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The author here seems to have a pretty shallow understanding of how banking infrastructure actually works (ex. ACH vs. wire vs. direct deposit), which is the ro

The author here seems to have a pretty shallow understanding of how banking infrastructure actually works (ex. ACH vs. wire vs. direct deposit), which is the root of a lot of these complaints. The other misconception is why banks continue to operate this way, which I personally believe comes down to prioritizing risk aversion and fraud resistance over other attributes. If you've never had to deal with large amounts of fraud as a business operator, a lot of things banks do (like require in-person verifications/transactions) probably won't make much sense or will seem really antiquated. Edit: also worth noting is that a significant portion of a large bank's customers are over middle age and still want high-touch in-person and phone interactions in a financial institution.

crooked-v 7y ago
Using a bank's services shouldn't require knowing how banking infrastructure works.
- toomuchtodo 7y ago
  Knowing helps calibrate your expectations so they’re realistic. Stripe can perform magic because they’re a very small piece of the entire puzzle, the banking sector can’t because of the very same decrepit financial infra foundations. Disclaimer: I work in financial services. If you want the plumbing fixed, lean on the Fed and the banking industry as a whole through Congress. You’re delusional if you think you can fix this with a startup (see: BankSimple and Standard Treasury). The industry inertia is overwhelming.
  - rhizome 7y ago
    How do unrealistic expectations take root, could it be the gap between reality and advertising? That said, they weren't saying that the knowledge can't help.
    - avianlyric 7y ago
      Difference between only experiencing the 99% happy path, and experiencing the 1% extremely unhappy path.
      - deleted 7y ago
        [deleted]
  - barry-cotter 7y ago
    > If you want the plumbing fixed, lean on the Fed and the banking industry as a whole through Congress. Easier and faster to just give up preemptively.
    - toomuchtodo 7y ago
      Yeah! But the work worth doing is never easy, nor fast to get done. Not the best attitude to have Barry!
- avianlyric 7y ago
  That would be ideal. But building non-leaky abstractions over banking infrastructure is extremely difficult. This due to the simple fact that banking infrastructure is a super complicated pot of badly combined standards created before the internet really existed, and equally complicated regulatory requirements that don’t map well onto the technical standards.
  - YawningAngel 7y ago
    If the infrastructure is so poor that building good abstractions over it is essentially impossible, that's another nail in the coffin for the notion that it's reasonable to expect end users to understand it.
  - beatgammit 7y ago
    The idea of banking isn't particularly complicated. Basically, you take deposits, use those deposits to make loans, and keep some on hand for liquidity. If you're not getting enough deposits, raise rates. If you're not getting enough stable deposits, you sell products that reward long term deposits (CDs). If you have too many deposits relative to loan demand, you reduce interest rates on both deposits and loans. Rates fluctuate along with supply and demand. This works quite well in the stock market, so why is banking so different? My guess is that it's regulated like crazy, so maybe simplifying those regulations would be a good idea. I'm not very well informed on the particulars of those regulations, but I have looked into building something that involves financial data and it's far more complicated that it needs to be. I should be able to automate money transfers just as easily (if not more easily) as doing stock trades, yet the opposite is true. It's needlessly complicated and expensive to get anything done.
    - cguess 7y ago
      > My guess is that it's regulated like crazy, so maybe simplifying those regulations would be a good idea Most of those regulations are in there for either a.) FDIC compliance to make sure there's enough liquidity in the case of a run (aka the "don't repeat 1929" rule) b.) anti-fraud/money laundering c.) because ACH rules are still there for a ton of legacy reasons The stock market is volatile because it assumes that those investing understand the risk involved. Bank accounts on the other hand should, really have to, be super stable. Treating liquidity like the stock market means a bad bet by the bank managers and everyone loses their college fund. > I should be able to automate money transfers just as easily (if not more easily) as doing stock trades, yet the opposite is true. The reason is because of money laundering. Despite how bad it seems the US has the best anti-money-laundering (AML) rules in the world and yea, this causes friction, but it's what's necessary.
- throwaway_tech 7y ago
  Satoshi Nakamoto must have missed that when "disrupting" banking with P2P electronic currency.
  - tsimionescu 7y ago
    Yes, they did, which is one of the reasons BitCoin is approximately 0.00% percent of the world financial markets.
    - throwaway_tech 7y ago
      Well that is one way to minimize the reality of Bitcoin. On the otherhand the Bitcoin market cap is 50%> than Tesla for example. That may not seem like much, until you realize Bitcoin has a bigger market cap than any US car manufacturer.
      - IAmEveryone 7y ago
        Farmland in southern Asia is worth a lot more than that, and just as easy to use for everyday transactions as Bitcoin is.
        amdavidson 7y ago
        I have never heard this analogy, and it so clearly refutes what drives me crazy about these Bitcoin :: Tesla|whatever comparisons.
      - tsimionescu 7y ago
        It does not matter whether it seems like much or not, because approximately none of that market cap is coming from using BitCoin for payments, it comes almost entirely from using BitCoin as a speculative asset. All attempts to use it for non-crime-related payments have failed so far, because of its slow speed and huge transaction costs. And in a spectacular turn of events, it may be a worse polluter than any single American car company as well. I bet Satoshi Nakamoto didn't plan for this one, eh?
- kovek 7y ago
  There’s a few types of checks you can send as payment to whoever. I kept asking why we needed a few different types and they all act in different ways. Some are “like cash”, some will “attempt to withdraw” the amount. I had to ask the bank. I don’t see how else I was supposed to go about my payment when I was asked to send a check.
  - kolinko 7y ago
