cheaper if you have a lot of transaction with higher dollar amounts. But the total cost of ownership is expensive. I mean the time and money to develop the process to integrate with your bank on ACH is going to be a heavy fixed cost and that is one of the reasons of the cost. Now Wire transfer and other type of transfers, they use different system and the costs varies because of that. Also regarding about the speed of transfer, that is hinging at the speed for the banks to reconcile all transactions with the Central Bank. I think the US Central Bank is planning to implement real time transaction and that consequently will speed up transfer.
jedberg 7y ago
The short answer is "because they can". The longer answer is because banking in the US is not as sophisticated as Europe since we have many fewer banks. The few banks we have have decided it isn't worth trying to compete on convince, so they haven't bothered to update the technology to be synchronous instead of asynchronous. In Europe, there are many banks in many countries, so they had to standardize quicker. FWIW in the US the banks are starting to play nice. They came up with Zelle, which is basically a federated payment processing system amongst the biggest banks to compete with PayPal/Venmo. You can instantly (almost, five minutes delay usually) send money to someone at another bank. The downside is that it is limited. Each bank has different rules, but it's usually just a few thousand a week. For example Bay Area rent can't be paid with Zelle.
- saarons 7y ago
  "because they can" is probably the best answer. Before RTP, which is still rolling out, wire tranfers were the only way to do same-day, non-reversible, high-value payments. On occasion we also see that wire transfers being sent manually need what's called "repair", as in the sending party didn't put enough information in the wire so the sending bank or receiving bank have to go get a human being to figure out what went wrong. Repairs and rejects add to the operational complexity of wire transfers and probably contribute to the higher end-user cost of sending one.
- crispinb 7y ago
  > since we have many fewer banks Australia has fewer still, with the big 5 almost entirely dominant, yet we have instant bank transfers through Osko, have had almost universal contactless in store payments for years, etc. I suspect it's more about government corruption. Governments are captured, each for its own historical reasons, by different industries. Australia by mining industries, the US by medical & finance, local governments almost everywhere by property development.
  - mynameisvlad 7y ago
    Adding onto this, Canada has pretty much the same amount of banks (about 5 big ones that completely dominate the industry) but unlike the US, have worked together for decades to create their own interbank network, Interac (https://en.wikipedia.org/wiki/Interac https://en.wikipedia.org/wiki/Interac). The network handles most ATMs, direct debits, e-transfers and online transactions, and the last two I think have been available for over 10 years now. Every single debit card in Canada is Interac-branded and the network is pretty much ubiquitous for transferring money. It blew my mind going from that to what the US has.
saarons 7y ago
CTO of Modern Treasury here. Banks are actually starting to setup a new payment system between themselves called Real-Time Payments (RTP) which has a lot of the same benefits as wire transfers. RTP is 24/7, instant, and (from our experience) much cheaper than wire transfers. It's starting to roll-out across more banks and currently ~50% of bank accounts can receive RTP transfers [1]. I just cashed out on Venmo the other day and their instant transfers are going over the RTP system. Other than coverage not being complete, one of the main downsides is the $25,000 cap which means that for higher dollar volumes people will likely choose a wire. If you're sending $1mil, then the $35 wire fee doesn't seem like so much in comparison. [1] https://www.theclearinghouse.org/payment-systems/rtp/institution https://www.theclearinghouse.org/payment-systems/rtp/institu...
- itcrowd 7y ago
  Thank you for the RTP information! Had not heard of it yet. The fees look very reasonable ($0.01-$0.045 depending on type of transaction) and they provide a level playing field (flat-fee, no discounts for volume) I also heard someone say at some point that Americans are very wary of having people transfer money to their bank account. Not sure what the rationale is (maybe taxes or afraid of criminal money?) but I was wondering if you have heard this and if so, whether RTP has some protections or safeguards against this?
  - saarons 7y ago
    Historically Americans have been wary of handing out their bank account information because that's all the information needed for a bad actor to issue an ACH debit and pull money from your account. The NACHA guidelines have very strict rules around this and the payment protections are rather strong but it's still a pain to deal with as a consumer. RTP itself is non-reversible so when someone sends you an RTP payment it clears instantly and can never be pulled back as it can with Check and ACH payments.
    - dexterdog 7y ago
