29 ms·

Fed announces details of new interbank service to support instant payments

683 points by tigerlily 6y ago

adammunich 6y ago
Are wires about to get cheaper?
- toomuchtodo 6y ago
  This likely replaces (most) domestic wires, checks, ACH transfers, and other legacy funds transfer mechanisms. https://www.federalreserve.gov/newsevents/pressreleases/files/other20200806a1.pdf https://www.federalreserve.gov/newsevents/pressreleases/file...
  - TedDoesntTalk 6y ago
    We will still need banks’ mobile apps to support this kind of transfer (FedNow). Considering that I’ve never been able to do wire transfers by mobile app with two major US banks (but Zelle transfer by mobile app? Of course!), I’m not confident this will replace Zelle, Venmo, etc for some time. Sure, in 10 years or so... but don’t hold your breath.
    - mixmastamyk 6y ago
      At least they’re finally working on it.
      - toomuchtodo 6y ago
        Indeed, having the infra in place is half the battle. Requiring banks provide access to the infra through their customer facing endpoints is just a bit of regulation away at that point. It'll take a while, but it's nice to know a decent end state is on the roadmap.
iou 6y ago
Does anything actually exist yet, is this just a notice of intent?
- ffggvv 6y ago
  >>> The target launch date for the service remains 2023 or 2024, with a more specific time frame to be announced after additional work is completed.
- storedbox 6y ago
  > The target launch date for the service remains 2023 or 2024, with a more specific time frame to be announced after additional work is completed. Sounds like it's just a notice of intent.
- protomyth 6y ago
  Here is the actual site https://www.frbservices.org/financial-services/fednow/index.html https://www.frbservices.org/financial-services/fednow/index.... - they have had a lot of milestones to get this done.
seibelj 6y ago
> The target launch date for the service remains 2023 or 2024, with a more specific time frame to be announced after additional work is completed. 4 years away, at least...
- pfundstein 6y ago
  Just to be pedantic, 2023 is less than 2½ years away, so not "4 years at least".
  - auslegung 6y ago
    In my experience with government, 2.5 years easily becomes "4 years at least". Maybe that's what the person meant?
    - pfundstein 6y ago
      Maybe, but it's a moot point since I was being pedantic. Also it's usually not a problem with the government that causes the delay, rather the lowest bidder that they award the tender to.
    - culopatin 6y ago
      The FED is not government. And if it’s slow it’s because of the big impact it would have if they messed up, and because it’s already hard for them to hold a positive reputation without messing up.
tobinfricke 6y ago
Will this be anything like SEPA and the easy, cheap, fast, ubiquitous interbank transfers allowed in Europe? https://en.wikipedia.org/wiki/Single_Euro_Payments_Area https://en.wikipedia.org/wiki/Single_Euro_Payments_Area
- Qworg 6y ago
  Just the B2B part of SEPA.
  - ATsch 6y ago
    Kind of typical. Wouldn't want the government to provide any useful service directly to it's citizens without some corporate middleman. Still a very good step though.
vxNsr 6y ago
>The rapid expenditure of COVID emergency relief payments highlighted the critical importance of having a resilient instant payments infrastructure with nationwide reach, especially for households and small businesses with cash flow constraints," The main issue with releasing cash as I understand it wasn’t that it wasn’t arriving fast enough; rather it was verifying the recipient was eligible and was who they say they were. The only way to solve that as I see it is with a national ID which I am more against the more I hear about the abuses that both democrats and republicans do with what little power they have to identify political enemies. Obviously ACH could be faster but when it comes to getting gov money back I just don’t see how the 2 extra days was the issue.
- beaunative 6y ago
  ACH could still be expedited even with the need to verifying identity. Technically it only need to demonstrate that the identity of receiver and the identity of the referred bank account are consistent, a national id won't be necessary. Fed is not technically a branch of the government.
  - TheSoftwareGuy 6y ago
    The fed is absolutely an agency of the us government: https://www.federalreserve.gov/faqs/about_14986.htm https://www.federalreserve.gov/faqs/about_14986.htm >The Federal Reserve System is not "owned" by anyone. The Federal Reserve was created in 1913 by the Federal Reserve Act to serve as the nation's central bank. The Board of Governors in Washington, D.C., is an agency of the federal government and reports to and is directly accountable to the Congress.