    Well, the issue is with "when I was asked to send a check". In some (if not all) European countries we don't have checks any more. Someone just gives you a bank account number, you wire a transfer, and it's at the recipient within a second to a day at most. The transfers cost between €0 to €0.5, regardless of the amount. I was on a date a few days ago, a girl really wanted to pay for herself, but didn't have the cash, so she asked me for the bank account. I gave it to her via messenger, she wired me €30, it landed on my account instantly, to which I said that this is too much, and wired her €15 back. Yes, seriously :)
    - brianwawok 7y ago
      Yah bank transfers are a mess here, several dollars and minutes of work to do. On the other hand, things like venmo and the cash app are ubiquitous. I just went to lunch with a friend, forgot cash, asked him his phone number and shot a venmo for half in 10 seconds. So luckily we have some services that are filling the shortcoming of our banking industry..
      - mixmastamyk 7y ago
        A rent-seeking third party probably selling your financial transaction data is not what I’d call lucky.
        brianwawok 7y ago
        It beats the alternative. It’s no secret I sent someone $10 for lunch. I posted it to hacker news.
avianlyric 7y ago
Yes this looks like a classic case of payment schemes not working anything like how people think they work (or even working in a sane way). With regards to the credit card payment, my guess would be that it went over a dual message system. Which means one message reserves the money, and a second one moves it. This is important because the first message will generally cause the payment to appear on your statement, and reduce your “available balance”. But doesn’t impact your actual balance. The money’s still yours so you earn interest on it, but you can’t touch it. When the second message turns up the money moves and the transaction completes (sometimes called “posting” or “clearing” or “presenting”). However if the second message never turns up (or a reversal is sent instead) then the money doesn’t move, it’s just un-reserved. How banks represent this un-reversal is usually very confusing. Either the transaction simply disappears or a back dated transaction appears. This is because from the banks perspective the transaction never happened (it didn’t present, so no money moved and thus no transaction). ACH is also a very strange payment scheme. I believe that debit ACH messages simply pull money from a bank account. The bank can’t stop this money movement (they always to have pay the bill or get disconnected from the ACH network). However in the case of fraud, your bank can send a message and claw the money back within a certain time span. All of this sounds ridiculous and is a result of history. But replacing it would require hundreds or thousands of banks to agree a new standard, and there’s a good XKCD about new standards.
- deleted 7y ago
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- Animats 7y ago
  This is really a user interface problem. Payment systems have distributed state machines, but the state isn't exposed to the customer and the parties may not be in sync. Banking is a "consistent eventually" system, with delays in days. The customer should be able to query "what happened with this transaction" from their account and get back a graphic of what's going on. That information is useful to fraudsters, though; some states are more vulnerable than others.
  - CaptainZapp 7y ago
77pt77 7y ago
I don't buy those arguments because somehow most of the developed world has moved on from the legacy systems still in place in the USA (eg: Europe).
- avianlyric 7y ago
  Europe developed its own systems that are almost completely different to the US. (Even Mastercard and VISA networks were different, and there’s effectively two versions of each network running in the world at the moment). They’re still old and have plenty of issues, just different to the US.
  - 77pt77 7y ago
    Having used both systems, the EU's is nowhere near as problematic as the USA's. Not even close. In the states things just feel and work as if you've jumped 15 years back in time. And I'm not even going into identity theft territory which is orders of magnitude less common in Europe. I know americans don't like hearing this and always downvote me into oblivion, but it's the truth. This time won't be any different, but maybe someone will be exposed to an alternate reality and reevaluate their biases.
    - spookthesunset 7y ago
      I don’t get the downvotes either. The US banking system objectively sucks. There is no excuse for system-wide ultra-low cost instant inter-bank transfers. Why the hell are we writing checks in 2020? The only thing that keeps it from happening is lack of political will. And seriously, why the downvotes? Who is here actually defending the US banking system? Speak up!
      - 77pt77 7y ago
        Just to say that it's usually a lot worse. Meaning I get a lot more downvotes. Maybe awareness is improving...
      - Dylan16807 7y ago
jariel 7y ago
"risk aversion and fraud resistance over other attributes" It runs much deeper. Most of these functions are 'middle/back office' for the bank, they were never seen as important. The 'Ops' part was always just operational labour, things done by 'workers' etc.. It's not 'banking' to the banks. Software at banks often parallels archaic processes, established for some very good reason long ago, but continue to exist only due to incumbency or possibly due to regulatory requirements. And because it's finance, the security and stability requirements are much higher, giving new meaning to 'break fast and new things'. When you add in the fact banks are incredibly incumbent and resistant to change, you get a Kafka-esque web of bureaucracy, inefficiency, arbitrary complexity etc.. I don't see any consumer oriented, 'Stripe-like' modern bank taking over either.
mushufasa 7y ago
Re: high-touch -- it's not an age thing. It's a user experience thing. People sometimes go into a bank knowing exactly what they want. More often, people don't really know what they want. i.e. they know they want a savings account, but they don't know if they want a 529 or a roth ira or just a money market checking account. You can think of bank branches like stack overflow: when someone asks "how can i do X" the answer is often often "do Y instead." Most people aren't taught financial literacy, and it varies over time and by geography. Also, most of the population isn't as comfortable with technology skills in general, which developers and professionals often overestimate. For commercial or investment banking (where banks make most of their profit) it's a whole 'nother story, but the author was trying to deal with consumer / small business stuff seems like.
- healsjnr1 7y ago