      You hand out your bank account information every time you give somebody a check
asadlionpk 7y ago
I was confused at how bad this is in the US compared to where I come from (Pakistan). I have to rely on Paypal and Venmo because the online banking is so backwards here.
- selimthegrim 7y ago
  How do you send or receive money from home?
nickjj 7y ago
Zelle[1] is a fairly recent solution to that problem. Free and nearly instant email address based transfers directly through your bank account without having to sign up for anything extra. I've done a bunch of transfers with it and it's been solid. It's about as easy as you can get and most US banks support it. [1]: https://www.zellepay.com/ https://www.zellepay.com/
- tempsy 7y ago
  Double edged sword IMO. If you use Zelle and off a digit in a phone number or email you are out of luck. No way to recover funds once sent.
  - nickjj 7y ago
    If you send it to an email address that doesn't exist, does the transfer go through? If so who ends up with the money? It's been a while since I sent funds to a new address but I am pretty sure my bank's UI provided protection against that, and now when I send future funds to the same account, I just pick them from a drop down box instead of entering it manually.
    - vinay427 7y ago
      It cancels after a few weeks (IIRC) of remaining unclaimed.
    - tempsy 7y ago
      No - it’s more dangerous with a phone number, which is how I usually send/receive. Much, much safer way to use Zelle is to ask the receiver to request a payment from you and then accept the request.
      - nickjj 7y ago
        That's a good idea in both cases. Although I'm guilty of just sending funds direct but only through email addresses which I usually copy / paste straight from what someone wrote to me.
mindslight 7y ago
ACH transfers aren't expensive or difficult, they're just relatively slow. The US banking system revolves around reversible transactions and pull transfers (check writing). If some business wants to buck the trend by taking in money via a pull and send it out via push, they're doubly on the hook for fraud. Which is why services like Zelle have a bunch of things in their terms to make you more responsible for fraudulent transactions - so they're in a better position of not having to roll back as many. For that same reason, I think it's a terrible idea to sign up for things like Zelle with any account that handles more than petty cash https://news.ycombinator.com/item?id=16899944 https://news.ycombinator.com/item?id=16899944 https://news.ycombinator.com/item?id=16033455 https://news.ycombinator.com/item?id=16033455
tyingq 7y ago
I can send ACH and international wires from my US bank's web interface. Neither is especially hard or expensive, but it is somewhat slow...1-3 business days.
djsumdog 7y ago
After living in Australia and NZ for years, I wondered the same thing. I did a write up on it a while back: https://penguindreams.org/blog/the-american-banking-system-is-still-in-the-1990s/ https://penguindreams.org/blog/the-american-banking-system-i...
edubs25 7y ago
Snarky answer - there's no real motivation to change it and from an institutional perspective it's not broken. - it costs a lot to fix or redesign a money system moving billions of dollars in volume per day - change is risky - any impacts on reliability would be unacceptable and have significant economic impact [both direct and indirect] - stakeholders that fully understand the existing system and have the knowledge to redesign it are part of that system and benefit from it - as an insider, it's hard not to make money within the system - it's a closed ecosystem - access to the system is controlled by the established players (like Wells Fargo, BoA, Visa, Mastercard, etc.) and they will revoke access if you threaten their position. - Insiders are making so much money at this game that end consumers have little leverage at this scale. Paypal, stripe, venmo, zelle, square, name-your-favorite-fintech-start-up are all working within the existing system by exposing easy to use integrations and interfaces. They aren't really fixing anything, just wrapping it up, putting a bow on it and making a handful of basis points on your transactions. The RTP system is a chance to fix it but I suspect it will take years for that to replace the existing systems. I've heard it discussed as an additional feature not a replacement. [I know HN likes proof but any real numbers I can't disclosed due to NDAs. I'm basing my opinion on the margins I saw and heard referenced while working at a smaller financial institution]
- pbreit 7y ago
  The biggest reason is that fast money is almost never needed, and usually indicative of a problem.
  - edubs25 7y ago
    Yeah, the only good use cases I heard for wanting real time payments had to do with businesses not wanting to keep cash reserves on site at all times. The two I recall were (1) in businesses that have variable payment demand (think scrap yards that buy scrap material from anyone that walks up) and they currently handle this by keeping large amounts of cash on site in a safe (2) some states where when a hourly employee is terminated, due to regulations it's easiest to pay them out for hours worked on the spot and this is currently usually handled in cash that's kept in a safe on site I might be forgetting some details on the whys but it seemed like they wanted a way to avoid having to secure cash funds.