    - JumpCrisscross 6y ago
      > fed is absolutely an agency of the us government It’s absolutely not a government agency but also absolutely not privately owned. It’s best thought of as a non-governmental entity that is strongly influenced—and sanctioned—by the government, but does not operate underneath it. This is why e.g. the Fed and Treasury negotiated how losses fell from the Main Street lending program. And if you visit a Fed, one of the first things their employees like to point out is that they’re NOT federal employees.
trollied 6y ago
We have this in the UK. It's called Faster Payments. https://en.wikipedia.org/wiki/Faster_Payments_Service https://en.wikipedia.org/wiki/Faster_Payments_Service Never had a problem with it. I use a few banks that are technically good, and I can send a payment from one to the other & get a push notification a couple of seconds after sending cash from one account to another. It's great!
- stephen_g 6y ago
  Yeah, we have a similar system called the "New Payments Platform" in Australia. You can use the traditional account/branch identifier numbers, or register a phone number or company number to an account. So people can generally just instantly transfer you money without even asking for details if they have your phone number.
  - dalanmiller 6y ago
    Under the hood, it is currently significantly more expensive than BECS however.
ahmedfromtunis 6y ago
How come the US -- the biggest economy in the world, and home of the most sophisticated banking sector on the planet -- is still not equipped with such a system? Are banks resisting it and if yes, why would they?
- mixmastamyk 6y ago
  Special interests like it that way.
- bichiliad 6y ago
  There's a profit to be made on the funds held while seemingly-instant transactions settle. When you Venmo someone money, you send money to their Venmo account, which has to go through the 1-to-three-day-long ACH process to get to your actual bank account. If money sits in your Venmo account, interest can be accrued on it[0]. Plus, Venmo (and PayPal) has interest in being a trusted brand in financial transactions of other sorts, I'm sure. PayPal has a credit product now, for example. I would not be surprised if they have a rent-seeking lobbying interest in making federal bank transactions remain a worse experience than their own service. [0]:https://www.marketplace.org/2018/02/20/what-are-apps-venmo-doing-your-money/ https://www.marketplace.org/2018/02/20/what-are-apps-venmo-d...
- jiqiren 6y ago
  Because there are already alternatives for transactions that have to instantly settle - like SWIFT or FedWire.
  - Qworg 6y ago
    Neither are instant.
- throw0101a 6y ago
  > is still not equipped with such a system? Inertia, at least partially. It's why chip-and-pin is still not a thing in many places: Old School credit card POS devices were distributed to a lot of places over the years, and those only had the magnetic strip readers. Replacing is time consuming and no one wants to go through the expense and effort of changing it in all the places that they're in (e.g., gas pumps). Sometimes it's handy to be a late/delayed adopter of technology and to skip a generation or two.
jperras 6y ago
Canadian here. This sounds like Interac eTransfer, which is available to any person sending/receiving money where the endpoints are Canadian banking institutions (all of them, I guess?). We've had this since 2003.
- thinkloop 6y ago
  E-transfer seems like what the American solution would have been - private banks integrating between themselves - whereas this fed solution seems like what Canada would have typically come up with. In fairness though, Canadian banks are so few and heavily regulated they can almost be considered government.
- zymhan 6y ago
  This has been such an ongoing issue in the US that a massive industry has sprung up to fill the void for "instant transfers". Paypal, Venmo, Apple/Google Pay, Square Cash, etc are all because the US financial transfer system is hopelessly outdated.
  - deleted 6y ago
    [deleted]
- peteretep 6y ago
  > We've had this since 2003. As much fun as it is to come up with Canadian supremacy, _everyone_ except the Americans has had this for a long time.
mike503 6y ago
I thought (and maybe just my personal conspiracy feeling) that banks lagged on transactions mainly to hold on to the cash longer and get interest. Secondary thought was just poor old technology debt. Something akin to hearing that payroll at a large company was a batch job dumping a ton of text files to a share or something and the bank slurped them up for direct deposit.
- logosmonkey 6y ago
  This was my assumption as well. For any large company I've always assumed refund times were 100% based around earning interest.
- Qworg 6y ago
  Partially this is due to self interest - holding the cash longer and getting interest - but most of it is actually due to self protection. Small banks have less cushion to recover from fraud, have less people to process payments quickly, and generally lack technological sophistication. NACHA represents all of the various institutions, from JPM down to the First Bank of Your Hometown, so it has limited flexibility in adopting new things that increase cost/requirements.
pfundstein 6y ago
Nearly all first world countries enjoy instant payments at the point of sale and person to person. It boggles my mind that it has taken this long and a pandemic to even set the gears in motion, all while battling ridiculous levels of cheque and credit card fraud.