  But I think this is one of the points of the article: the human system are thoroughly broken and convoluted. I've recently switched between banks and done just what you said: I went in to a branch knowing roughly what I wanted, but unsure exactly how to setup it up. The end results was _months_ of back and forth. The agents in person or in call centres did not know answers to fairly simply questions (can I have an overdraft on an offset account) and were unable to answer questions about applications (my credit card application continually gave me notice online saying 'proof of other funds required', no one was able to tell me what this meant our what I had to provide). These problems are not related to the deep legacy issues of interbank transfers and settlement or fraud. They are failings in organisational design and management, information design, customer service design. I'd guess they are a symptom of continuous churn and restructuring, of flipping from in sourcing to outsourcing and back again. They are all problems that are within their power to resolve (yes, at great cost )
  - eecc 7y ago
    Oh, you nailed it with “symptoms of continuous churn and restructuring”. Just yesterday I was chatting with my manager about the “legacies that never die” which dramatically multiply complexity and spread the teams even more thinly...
avip 7y ago
It's just another example of the universal Chesterton’s Wild Boar fence rule https://news.ycombinator.com/item?id=20616290 https://news.ycombinator.com/item?id=20616290
JohnFen 7y ago
> The author here seems to have a pretty shallow understanding of how banking infrastructure actually works (ex. ACH vs. wire vs. direct deposit), which is the root of a lot of these complaints. This is approximately the level of understanding that most people have. I think this helps highlight the point that the banking system is just horrible to have to deal with -- you shouldn't have to know the intricacies and oddities of the banking system in order to do this sort of stuff. > and still want high-touch in-person and phone interactions in a financial institution. This is me. For mundane things, I prefer an automated system. But if anything at all goes wrong, or if I'm doing something unusual, I want a human to hold my hand.
jka 7y ago
To try an approach without assigning blame: Banks and financial institutions are set up to detect fraud in ways which will tend to spot 'unusual' behavior and anomalous patterns. The combination of someone who is technically competent to the point that they use seemingly different behaviors to the typical user population and are taking actions which have traditionally been seen as high risk (wire transfers, transactions from new accounts, ...) is going to lead to automated flags being raised. A wise implementation will avoid feedback loops, introduce human review which assumes the best unless clear evidence of fraud is present, and will provide mechanisms for individuals to clear/restore their status. The latter resolution workflow, unfortunately, introduces further risks, especially if implemented halfheartedly. Training individuals that it's OK / expected to provide additional personal details to use a service ends up leading phishers to attempt the same techniques, and simultaneously creates a high-value target database of personal data should any of that information be stored long-term. I don't know clear answers here - and yes, perhaps the author could have taken a more gradual or slower approach in order to avoid some problems, and maybe they are angry based on things about the financial system that they don't understand. But there is an ongoing and serious problem here with the way that we provide access to systems and services and then attempt to remediate concerns via automated means. Source: am European and have lived in the U.S., thus have experienced being 'unusual' to many U.S. financial services, have experienced not understanding systems in a country new to me, and have also worked in fraud and care about computer security and overall freedom and safety.
deleted 7y ago
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the_mar 7y ago
Not to burst your bubble, but this is not how it works for banks outside of the US. But since we are on the subject, we should probably address the complexity of universal healthcare first
cortesoft 7y ago
If they care so much about fraud, why do they use things like phone numbers and social security numbers for verification?
- manigandham 7y ago
  What else should they use that average people would understand?
  - closeparen 7y ago
    Well, they already run the world's largest infrastructure for hardware tokens with crypto processors in them.
    - manigandham 7y ago
      Cards are already used when they're available for transactions and interactions (atms, branch visits). Also having a card doesn't mean it's your card, that's what the personal verification is for.
joe_the_user 7y ago
In the one time I've had to transfer more than $100K personally, the operation of wire transfer merely seemed klunky and not the least bit risk averse. I walked into my bank and talked about transferring the money to a relative's bank account in another state. The answer was "sure, we can do that but if you get even the smallest bit of information wrong, the money will go elsewhere and we'll wash our hands of the results". I finally just carried a check physically.
- cowsandmilk 7y ago
  Why were you trying to use a wire transfer for that? Maybe the bank incorrectly steered you towards that? If you consider a check an option for a transaction, a wire transfer doesn’t make sense.
  - joe_the_user 7y ago
    What are write transfers used for if they aren't for transferring large amounts of money long distances?
    - __float 7y ago
      Transferring large amounts of money quickly. The fees can be very high, and you may very well consider an alternative as a result.
      - o-__-o 7y ago
        $40 on $10000 is 0.4% and it goes down from there. My national chain bank charges $25 and the typically destination fee is $15. Put the risk on the banks and get money within 2 hours? Ok
        cowsandmilk 7y ago
        > Put the risk on the banks and get money within 2 hours? How does a wire transfer “put the risk on the banks”?
christopoulos 7y ago
As I’m not from the US, could you explain the differences or provide a resource?
kccqzy 7y ago
> also worth noting is that a significant portion of a large bank's customers are over middle age and still want high-touch in-person and phone interactions in a financial institution. I'm a millennial. For some banks I vastly prefer phone interactions just because their customer service is so fast and awesome; little to no hold time needed. Calling Discover Bank or Schwab has always been this pleasant. I've even become so lazy that I'd just call them to ask for a workaround for their UI bug. The same cannot be said for most other banks, like Bank of America. If I discover a bug on their UI, I'd rather get into the software engineer's problem-solving mode and figure out a workaround by myself, assuming Googling the issue doesn't work.
abalone 7y ago
Yeah, this blog post comes across as startup-y hero worship, like > I think the root cultural cause is an aversion to self-serve flows. which is plainly false given the biggest push in the past decade of banking has been self service flows that allow them to cut costs and downsize branches. Stripe is built on a traditional bank partner. The workflows Stripe optimizes are not “make it easy to empty my new bank account with minimal authentication” workflows.