ThrustVectoring 7y ago
A partial answer is also the US's approach to banking regulation. First off, the US prioritizes having many small community banks. The US has 4,909 banks, while Japan has 198. This necessarily makes setting up inter-operation between banks more complicated. Second, US banks are regulated on both a Federal and State level. A system that works for a bunch of banks in California may not be viable for interoperation with banks in, say, Georgia. In short, US banks cannot easily set up a way cheaper system with the vast number of banking partners they'd need to coordinate with and the large amount of regulatory systems to navigate.
- orf 7y ago
  > The US has 4,909 banks ... This necessarily makes setting up inter-operation between banks more complicated. The EU has 6,250 banks though. Each with different countries. With 28 different languages, cultures and governments, with far more differences than the states in the USA. You're really arguing that it's harder to unify that in the homogeneous USA than it is in Europe? Come now.
  - Faaak 7y ago
    And FYI: they all "talk" SEPA. You can wire money anywhere in europe (+ switzerland and some other countries) overnight for next to nothing (<1 USD).
    - gpvos 7y ago
      ...as long as it's in euro. In other currencies, you may get lucky, you may not. I recently got charged € 6 for a payment from euro to zloty.
- delfinom 7y ago
  I like community banks. They don't fuck you in the ass like big banks.
  - tialaramex 7y ago
lonelappde 7y ago
Those companies are not able to transmit money with the same scale and security as wires.
deleted 7y ago
[deleted]
knicholes 7y ago
I'm not sure why nobody has mentioned it, but at the end of July, someone transferred $468.5M worth of BTC for $374.98. It's much faster than a wire transfer, too. So many afternoons I'd have to sit at the bank and sign papers for wire transfers...
clumsysmurf 7y ago
This could be changing with FedNow https://www.federalreserve.gov/newsevents/pressreleases/other20190805a.htm https://www.federalreserve.gov/newsevents/pressreleases/othe... You may want to read the findings of the Faster Payments Task Force (FPTF) https://fasterpaymentstaskforce.org/ https://fasterpaymentstaskforce.org/
lifeisstillgood 7y ago
The not-answer answer is fairly simple - negative interest rates are "natural". If I give you a car / boat / house / gold bar to look after you will charge me a fee for the effort. Where money is concerned there has been a magic trick - initially banks took your money and paid you a fee (interest rates). However they sneakily make more money from other things - Just offering less interest than you earn (competed away) - Account fees (competition eats those away) - Taking three days to move money (regulators eat those away in EU, in US finally the Fed is killing it off - soon) But overall, giving someone else money costs us money. Positive interest rates it seems are a thing of the past.
kube-system 7y ago
I wonder what happens when you Venmo a dead person. Given other stories I've heard about the difficulty of resolving problematic payments over Venmo with no recourse, I bet they don't have much of a robust system in place for resolving that either. Banking controls are expensive. It's cheap when you simply don't have them.
thewhitetulip 7y ago
India launched UPI payments method. Everyone who downloaded the UPI app has an address like email and can send money to each other. Money goes into bank account directly! And it's free.
squirrelicus 7y ago
Electricity costs for the 70s mainframes running COBOL probably. Only half tongue in cheek.
NoInputSignal 7y ago
Disclosure: I work for financial institution in the US. I think that the nature of wire transfers makes them somewhat risky. The institutions facilitating the transfers assume some of that risk for their consumers. If a large some of money is moved from your account to someone else's, and you dispute the transfer, the institution sending the wire may have to refund you the money. The cost of a single transfer offsets the risk of the aggregation of fraudulent transfers. This could be a calculation of volume, fraud rates, average amount transferred on that channel, etc. This is all in addition to network costs as payment processors (third party inbetween financial institutions) So, fees = portion of network cost + risk offset Hope this sheds a little light.
- toomanybeersies 7y ago
  I don't see how cheques (or credit cards) are any different in this regard. Cheques can be forged, just as easy, if not easier than a wire transfer.
  - bestnameever 7y ago
    Checks are a little different. Many banks will not allow immediate availability of funds with checks which allows banks some time to catch fraud. Many businesses also communicate their check registers to banks which prevent forged checks from clearing the bank account.
  - NoInputSignal 7y ago
    Checks you tend to purchase from the FI and credit card purchases have fees, but they are covered by the merchant.