- mixmastamyk 6y ago
  Not to mention potentially malicious rent-seeking third parties inserted and selling financial info.
  - orthecreedence 6y ago
    Why is this downvoted? We have three major credit bureaus, and only just recently one got hacked and leaked everyone's info. Finance in the US is full of third-party jackasses that make money by doing nothing other than acting as gatekeepers. It's the definition of rent-seeking.
    - mixmastamyk 6y ago
      Yes, was also thinking unnecessary players like venmo or mobile pay. Weren't needed in places with modern banking.
- kome 6y ago
  Americans have such a strange relationship with technology... the most innovative startups, and yet the worse infrastructure. here in Europe it's the contrary :) and btw: the service will be active in 2023 or 2024... while I enjoy immediate transfers bank to bank since years...
  - api 6y ago
    Its because a generation or two of Americans were propagandized heavily that anything socialized will immediately lead to Soviet communism. If we build infrastructure Lenin will rise from the dead and transform into a giant mech warrior and wade across the Atlantic to destroy us all.
TedDoesntTalk 6y ago
Planet Money did a piece on ACH seven years ago. It’s a batch system written in COBOL in the 1970s: https://www.npr.org/transcripts/229224964 https://www.npr.org/transcripts/229224964 And that’s why the Feds want to replace it, not refactor it.
- tyingq 6y ago
  Your Visa transactions are running through older TPF 360 assembler. Old isn't an excuse for bad.
  - TedDoesntTalk 6y ago
    It’s not bad. It is simply a product of its time: according to planet money in that 2013 piece, ACH batch processing runs only once per day and only during bank hours (no weekends, etc). Presumably, increasing that frequency would break something in the system or it would already have been done. In the ‘70s, no one predicted 24/7 banking or even ATMs let alone internet payments. I remember my father using an ATM for the first time in 1981, I think. Perhaps it was 1980. But we had to drive 7 miles to get to it. Stocks were still traded in fractions, not decimals!
    - lyrrad 6y ago
      Things have improved somewhat since then, with the introduction of Same Day ACH, which provides two additional ACH processing periods each business day. https://www.nacha.org/rules/same-day-ach-moving-payments-faster-phase-3 https://www.nacha.org/rules/same-day-ach-moving-payments-fas... It's more expensive than regular ACH transactions. The above page seems to indicate the sending bank has to pay the receiving bank 5.2 cents per same day transaction on top of regular ACH fees (that appear to be 0.0185 cents per transaction sent or received for 2020).
    - tcbawo 6y ago
      Funnily enough, US stocks were trading in fractions until 2001!
    - 6y ago
justinzollars 6y ago
With this tech the Fed will now be able to buy junk bonds with monopoly money at light speed.
woodruffw 6y ago
Settlement between banks in the United States is astoundingly complicated, for (fascinating, terrifying) historical reasons. FedNow is a huge step towards fixing holes that private companies have been papering over for over two decades. Blatant self promotion: for anybody interested in learning more about the Automated Clearing House system (which FedNow will eventually supplement) and interbank settlement in general, I wrote a summary of much of it here: https://blog.yossarian.net/2019/12/25/A-shallow-dive-into-the-American-banking-system https://blog.yossarian.net/2019/12/25/A-shallow-dive-into-th...
- JMTQp8lwXL 6y ago
  The history of credit cards is also somewhat wild: unsolicited cards arrived activated in the mail, and consequently, a huge volume of credit card fraud was born. Consumer protections came a few years later cleaning up obvious issues. But looking at that story, it seemed awfully reminiscent of the Uber model.
  - bfieidhbrjr 6y ago
    "A piece of the action" is a great book on the history of this.
- hashtagmarkup 6y ago
  "Astoundingly" complicated???? ACH/NACHA isn't any more complicated than any other API. If anything it's easier than most if you're used to string processing, because the file format is just 80 character rows with 9 different types of rows starting with that numerical digit. The schema is well defined. In many cases a "transaction" is executed by simply FTPing an .ach file. What did you find so complicated?