- ianlevesque 7y ago
  So why do they all insist on SMS-only for 2FA?
  - AlexCoventry 7y ago
    It doesn't detract from your argument, but there appear to be nine US banks listed at https://twofactorauth.org/#banking https://twofactorauth.org/#banking which offer hardware- or software-based 2FA.
  - vidarh 7y ago
    Because they optimise for 'easiest for most people, with an acceptable risk profile'. Note acceptable not lowest.
cm2187 7y ago
And I must say that the Silicon Valley way of dealing with fraud isn’t much more fun from a user experience point of views (solving captchas all day long, waiting for 2fa that may or may not come, accounts suspended without explanations, etc). Also the author thinks that buying a bank will solve things. This is also naive. Either you are not a regulated owner and you are severely limited in what influence you can have on the bank, or you become a banking group and banking regulations apply to you too. The solution is competition, but regulations have made it so expensive for a new player that there isn’t really any. That’s the cost of you not having to worry about whether the money on your bank account will still be there tomorrow. Then in absence of competition, it is pretty horrifying how laziness and incompetence can cripple a large organisation to a quasi standstill.
- eru 7y ago
  Mostly agreed! > That’s the cost of you not having to worry about whether the money on your bank account will still be there tomorrow. That's too high a cost. The eg Scottish banking system of the industrial revolution and the Canadian banking systems of the 19th century had this piece of mind in practice _and_ plenty of competition. See eg https://www.alt-m.org/2015/07/29/there-was-no-place-like-canada/ https://www.alt-m.org/2015/07/29/there-was-no-place-like-can...
- csomar 7y ago
  It's not really that expensive to get your foot on the door. There has been a lot of these fintech banks (basically a card and an app). Here is the problem: They don't offer many of the products that banks offer (the most important being credit). Also, from experience, they have a shittier customer service. The guy complains about branches, yet I have found branches much better than having no person to contact what-so-ever.
  - marcus_holmes 7y ago
    Most fintech startups that look like banks aren't. They use banking services from other banks, and deal with the bank's bullshit for you.
  - 7y ago
syshum 7y ago
>>>also worth noting is that a significant portion of a large bank's customers are over middle age That maybe true today, 30 years from now those boomers will be dead. >>The other misconception is why banks continue to operate this way, which I personally believe comes down to prioritizing risk aversion and fraud resistance over other attributes There are many ways to solve for both, other nations have done it successfully ACH for example is a shit show and should have been replaced decades ago, its biggest "security" features is that fact that it is slow to complete a transaction to allow humans to catch an error or fraud.... US banking is not about risk aversion or fraud control, it is about risk shifting and CYA. They do not care about preventing fraud, they care about making sure they do not have a pay for fraud by shifting liability to either consumers, businesses, or another bank
ivanhoe 7y ago
Why would a customer need to know anything about banking at all? Imagine if you were stopped in a supermarket because you beeped on the way out, and then they leave you to wait for hours before someone finally comes to tell you it's well-known that their door gates' sensors are just too sensitive and you can go. You'd probably sue them or at least never go there again, certainly no one would tell you that you don't understand how shoplifting is a complex problem. If a fraud detection system is known to detect false positives (and they're designed that way on purpose, to provide a better protection to the institution), then there should be measures in place to contain the possible damage to clients, and also an easy procedure for clients to resolve these issues quickly and painlessly. That's a bare minimum. One of the main reason why people moved to Stripe from PayPal and similar services in the first place (beside an api that works) is exactly this type of problems where payment gateways would block your money in the name of some arbitrary "fraud risk" and you couldn't do anything about it. Fraud is their business problem, not mine as a customer. If I'm doing business legally why would I need to care or know anything about it?
- grenoire 7y ago
  The analogy falls short considering the OP's initial point: The sums involved make a big difference in the reaction.
  - ivanhoe 7y ago
    Issue is not if there should be fraud screenings - of course, they're required both by law and a common sense. Question is do you treat your own system's false positives like customers' problem, or you actually do something pro-active to help them? In my experience most banks and payments services just don't care. It's up to customer to complain and push repeatedly for it to be resolved, and banks make it harder, rather than easier. To get access to your own money you have to go through tones of bureaucracy to prove you didn't do anything wrong. Exactly because of the sums in question the treatment should be different, bank is using that money while it's locked and pays you no interest on that.
- jeremyjh 7y ago
  The government requires banks to do some of these things. Not just to prevent fraud, but to prevent money laundering, funding terrorists, giving money to entities controlled by sanctioned countries and other criminal activity. If you don't understand any of these issues, the bank's behavior will seem willfully incompetent and spiteful, and raises some of the feelings expressed in the SP. But you won't find it different at "new tech" bank.
vonseel 7y ago
Do you think the age issue and familiarity with tech will change in the future though? Even technology should reduce fraud cases and risk, surely it is nothing like the days of CATCH ME WHEN YOU CAN. I have only needed to visit a bank in person once in the last 5 years or more, and that was to deposit some old US $100 bills which modern ATMs did not recognize and the local credit union did not want to take the bills ( I am not a member of local CU but it has an ATM I can use for deposits with my out of state CU). Which reminds me, to fix that issue I signed up for a Chase account online, drove down to the bank 5 minutes later and deposited the $700 pre-1980s cash to a teller, who verified the bills were real without any griping - they have the right machines and tech to be confident about those things, unlike the local credit union. So, I guess, on a surprising note I had a good story about Chase to share. They also gave me a few hundred dollars bonus to open a checking account, which was cool.