grecy 7y ago

Moving from Australia to Canada/US felt like going back in time 20 years when it came to banking. Even ten years ago in Australia I could do more with my online banking than I can today in North America. Checks are for what now?

lettergram 7y ago
I use checks all the time actually. Every other form of payment online is “pull”, I only want to “push” my funds to external people.
- fernandotakai 7y ago
  i've never used a check in my entire life. when i need to pay someone i just do an online transfer.
- loeber 7y ago
  That's not actually correct. By giving an external person a check, you give them the ABILITY to PULL funds from you. It looks like a push, but it's actually not. https://www.bankrate.com/financing/banking/writing-checks-increasingly-risky/ https://www.bankrate.com/financing/banking/writing-checks-in...
  - mindslight 7y ago
    More importantly you're giving them the authorization. Everyone already has the basic ability to pull funds from arbitrary checking accounts. heh.
  - bsder 7y ago
    Knuth had to quit giving out real checks (which nobody actually ever cashed, anyway) for exactly this reason.
  - emiliobumachar 7y ago
    They probably meant a fire-and-forget method to pay untrusted parties without giving them the ability to charge more than agreed. Chargebacks are a thing, but they require constant vigilance and the occasional bureaucratic task.
    - TylerE 7y ago
      Checks have substantially less security there. Not more - and even if/when it gets fixed the money comes out immediately.
- kolinko 7y ago
  That’s what wire transfers are for in EU. Same day/instant, either free or with a flat fee of $0.25-0.5. In Poland if you’re going out with friends and someone paid for you bc you forgot a card, you just wire them money from your phone. For my whole adult life (36 yo) I only used and saw an actual check once. Wire transfers since I can remember.
  - iokanuon 7y ago
    Since a few years ago, you were also able to use the BLIK system to transfer money instantly for free between most banks, by only knowing the recipient's phone number. To be fair I can't imagine anything more convenient.
    - eythian 7y ago
      In NL we have "Tikkie", where you just have to give them a link, whether it's by whatsapp, email, IRC, whatever. Sounds slightly more convenient as it's not based around a phone number (but can be if that's what you have :)
- itcrowd 7y ago
  > Every other form of payment online is “pull" Sorry, but if I transfer funds to a friend from my banking app, how is that "pull"? If I send you money with PayPal, that's not "pull". If we settle our debt using e.g. TransferWise, that's not "pull"..? I don't get your point. There are plenty of "push" methods.
  - layoutIfNeeded 7y ago
    If PayPal decided to charge you a $10 per month for “maintenance costs”, how would you stop them from doing so?
    - pjc50 7y ago
      Well, if they're not authorised, dispute it with the bank? https://www.directdebit.co.uk/DirectDebitExplained/Pages/DirectDebitGuarantee.aspx https://www.directdebit.co.uk/DirectDebitExplained/Pages/Dir...
  - mattmcknight 7y ago
    Can you pay your electric bill with those?
    - itcrowd 7y ago
      Yes, I pay all my bills by bank transfer (house, electric, internet, settlements with friends etc). It's the most common payment method here (I'm in Europe). PayPal et al are barely used here because the bank transfer system is free and frictionless.
      - Symbiote 7y ago
        I'm guessing, but I think most people probably give the electric company permission to pull the money from their account (direct debit) rather than reviewing the bill and "pushing" the money every time. There are very strong guarantees in the individual's favour if the company makes a mistake.
- mantasm 7y ago
  The numbers at the bottom of the check are all that someone needs to initiate an ACH transfer out of your account!
- wereHamster 7y ago
  > Every other form of payment online is “pull”, […] Wat? When I transfer money to another account via my bank's ebanking app that is very much "push". The transfer is executed either immediately or at the end of the business day. Nobody is pulling anything.
  - anonymouz 7y ago
    I assume you live in the EU (or somewhere else outside the US), where it is the most natural thing to just send money from your account to another one. This simply isn't a thing in the US, as I discovered when moving to there for a time. They use third-party apps, cheques, and wire transfers (which are expensive and seem to work via ACH, a pull type system). It's simply not possible to go into your ebanking app and transfer money to someone elses account. (With very restrictive exceptions, e.g. same bank, or maybe the bank has integrated a third party service...) As inconceivable as the American system is in the beginning for somebody coming from the EU, I guess for many people from the US it's similarly non-obvious that a push system can (and does) exist somewhere else.
    - iagovar 7y ago
      But why? It just doesn't make sense to not have a push system. I, honestly, don't get it.
    - watersb 7y ago
      Lived in the USA all my life, have always wanted to have direct transfer as you describe.
- mixmastamyk 7y ago
  Nope, "online push" is ubiquitous in civilized countries. Don't get me started on filing taxes!
- mattmcknight 7y ago
  I think the point here is that the various bills I have to pay don't give me their bank account number, but they ask for me to give them our account information so they can automatically subtract whatever amount. If they would give me their account numbers, I would gladly send them funds. Instead, I use my bank's online bill pay to generate a check for them.
  - jpindar 7y ago
    >I use my bank's online bill pay to generate a check which has your account information on it (I do the same thing, though.)
    - mattmcknight 7y ago
      I am not so much worried about the fraud aspect, as I am explicitly giving them permission to take amounts of their determination from my account without my explicit agreement to the amount of each transaction and on their schedule.