  - woodruffw 6y ago
    As I mentioned in the blog post: * ACH-formatted transactions are supposed to be 80 character rows, but ACH emitters play loose and fast with that. 81 (CR/LF) and 82 (CR+LF) character entries are common enough in the wild that financial communities regularly complain about them. ACH transactions are supposed to be concatenative, so it wouldn't surprise me to learn that most real-world ACH handling code needs to handle 80, 81, and 82-character records in the same stream. * The envelope and hierarchy of ACH is extremely simple. The internal state machine isn't: there are plenty of overlapping entry classes[1], obscure return codes, common misuse of said codes, and rider entries (like addenda information). The records for international settlements are shockingly complex; no ODFIs or RDFIs seem to follow the rules about not clawing back money after various contest periods expire. [1]: When do I use CIE entries versus PPD? Do I use WEB for a recurring utility payment that was initiated online?
grizzles 6y ago
This has little to no chance of coming into service. It's absolutely a direct threat to Visa & 100+ others. They will make sure that this is killed in Congress + legislation will likely be written prohibiting the Fed from creating something like this ever again. [1] https://www.propublica.org/article/congress-is-about-to-ban-the-government-from-offering-free-online-tax-filing-thank-turbotax https://www.propublica.org/article/congress-is-about-to-ban-... PS I knew I'd get these downvotes. The comment stands. Uncomfortable things should be said.
- antihero 6y ago
  Visa and Mastercard are doing just fine in the UK, it would be highly inconvenient to have to bank transfer to every merchant you interact with.
classics2 6y ago
PayPal be like o.O
tehjoker 6y ago
The government will do everything to make the financial system work for banks and nothing to make it work for people.
- triceratops 6y ago
  "The rapid expenditure of COVID emergency relief payments highlighted the critical importance of having a resilient instant payments infrastructure with nationwide reach, especially for households and small businesses with cash flow constraints," said Federal Reserve Board Governor Lael Brainard." It sure sounds like this particular thing is good for "the people". It'll take away some business from industries that prey on the poor, like check-cashing.
  - tehjoker 6y ago
    There are some minor benefits from faster payments, but I assure you that people with lots of money to move are the ones welcoming this and asking for it.
    - triceratops 6y ago
      You're vastly underestimating the benefits to regular people. You haven't lived in a country with instant, universal electronic payments.
lelc 6y ago
If anyone from the FED is reading this I have this advice: don't use ISO20022! (I've been working on the brazilian instant payments project, known as PIX). It's an overly-complicated-try-to-solve-everything standard that promises interoperability but only delivers pain and misery. Since each country has its own standards for person and account identification, in dealing with these local realities, the ISO20022 adds quite a lot of complexity. But all this cost does not result in interoperability. In fact, each payment scheme end up with a localized version of the standard, incompatible with others. What could have been a clean API, ends up a mess.
- kovek 6y ago
  What would be an alternative?
  - amluto 6y ago
    A brand new protocol.
    - rudolph9 6y ago
      https://xkcd.com/927/ https://xkcd.com/927/
      - themacguffinman 6y ago
        A standard backed by the US government isn't going to be just another standard.
        protomyth 6y ago
        Yeah, there is an amazing amount of power to force adoption if the Fed tells banks, that to continue to be banks, they must adopt this data standard.
        iagovar 6y ago
        Why don't just copy what's in use in other countries? For example, sending and receiving money in the EU is pretty simple, you only need their IBAN, and maybe their name (AFAIK some countries require it). I'm not even aware of what's going on in the background, but from the user perspective its easy and free.
jawns 6y ago
There was a technology that I started seeing about 10-15 years ago (I believe Paypal used it at some point) where bank payments happened "instantaneously" because they were backed by a credit card on file. The bank settlement still took the same amount of time under the hood, but because the credit card acted as a backstop, there was an appearance of an instant payment. I was always surprised at how few merchants adopted this. Hopefully, FedNow will make it totally obsolete.
supernova87a 6y ago
What I really want this payment system to do is eliminate the direct debit system from checking accounts and return some real security to banking. Secure, irrevocable payments, only initiated by me, from my account to others. No more system that allows mistake debits or others to accidentally/maliciously deduct from my checking account, such that I have to be watching for errors and ask for them to be fixed. Or wondering if someone's payment to me might be reversed. Or having my (or your) parents fall victim to an advance fee scam with bounced checks 2 weeks after deposit. Ridiculous. It's well past time for this. Or at least now give me the choice to have those loopholes eliminated from my checking account.
- uoylj 6y ago
  You're describing Bitcoin.
- jonahbenton 6y ago
  There will be banks that offer products for handling pulls differently, it's a product decision, various features around this are available for the big boys, just haven't trickled down to the masses. But this decade they will. Has nothing to do with Fed Now. Irrevocability- for consumer payments there will always be revocability. Humans doing stuff make mistakes, and need to be able to "take it back." At the ledger level, all transactions are irrevocable. You apply other transactions on top to implement recovability.