crooked-v 7y ago

Using a bank's services shouldn't require knowing how banking infrastructure works.

toomuchtodo 7y ago
Knowing helps calibrate your expectations so they’re realistic. Stripe can perform magic because they’re a very small piece of the entire puzzle, the banking sector can’t because of the very same decrepit financial infra foundations. Disclaimer: I work in financial services. If you want the plumbing fixed, lean on the Fed and the banking industry as a whole through Congress. You’re delusional if you think you can fix this with a startup (see: BankSimple and Standard Treasury). The industry inertia is overwhelming.
- rhizome 7y ago
  How do unrealistic expectations take root, could it be the gap between reality and advertising? That said, they weren't saying that the knowledge can't help.
  - avianlyric 7y ago
    Difference between only experiencing the 99% happy path, and experiencing the 1% extremely unhappy path.
    - deleted 7y ago
      [deleted]
- barry-cotter 7y ago
  > If you want the plumbing fixed, lean on the Fed and the banking industry as a whole through Congress. Easier and faster to just give up preemptively.
  - toomuchtodo 7y ago
    Yeah! But the work worth doing is never easy, nor fast to get done. Not the best attitude to have Barry!
avianlyric 7y ago
That would be ideal. But building non-leaky abstractions over banking infrastructure is extremely difficult. This due to the simple fact that banking infrastructure is a super complicated pot of badly combined standards created before the internet really existed, and equally complicated regulatory requirements that don’t map well onto the technical standards.
- YawningAngel 7y ago
  If the infrastructure is so poor that building good abstractions over it is essentially impossible, that's another nail in the coffin for the notion that it's reasonable to expect end users to understand it.
- beatgammit 7y ago
  The idea of banking isn't particularly complicated. Basically, you take deposits, use those deposits to make loans, and keep some on hand for liquidity. If you're not getting enough deposits, raise rates. If you're not getting enough stable deposits, you sell products that reward long term deposits (CDs). If you have too many deposits relative to loan demand, you reduce interest rates on both deposits and loans. Rates fluctuate along with supply and demand. This works quite well in the stock market, so why is banking so different? My guess is that it's regulated like crazy, so maybe simplifying those regulations would be a good idea. I'm not very well informed on the particulars of those regulations, but I have looked into building something that involves financial data and it's far more complicated that it needs to be. I should be able to automate money transfers just as easily (if not more easily) as doing stock trades, yet the opposite is true. It's needlessly complicated and expensive to get anything done.
  - cguess 7y ago
    > My guess is that it's regulated like crazy, so maybe simplifying those regulations would be a good idea Most of those regulations are in there for either a.) FDIC compliance to make sure there's enough liquidity in the case of a run (aka the "don't repeat 1929" rule) b.) anti-fraud/money laundering c.) because ACH rules are still there for a ton of legacy reasons The stock market is volatile because it assumes that those investing understand the risk involved. Bank accounts on the other hand should, really have to, be super stable. Treating liquidity like the stock market means a bad bet by the bank managers and everyone loses their college fund. > I should be able to automate money transfers just as easily (if not more easily) as doing stock trades, yet the opposite is true. The reason is because of money laundering. Despite how bad it seems the US has the best anti-money-laundering (AML) rules in the world and yea, this causes friction, but it's what's necessary.
throwaway_tech 7y ago
Satoshi Nakamoto must have missed that when "disrupting" banking with P2P electronic currency.
- tsimionescu 7y ago
  Yes, they did, which is one of the reasons BitCoin is approximately 0.00% percent of the world financial markets.
  - throwaway_tech 7y ago
    Well that is one way to minimize the reality of Bitcoin. On the otherhand the Bitcoin market cap is 50%> than Tesla for example. That may not seem like much, until you realize Bitcoin has a bigger market cap than any US car manufacturer.
    - IAmEveryone 7y ago
      Farmland in southern Asia is worth a lot more than that, and just as easy to use for everyday transactions as Bitcoin is.
      - amdavidson 7y ago
        I have never heard this analogy, and it so clearly refutes what drives me crazy about these Bitcoin :: Tesla|whatever comparisons.
    - tsimionescu 7y ago
      It does not matter whether it seems like much or not, because approximately none of that market cap is coming from using BitCoin for payments, it comes almost entirely from using BitCoin as a speculative asset. All attempts to use it for non-crime-related payments have failed so far, because of its slow speed and huge transaction costs. And in a spectacular turn of events, it may be a worse polluter than any single American car company as well. I bet Satoshi Nakamoto didn't plan for this one, eh?
kovek 7y ago
There’s a few types of checks you can send as payment to whoever. I kept asking why we needed a few different types and they all act in different ways. Some are “like cash”, some will “attempt to withdraw” the amount. I had to ask the bank. I don’t see how else I was supposed to go about my payment when I was asked to send a check.
- kolinko 7y ago
  Well, the issue is with "when I was asked to send a check". In some (if not all) European countries we don't have checks any more. Someone just gives you a bank account number, you wire a transfer, and it's at the recipient within a second to a day at most. The transfers cost between €0 to €0.5, regardless of the amount. I was on a date a few days ago, a girl really wanted to pay for herself, but didn't have the cash, so she asked me for the bank account. I gave it to her via messenger, she wired me €30, it landed on my account instantly, to which I said that this is too much, and wired her €15 back. Yes, seriously :)
  - brianwawok 7y ago
    Yah bank transfers are a mess here, several dollars and minutes of work to do. On the other hand, things like venmo and the cash app are ubiquitous. I just went to lunch with a friend, forgot cash, asked him his phone number and shot a venmo for half in 10 seconds. So luckily we have some services that are filling the shortcoming of our banking industry..
    - mixmastamyk 7y ago
      A rent-seeking third party probably selling your financial transaction data is not what I’d call lucky.
      - brianwawok 7y ago
        It beats the alternative. It’s no secret I sent someone $10 for lunch. I posted it to hacker news.