- emiliobumachar 7y ago
  Sorry if I'm out-of-date, but how do checks work online?
  - falsedan 7y ago
    Like, to pay for something remotely? I’ve emailed a picture of the check to sellers who refuse to use PayPal and then they use their bank’s online deposit system to drop it into their account (a couple of times for second-hand board games).
    - emiliobumachar 7y ago
      Thanks for the reply. But, that sounded very unsecure. What happens if a third party cashes it first, you say you didn't share the picture, the merchant says they didn't share the picture?
      - falsedan 7y ago
        You’re stuffed, you’re supposed to only exchange the physical instrument so you’d be liable for fraud.
reaperducer 7y ago
Checks are for what now? For me this week: Paid for a city license, paid the cat sitter, paid for a small magazine subscription, made a charitable donation, and paid the rent. The cat sitter and the charity were check only. No other option. The magazine has a PayPal option, but I don't trust PayPal. The city license could have been done with a card online, but I'm not interested in setting up yet another account with yet another third party to mishandle my information. Paying the rent by check is free, but paying with a credit card is a $74 fee. And this is with a very large company that almost everyone knows. People do abandon checks when possible. But for the most part it's the businesses that put up barriers. Or, in my case, a lack of trust, which has caused me to use checks more. I like the paper trail. I check my bank statement every month and at least once a year there is an error. I am coming around somewhat on the trust thing. If I can use a virtual credit card number, I will. But not if I have to make yet another account with yet another password and yet more gathering of information that is nobody's business. Edit: I forgot that I also had to send a check to a county recorder out if state to file some legal documents. But that was a cashier's check, not a bank draft. Still, the only form of payment accepted by that county government is cash if you live there, or a cashier's check if you're out of state. Also, my accountant only takes cash and checks. I consider it a virtue since it indicates that she watches every penny. But I didn't put that payment in the list because it was a couple of months ago. When your life is simple, banking is simple. As you get older and your life becomes more complicated, banking gets more complacated.
- scarejunba 7y ago
  I know. In America, it's such a bloody nightmare with the cheques everywhere. This should obviously be first-class supported by banks. If I could just set up direct debit that would be so much better. It would all show up on one screen, I could see what this months aggregate direct debits are, what they are to each account. You could even just use the 'Transfer Money' functionality to one-time things if you don't want to give repeat access. And to top it all off, the American bank cheque system is so insecure.
  - thfuran 7y ago
    Yeah, it's hard to secure a system where paying someone involves giving them your name, address, bank account and routing number, and signature.
djmips 7y ago
Canada has Interac E-transfer which is convenient and free depending on which bank you bank with. I pay my rent with it for example.
Scoundreller 7y ago
I use checks to pay vendors I don’t like, like the for-profit power utility my building forces me to use. I have stamps to use up, and it costs them probably $7-$10 to handle it.
- lotsofpulp 7y ago
  There is no way depositing a check costs $7 to $10 for any decent size business as they’re already probably handling checks. If anything, a check payment is cheaper as it’s more secure for the recipient in case of a dispute.
  - Scoundreller 7y ago
    Someone has to open it. Someone has to key it into a billing system. Someone has to scan it. Someone has to archive it. Some process needs to occur to verify that the payment indeed went through. I doubt their remote deposit app is any less clunky than the consumer one they give me. If it’s better, they’re paying for it. Someone needs to manage those people. And they need space to do their work. I could see it taking 15 minutes in total labour costs.
    - deleted 7y ago
      [deleted]
    - lotsofpulp 7y ago
      Those people likely do many other tasks. Removing checks from the equation would not eliminate their jobs.
    - cosmie 7y ago
      It's entirely possible that all of those someones are outsourced. If they're using a lockbox service[1], the entire cost of processing your mailed check can come out to less than $1 (substantially less with sufficient volume). And at the same time, many lockbox services will expose your data to offshore contractors doing the manual components. [1] https://en.wikipedia.org/wiki/Lock_box https://en.wikipedia.org/wiki/Lock_box
brongondwana 7y ago
Moving from Norway back to Australia felt like going back in time 20 years when it came to banking! In Norway I'd get a new bill and enter the code into my banking and it would offer me an option to "automatically approve up to X per month for this vendor". Automatically approved bills didn't get auto paid - but they appeared in the "upcoming bills" when issued, with a pay date of the due date on the bill. I could go an hit "pause" or "stop" on any bill - and it either wouldn't pay or would be removed entirely. Anything that wasn't auto-approved would start in paused mode and I'd have to manually approve it - but that was a single click. Still, I agree that when I'm in the states it feels crazy old tech. They still require signatures on credit cards!
- girvo 7y ago
  BPay gets you close with that. Had that for years and years at this point. Now we have Osko and PayID which is immediate free payments without needing to remember bank account details. It’s neat!
  - brongondwana 7y ago
    Yeah, PayID is pretty cool.
- grecy 7y ago
  I was doing that 10 years ago in Australia with BPay...

leetcrew 7y ago

isn't it usually free to transfer money between accounts if you're willing to wait? I've never paid a fee to transfer money, but it usually takes 2-3 days to clear. now wires (near instant transfers) have usually been about $25 sometimes plus a certain percent of the transaction amount. I always assumed that was the cost of having a real human audit the request and perform it in realtime.

edubs25 7y ago
If you schedule the transfer via the bank that is receiving the funds, they will usually eat the cost and not pass it onto you as the consumer. Smaller banks [which are most] will submit ACH files up to larger banks [like Wells Fargo or Bank of America] that will actually run the ACH requests through the network. The smaller bank itself is usually being charged either per file fee or some data transmission rate by the bigger bank. I think there are less than 20 banks in the US that can actually run ACH directly but it's been a while since I had to know any of this and it evolves over time.

designium 7y ago

ACH transfer itself is charged by batches from the banks like BofA. As an example, they might charge $5 for each NACHA file transfer but you can have hundreds or even thousand transactions of many different types. From that perspective of cost per value transfer, it is going to be cheaper if you have a lot of transaction with higher dollar amounts. But the total cost of ownership is expensive. I mean the time and money to develop the process to integrate with your bank on ACH is going to be a heavy fixed cost and that is one of the reasons of the cost. Now Wire transfer and other type of transfers, they use different system and the costs varies because of that. Also regarding about the speed of transfer, that is hinging at the speed for the banks to reconcile all transactions with the Central Bank. I think the US Central Bank is planning to implement real time transaction and that consequently will speed up transfer.

jedberg 7y ago

The short answer is "because they can". The longer answer is because banking in the US is not as sophisticated as Europe since we have many fewer banks. The few banks we have have decided it isn't worth trying to compete on convince, so they haven't bothered to update the technology to be synchronous instead of asynchronous. In Europe, there are many banks in many countries, so they had to standardize quicker. FWIW in the US the banks are starting to play nice. They came up with Zelle, which is basically a federated payment processing system amongst the biggest banks to compete with PayPal/Venmo. You can instantly (almost, five minutes delay usually) send money to someone at another bank. The downside is that it is limited. Each bank has different rules, but it's usually just a few thousand a week. For example Bay Area rent can't be paid with Zelle.

saarons 7y ago
"because they can" is probably the best answer. Before RTP, which is still rolling out, wire tranfers were the only way to do same-day, non-reversible, high-value payments. On occasion we also see that wire transfers being sent manually need what's called "repair", as in the sending party didn't put enough information in the wire so the sending bank or receiving bank have to go get a human being to figure out what went wrong. Repairs and rejects add to the operational complexity of wire transfers and probably contribute to the higher end-user cost of sending one.
crispinb 7y ago
> since we have many fewer banks Australia has fewer still, with the big 5 almost entirely dominant, yet we have instant bank transfers through Osko, have had almost universal contactless in store payments for years, etc. I suspect it's more about government corruption. Governments are captured, each for its own historical reasons, by different industries. Australia by mining industries, the US by medical & finance, local governments almost everywhere by property development.
- mynameisvlad 7y ago
  Adding onto this, Canada has pretty much the same amount of banks (about 5 big ones that completely dominate the industry) but unlike the US, have worked together for decades to create their own interbank network, Interac (https://en.wikipedia.org/wiki/Interac https://en.wikipedia.org/wiki/Interac). The network handles most ATMs, direct debits, e-transfers and online transactions, and the last two I think have been available for over 10 years now. Every single debit card in Canada is Interac-branded and the network is pretty much ubiquitous for transferring money. It blew my mind going from that to what the US has.

saarons 7y ago

CTO of Modern Treasury here. Banks are actually starting to setup a new payment system between themselves called Real-Time Payments (RTP) which has a lot of the same benefits as wire transfers. RTP is 24/7, instant, and (from our experience) much cheaper than wire transfers. It's starting to roll-out across more banks and currently ~50% of bank accounts can receive RTP transfers [1]. I just cashed out on Venmo the other day and their instant transfers are going over the RTP system. Other than coverage not being complete, one of the main downsides is the $25,000 cap which means that for higher dollar volumes people will likely choose a wire. If you're sending $1mil, then the $35 wire fee doesn't seem like so much in comparison. [1] https://www.theclearinghouse.org/payment-systems/rtp/institution https://www.theclearinghouse.org/payment-systems/rtp/institu...