avianlyric 7y ago

Yes this looks like a classic case of payment schemes not working anything like how people think they work (or even working in a sane way). With regards to the credit card payment, my guess would be that it went over a dual message system. Which means one message reserves the money, and a second one moves it. This is important because the first message will generally cause the payment to appear on your statement, and reduce your “available balance”. But doesn’t impact your actual balance. The money’s still yours so you earn interest on it, but you can’t touch it. When the second message turns up the money moves and the transaction completes (sometimes called “posting” or “clearing” or “presenting”). However if the second message never turns up (or a reversal is sent instead) then the money doesn’t move, it’s just un-reserved. How banks represent this un-reversal is usually very confusing. Either the transaction simply disappears or a back dated transaction appears. This is because from the banks perspective the transaction never happened (it didn’t present, so no money moved and thus no transaction). ACH is also a very strange payment scheme. I believe that debit ACH messages simply pull money from a bank account. The bank can’t stop this money movement (they always to have pay the bill or get disconnected from the ACH network). However in the case of fraud, your bank can send a message and claw the money back within a certain time span. All of this sounds ridiculous and is a result of history. But replacing it would require hundreds or thousands of banks to agree a new standard, and there’s a good XKCD about new standards.

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Animats 7y ago
This is really a user interface problem. Payment systems have distributed state machines, but the state isn't exposed to the customer and the parties may not be in sync. Banking is a "consistent eventually" system, with delays in days. The customer should be able to query "what happened with this transaction" from their account and get back a graphic of what's going on. That information is useful to fraudsters, though; some states are more vulnerable than others.
- CaptainZapp 7y ago

77pt77 7y ago

I don't buy those arguments because somehow most of the developed world has moved on from the legacy systems still in place in the USA (eg: Europe).

avianlyric 7y ago
Europe developed its own systems that are almost completely different to the US. (Even Mastercard and VISA networks were different, and there’s effectively two versions of each network running in the world at the moment). They’re still old and have plenty of issues, just different to the US.
- 77pt77 7y ago
  Having used both systems, the EU's is nowhere near as problematic as the USA's. Not even close. In the states things just feel and work as if you've jumped 15 years back in time. And I'm not even going into identity theft territory which is orders of magnitude less common in Europe. I know americans don't like hearing this and always downvote me into oblivion, but it's the truth. This time won't be any different, but maybe someone will be exposed to an alternate reality and reevaluate their biases.
  - spookthesunset 7y ago
    I don’t get the downvotes either. The US banking system objectively sucks. There is no excuse for system-wide ultra-low cost instant inter-bank transfers. Why the hell are we writing checks in 2020? The only thing that keeps it from happening is lack of political will. And seriously, why the downvotes? Who is here actually defending the US banking system? Speak up!
    - 77pt77 7y ago
      Just to say that it's usually a lot worse. Meaning I get a lot more downvotes. Maybe awareness is improving...
    - Dylan16807 7y ago

jariel 7y ago

"risk aversion and fraud resistance over other attributes" It runs much deeper. Most of these functions are 'middle/back office' for the bank, they were never seen as important. The 'Ops' part was always just operational labour, things done by 'workers' etc.. It's not 'banking' to the banks. Software at banks often parallels archaic processes, established for some very good reason long ago, but continue to exist only due to incumbency or possibly due to regulatory requirements. And because it's finance, the security and stability requirements are much higher, giving new meaning to 'break fast and new things'. When you add in the fact banks are incredibly incumbent and resistant to change, you get a Kafka-esque web of bureaucracy, inefficiency, arbitrary complexity etc.. I don't see any consumer oriented, 'Stripe-like' modern bank taking over either.

mushufasa 7y ago

Re: high-touch -- it's not an age thing. It's a user experience thing. People sometimes go into a bank knowing exactly what they want. More often, people don't really know what they want. i.e. they know they want a savings account, but they don't know if they want a 529 or a roth ira or just a money market checking account. You can think of bank branches like stack overflow: when someone asks "how can i do X" the answer is often often "do Y instead." Most people aren't taught financial literacy, and it varies over time and by geography. Also, most of the population isn't as comfortable with technology skills in general, which developers and professionals often overestimate. For commercial or investment banking (where banks make most of their profit) it's a whole 'nother story, but the author was trying to deal with consumer / small business stuff seems like.