itcrowd 7y ago
Thank you for the RTP information! Had not heard of it yet. The fees look very reasonable ($0.01-$0.045 depending on type of transaction) and they provide a level playing field (flat-fee, no discounts for volume) I also heard someone say at some point that Americans are very wary of having people transfer money to their bank account. Not sure what the rationale is (maybe taxes or afraid of criminal money?) but I was wondering if you have heard this and if so, whether RTP has some protections or safeguards against this?
- saarons 7y ago
  Historically Americans have been wary of handing out their bank account information because that's all the information needed for a bad actor to issue an ACH debit and pull money from your account. The NACHA guidelines have very strict rules around this and the payment protections are rather strong but it's still a pain to deal with as a consumer. RTP itself is non-reversible so when someone sends you an RTP payment it clears instantly and can never be pulled back as it can with Check and ACH payments.
  - dexterdog 7y ago
    You hand out your bank account information every time you give somebody a check

asadlionpk 7y ago

I was confused at how bad this is in the US compared to where I come from (Pakistan). I have to rely on Paypal and Venmo because the online banking is so backwards here.

selimthegrim 7y ago
How do you send or receive money from home?

nickjj 7y ago

Zelle[1] is a fairly recent solution to that problem. Free and nearly instant email address based transfers directly through your bank account without having to sign up for anything extra. I've done a bunch of transfers with it and it's been solid. It's about as easy as you can get and most US banks support it. [1]: https://www.zellepay.com/ https://www.zellepay.com/

tempsy 7y ago
Double edged sword IMO. If you use Zelle and off a digit in a phone number or email you are out of luck. No way to recover funds once sent.
- nickjj 7y ago
  If you send it to an email address that doesn't exist, does the transfer go through? If so who ends up with the money? It's been a while since I sent funds to a new address but I am pretty sure my bank's UI provided protection against that, and now when I send future funds to the same account, I just pick them from a drop down box instead of entering it manually.
  - vinay427 7y ago
    It cancels after a few weeks (IIRC) of remaining unclaimed.
  - tempsy 7y ago
    No - it’s more dangerous with a phone number, which is how I usually send/receive. Much, much safer way to use Zelle is to ask the receiver to request a payment from you and then accept the request.
    - nickjj 7y ago
      That's a good idea in both cases. Although I'm guilty of just sending funds direct but only through email addresses which I usually copy / paste straight from what someone wrote to me.

mindslight 7y ago

ACH transfers aren't expensive or difficult, they're just relatively slow. The US banking system revolves around reversible transactions and pull transfers (check writing). If some business wants to buck the trend by taking in money via a pull and send it out via push, they're doubly on the hook for fraud. Which is why services like Zelle have a bunch of things in their terms to make you more responsible for fraudulent transactions - so they're in a better position of not having to roll back as many. For that same reason, I think it's a terrible idea to sign up for things like Zelle with any account that handles more than petty cash https://news.ycombinator.com/item?id=16899944 https://news.ycombinator.com/item?id=16899944 https://news.ycombinator.com/item?id=16033455 https://news.ycombinator.com/item?id=16033455

tyingq 7y ago

I can send ACH and international wires from my US bank's web interface. Neither is especially hard or expensive, but it is somewhat slow...1-3 business days.

djsumdog 7y ago

After living in Australia and NZ for years, I wondered the same thing. I did a write up on it a while back: https://penguindreams.org/blog/the-american-banking-system-is-still-in-the-1990s/ https://penguindreams.org/blog/the-american-banking-system-i...

edubs25 7y ago

Snarky answer - there's no real motivation to change it and from an institutional perspective it's not broken. - it costs a lot to fix or redesign a money system moving billions of dollars in volume per day - change is risky - any impacts on reliability would be unacceptable and have significant economic impact [both direct and indirect] - stakeholders that fully understand the existing system and have the knowledge to redesign it are part of that system and benefit from it - as an insider, it's hard not to make money within the system - it's a closed ecosystem - access to the system is controlled by the established players (like Wells Fargo, BoA, Visa, Mastercard, etc.) and they will revoke access if you threaten their position. - Insiders are making so much money at this game that end consumers have little leverage at this scale. Paypal, stripe, venmo, zelle, square, name-your-favorite-fintech-start-up are all working within the existing system by exposing easy to use integrations and interfaces. They aren't really fixing anything, just wrapping it up, putting a bow on it and making a handful of basis points on your transactions. The RTP system is a chance to fix it but I suspect it will take years for that to replace the existing systems. I've heard it discussed as an additional feature not a replacement. [I know HN likes proof but any real numbers I can't disclosed due to NDAs. I'm basing my opinion on the margins I saw and heard referenced while working at a smaller financial institution]

pbreit 7y ago
The biggest reason is that fast money is almost never needed, and usually indicative of a problem.
- edubs25 7y ago
  Yeah, the only good use cases I heard for wanting real time payments had to do with businesses not wanting to keep cash reserves on site at all times. The two I recall were (1) in businesses that have variable payment demand (think scrap yards that buy scrap material from anyone that walks up) and they currently handle this by keeping large amounts of cash on site in a safe (2) some states where when a hourly employee is terminated, due to regulations it's easiest to pay them out for hours worked on the spot and this is currently usually handled in cash that's kept in a safe on site I might be forgetting some details on the whys but it seemed like they wanted a way to avoid having to secure cash funds.

ThrustVectoring 7y ago

A partial answer is also the US's approach to banking regulation. First off, the US prioritizes having many small community banks. The US has 4,909 banks, while Japan has 198. This necessarily makes setting up inter-operation between banks more complicated. Second, US banks are regulated on both a Federal and State level. A system that works for a bunch of banks in California may not be viable for interoperation with banks in, say, Georgia. In short, US banks cannot easily set up a way cheaper system with the vast number of banking partners they'd need to coordinate with and the large amount of regulatory systems to navigate.

orf 7y ago
> The US has 4,909 banks ... This necessarily makes setting up inter-operation between banks more complicated. The EU has 6,250 banks though. Each with different countries. With 28 different languages, cultures and governments, with far more differences than the states in the USA. You're really arguing that it's harder to unify that in the homogeneous USA than it is in Europe? Come now.
- Faaak 7y ago
  And FYI: they all "talk" SEPA. You can wire money anywhere in europe (+ switzerland and some other countries) overnight for next to nothing (<1 USD).
  - gpvos 7y ago
    ...as long as it's in euro. In other currencies, you may get lucky, you may not. I recently got charged € 6 for a payment from euro to zloty.
delfinom 7y ago
I like community banks. They don't fuck you in the ass like big banks.
- tialaramex 7y ago

lonelappde 7y ago

Those companies are not able to transmit money with the same scale and security as wires.

deleted 7y ago

[deleted]

knicholes 7y ago

I'm not sure why nobody has mentioned it, but at the end of July, someone transferred $468.5M worth of BTC for $374.98. It's much faster than a wire transfer, too. So many afternoons I'd have to sit at the bank and sign papers for wire transfers...

clumsysmurf 7y ago

This could be changing with FedNow https://www.federalreserve.gov/newsevents/pressreleases/other20190805a.htm https://www.federalreserve.gov/newsevents/pressreleases/othe... You may want to read the findings of the Faster Payments Task Force (FPTF) https://fasterpaymentstaskforce.org/ https://fasterpaymentstaskforce.org/

lifeisstillgood 7y ago

The not-answer answer is fairly simple - negative interest rates are "natural". If I give you a car / boat / house / gold bar to look after you will charge me a fee for the effort. Where money is concerned there has been a magic trick - initially banks took your money and paid you a fee (interest rates). However they sneakily make more money from other things - Just offering less interest than you earn (competed away) - Account fees (competition eats those away) - Taking three days to move money (regulators eat those away in EU, in US finally the Fed is killing it off - soon) But overall, giving someone else money costs us money. Positive interest rates it seems are a thing of the past.

kube-system 7y ago

I wonder what happens when you Venmo a dead person. Given other stories I've heard about the difficulty of resolving problematic payments over Venmo with no recourse, I bet they don't have much of a robust system in place for resolving that either. Banking controls are expensive. It's cheap when you simply don't have them.

thewhitetulip 7y ago

India launched UPI payments method. Everyone who downloaded the UPI app has an address like email and can send money to each other. Money goes into bank account directly! And it's free.

squirrelicus 7y ago

Electricity costs for the 70s mainframes running COBOL probably. Only half tongue in cheek.

NoInputSignal 7y ago

Disclosure: I work for financial institution in the US. I think that the nature of wire transfers makes them somewhat risky. The institutions facilitating the transfers assume some of that risk for their consumers. If a large some of money is moved from your account to someone else's, and you dispute the transfer, the institution sending the wire may have to refund you the money. The cost of a single transfer offsets the risk of the aggregation of fraudulent transfers. This could be a calculation of volume, fraud rates, average amount transferred on that channel, etc. This is all in addition to network costs as payment processors (third party inbetween financial institutions) So, fees = portion of network cost + risk offset Hope this sheds a little light.

toomanybeersies 7y ago
I don't see how cheques (or credit cards) are any different in this regard. Cheques can be forged, just as easy, if not easier than a wire transfer.
- bestnameever 7y ago
  Checks are a little different. Many banks will not allow immediate availability of funds with checks which allows banks some time to catch fraud. Many businesses also communicate their check registers to banks which prevent forged checks from clearing the bank account.
- NoInputSignal 7y ago
  Checks you tend to purchase from the FI and credit card purchases have fees, but they are covered by the merchant.