healsjnr1 7y ago
But I think this is one of the points of the article: the human system are thoroughly broken and convoluted. I've recently switched between banks and done just what you said: I went in to a branch knowing roughly what I wanted, but unsure exactly how to setup it up. The end results was _months_ of back and forth. The agents in person or in call centres did not know answers to fairly simply questions (can I have an overdraft on an offset account) and were unable to answer questions about applications (my credit card application continually gave me notice online saying 'proof of other funds required', no one was able to tell me what this meant our what I had to provide). These problems are not related to the deep legacy issues of interbank transfers and settlement or fraud. They are failings in organisational design and management, information design, customer service design. I'd guess they are a symptom of continuous churn and restructuring, of flipping from in sourcing to outsourcing and back again. They are all problems that are within their power to resolve (yes, at great cost )
- eecc 7y ago
  Oh, you nailed it with “symptoms of continuous churn and restructuring”. Just yesterday I was chatting with my manager about the “legacies that never die” which dramatically multiply complexity and spread the teams even more thinly...

avip 7y ago

It's just another example of the universal Chesterton’s Wild Boar fence rule https://news.ycombinator.com/item?id=20616290 https://news.ycombinator.com/item?id=20616290

JohnFen 7y ago

> The author here seems to have a pretty shallow understanding of how banking infrastructure actually works (ex. ACH vs. wire vs. direct deposit), which is the root of a lot of these complaints. This is approximately the level of understanding that most people have. I think this helps highlight the point that the banking system is just horrible to have to deal with -- you shouldn't have to know the intricacies and oddities of the banking system in order to do this sort of stuff. > and still want high-touch in-person and phone interactions in a financial institution. This is me. For mundane things, I prefer an automated system. But if anything at all goes wrong, or if I'm doing something unusual, I want a human to hold my hand.

jka 7y ago

To try an approach without assigning blame: Banks and financial institutions are set up to detect fraud in ways which will tend to spot 'unusual' behavior and anomalous patterns. The combination of someone who is technically competent to the point that they use seemingly different behaviors to the typical user population and are taking actions which have traditionally been seen as high risk (wire transfers, transactions from new accounts, ...) is going to lead to automated flags being raised. A wise implementation will avoid feedback loops, introduce human review which assumes the best unless clear evidence of fraud is present, and will provide mechanisms for individuals to clear/restore their status. The latter resolution workflow, unfortunately, introduces further risks, especially if implemented halfheartedly. Training individuals that it's OK / expected to provide additional personal details to use a service ends up leading phishers to attempt the same techniques, and simultaneously creates a high-value target database of personal data should any of that information be stored long-term. I don't know clear answers here - and yes, perhaps the author could have taken a more gradual or slower approach in order to avoid some problems, and maybe they are angry based on things about the financial system that they don't understand. But there is an ongoing and serious problem here with the way that we provide access to systems and services and then attempt to remediate concerns via automated means. Source: am European and have lived in the U.S., thus have experienced being 'unusual' to many U.S. financial services, have experienced not understanding systems in a country new to me, and have also worked in fraud and care about computer security and overall freedom and safety.

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the_mar 7y ago

Not to burst your bubble, but this is not how it works for banks outside of the US. But since we are on the subject, we should probably address the complexity of universal healthcare first

cortesoft 7y ago

If they care so much about fraud, why do they use things like phone numbers and social security numbers for verification?

manigandham 7y ago
What else should they use that average people would understand?
- closeparen 7y ago
  Well, they already run the world's largest infrastructure for hardware tokens with crypto processors in them.
  - manigandham 7y ago
    Cards are already used when they're available for transactions and interactions (atms, branch visits). Also having a card doesn't mean it's your card, that's what the personal verification is for.

joe_the_user 7y ago

In the one time I've had to transfer more than $100K personally, the operation of wire transfer merely seemed klunky and not the least bit risk averse. I walked into my bank and talked about transferring the money to a relative's bank account in another state. The answer was "sure, we can do that but if you get even the smallest bit of information wrong, the money will go elsewhere and we'll wash our hands of the results". I finally just carried a check physically.

cowsandmilk 7y ago
Why were you trying to use a wire transfer for that? Maybe the bank incorrectly steered you towards that? If you consider a check an option for a transaction, a wire transfer doesn’t make sense.
- joe_the_user 7y ago
  What are write transfers used for if they aren't for transferring large amounts of money long distances?
  - __float 7y ago
    Transferring large amounts of money quickly. The fees can be very high, and you may very well consider an alternative as a result.
    - o-__-o 7y ago
      $40 on $10000 is 0.4% and it goes down from there. My national chain bank charges $25 and the typically destination fee is $15. Put the risk on the banks and get money within 2 hours? Ok
      - cowsandmilk 7y ago
        > Put the risk on the banks and get money within 2 hours? How does a wire transfer “put the risk on the banks”?

christopoulos 7y ago

As I’m not from the US, could you explain the differences or provide a resource?

kccqzy 7y ago

> also worth noting is that a significant portion of a large bank's customers are over middle age and still want high-touch in-person and phone interactions in a financial institution. I'm a millennial. For some banks I vastly prefer phone interactions just because their customer service is so fast and awesome; little to no hold time needed. Calling Discover Bank or Schwab has always been this pleasant. I've even become so lazy that I'd just call them to ask for a workaround for their UI bug. The same cannot be said for most other banks, like Bank of America. If I discover a bug on their UI, I'd rather get into the software engineer's problem-solving mode and figure out a workaround by myself, assuming Googling the issue doesn't work.

abalone 7y ago

Yeah, this blog post comes across as startup-y hero worship, like > I think the root cultural cause is an aversion to self-serve flows. which is plainly false given the biggest push in the past decade of banking has been self service flows that allow them to cut costs and downsize branches. Stripe is built on a traditional bank partner. The workflows Stripe optimizes are not “make it easy to empty my new bank account with minimal authentication” workflows.

ianlevesque 7y ago
So why do they all insist on SMS-only for 2FA?
- AlexCoventry 7y ago
  It doesn't detract from your argument, but there appear to be nine US banks listed at https://twofactorauth.org/#banking https://twofactorauth.org/#banking which offer hardware- or software-based 2FA.
- vidarh 7y ago
  Because they optimise for 'easiest for most people, with an acceptable risk profile'. Note acceptable not lowest.

cm2187 7y ago

And I must say that the Silicon Valley way of dealing with fraud isn’t much more fun from a user experience point of views (solving captchas all day long, waiting for 2fa that may or may not come, accounts suspended without explanations, etc). Also the author thinks that buying a bank will solve things. This is also naive. Either you are not a regulated owner and you are severely limited in what influence you can have on the bank, or you become a banking group and banking regulations apply to you too. The solution is competition, but regulations have made it so expensive for a new player that there isn’t really any. That’s the cost of you not having to worry about whether the money on your bank account will still be there tomorrow. Then in absence of competition, it is pretty horrifying how laziness and incompetence can cripple a large organisation to a quasi standstill.

eru 7y ago
Mostly agreed! > That’s the cost of you not having to worry about whether the money on your bank account will still be there tomorrow. That's too high a cost. The eg Scottish banking system of the industrial revolution and the Canadian banking systems of the 19th century had this piece of mind in practice _and_ plenty of competition. See eg https://www.alt-m.org/2015/07/29/there-was-no-place-like-canada/ https://www.alt-m.org/2015/07/29/there-was-no-place-like-can...
csomar 7y ago
It's not really that expensive to get your foot on the door. There has been a lot of these fintech banks (basically a card and an app). Here is the problem: They don't offer many of the products that banks offer (the most important being credit). Also, from experience, they have a shittier customer service. The guy complains about branches, yet I have found branches much better than having no person to contact what-so-ever.
- marcus_holmes 7y ago
  Most fintech startups that look like banks aren't. They use banking services from other banks, and deal with the bank's bullshit for you.
- 7y ago

syshum 7y ago

>>>also worth noting is that a significant portion of a large bank's customers are over middle age That maybe true today, 30 years from now those boomers will be dead. >>The other misconception is why banks continue to operate this way, which I personally believe comes down to prioritizing risk aversion and fraud resistance over other attributes There are many ways to solve for both, other nations have done it successfully ACH for example is a shit show and should have been replaced decades ago, its biggest "security" features is that fact that it is slow to complete a transaction to allow humans to catch an error or fraud.... US banking is not about risk aversion or fraud control, it is about risk shifting and CYA. They do not care about preventing fraud, they care about making sure they do not have a pay for fraud by shifting liability to either consumers, businesses, or another bank

ivanhoe 7y ago

Why would a customer need to know anything about banking at all? Imagine if you were stopped in a supermarket because you beeped on the way out, and then they leave you to wait for hours before someone finally comes to tell you it's well-known that their door gates' sensors are just too sensitive and you can go. You'd probably sue them or at least never go there again, certainly no one would tell you that you don't understand how shoplifting is a complex problem. If a fraud detection system is known to detect false positives (and they're designed that way on purpose, to provide a better protection to the institution), then there should be measures in place to contain the possible damage to clients, and also an easy procedure for clients to resolve these issues quickly and painlessly. That's a bare minimum. One of the main reason why people moved to Stripe from PayPal and similar services in the first place (beside an api that works) is exactly this type of problems where payment gateways would block your money in the name of some arbitrary "fraud risk" and you couldn't do anything about it. Fraud is their business problem, not mine as a customer. If I'm doing business legally why would I need to care or know anything about it?

grenoire 7y ago
The analogy falls short considering the OP's initial point: The sums involved make a big difference in the reaction.
- ivanhoe 7y ago
  Issue is not if there should be fraud screenings - of course, they're required both by law and a common sense. Question is do you treat your own system's false positives like customers' problem, or you actually do something pro-active to help them? In my experience most banks and payments services just don't care. It's up to customer to complain and push repeatedly for it to be resolved, and banks make it harder, rather than easier. To get access to your own money you have to go through tones of bureaucracy to prove you didn't do anything wrong. Exactly because of the sums in question the treatment should be different, bank is using that money while it's locked and pays you no interest on that.
jeremyjh 7y ago
The government requires banks to do some of these things. Not just to prevent fraud, but to prevent money laundering, funding terrorists, giving money to entities controlled by sanctioned countries and other criminal activity. If you don't understand any of these issues, the bank's behavior will seem willfully incompetent and spiteful, and raises some of the feelings expressed in the SP. But you won't find it different at "new tech" bank.

vonseel 7y ago

Do you think the age issue and familiarity with tech will change in the future though? Even technology should reduce fraud cases and risk, surely it is nothing like the days of CATCH ME WHEN YOU CAN. I have only needed to visit a bank in person once in the last 5 years or more, and that was to deposit some old US $100 bills which modern ATMs did not recognize and the local credit union did not want to take the bills ( I am not a member of local CU but it has an ATM I can use for deposits with my out of state CU). Which reminds me, to fix that issue I signed up for a Chase account online, drove down to the bank 5 minutes later and deposited the $700 pre-1980s cash to a teller, who verified the bills were real without any griping - they have the right machines and tech to be confident about those things, unlike the local credit union. So, I guess, on a surprising note I had a good story about Chase to share. They also gave me a few hundred dollars bonus to open a checking account, which was cool.