  - Silhouette 6y ago
    Irrevocability- for consumer payments there will always be revocability. And yet, if you go into a store and buy something with cash, you have never been able to just arbitrarily reverse that payment and keep the goods several months later, and the sky has not fallen. Humans doing stuff make mistakes, and need to be able to "take it back." And what about the humans who didn't make a mistake, but simply chose to abuse the system at the expense of whoever they transferred the money to? Certainty and security are important for those on both sides of a transaction. If you have a dispute, that's what legal systems are there for. The quasi-judicial role that financial services play in resolving disputes, often with little regulatory oversight and absolutely no requirement to be neutral or objective, is long overdue for retirement.
marmshallow 6y ago
What does this change from my perspective? No more waiting 2-3 business days for all my transfers between banks or 3rd parties?
harikb 6y ago
One thing I don't see mention regarding the existing US ACH (or whatever interbank) system is that there is absolutely no verification or security in this system. Just like verification of paper check signature and a whole lot of other financial items - most banks allow anything until questioned. The easiest and cost effective way is to let it happen and reimburse for failures. 1. I have linked a non-joint account in my name at bank A to another (non-joint) account of my wife at bank B (accidentally) without any verification of any kind. I call BS on anyone claiming they magically checked the home address link or know we are married. 2. I have walked in to my bank and did a wire transfer of a large amount without any kind of verification. They didn't check my ID. I am not kidding. I did enter my ATM card and PIN. Then why do they have a $500 or $1000 limit at ATM. If someone did get my ATM card and PIN, they just had to appear confident and walk in to the branch. This is one of the largest banks in the US. 3. Because my wife doesn't like to deal with customer service of various financial items (credit-cards, 401k etc). I regularly call and just say I am her (clearly feminine name) and the conversation carries on as if nothing is surprising/suspicious. 4. On the other extreme, IRS's "MyIRS" site let us authenticate yourself (first time setup) using a security question that allows one to type any financial account number. CC, Bank, 401k, whatever. I mean how tf did they get all that data on me? legally? Why does IRS need my CC number? IMHO, the only thing keeping us secure is that nobody from outside US has really tried to mess around with US banks.
- ragona 6y ago
  Regarding your last sentence, I think that’s true for, well, basically the entire world. Our security sucks in general. Humans aren’t as mean as they seem, or maybe they just generally suck at it.
  - harikb 6y ago
    I was only expecting something like OTP enforced by bank (not a choice by customer). Yes, I get the SMS / insecure transport problem, but other countries do this.
  - illektr1k 6y ago
    You guys might enjoy https://en.wikipedia.org/wiki/Truth-default_theory https://en.wikipedia.org/wiki/Truth-default_theory
bitxbit 6y ago
Here’s a thought: come up with an online payment platform with ZERO txn fees. You only pay 1% when you cash out. It can be done and it will be done.
btian 6y ago
> The target launch date for the service remains 2023 or 2024 Does anyone in fin tech know why it takes so long? My understanding is this achieves the same goal as wire transfer, which already exists today, but is for whatever reason super expensive. Why is wire transfer so expensive?
- at_a_remove 6y ago
  Just as a hunch, but maybe "move fast and break things" doesn't really resonate with the people who are concerned about where billions of dollars are.
crystaln 6y ago
What are the chances this is not going to be a debacle, take 10 years, and late with disappointing dated features?
neltnerb 6y ago
I suppose they already have a complete log of all your transactions, so may as well make it function better.
iknowstuff 6y ago
Is this kinda like SCT Inst for the Eurozone? https://www.europeanpaymentscouncil.eu/what-we-do/sepa-instant-credit-transfer https://www.europeanpaymentscouncil.eu/what-we-do/sepa-insta...
wprapido 6y ago
That's pretty much the norm in every developed country and many developing countries.
koopuluri 6y ago
I moved to India at the start of the year and there's the Universal Payment Interface (UPI) here that essentially allows a Venmo like interface to transfer $ instantaneously from any bank account to another - by simply using the recipient's phone number or a QR code. There are multiple apps that interface with UPI, and the barrier to entry isn't high - allowing for good competition on the UX. Literally every person I've met here or wanted to transact with in some way accepts payments via UPI... heck I was forced (or rather "strongly recommended") to pay a bribe to a cop that they were able to accept via UPI. I felt like I stepped into the future. Transferring money to a friend w/ a different bank in the US is such a hassle if they don't have Venmo (and more than half in my circle don't), and I've had horrendous experiences with Zelle (terrible UX, confusing and often incorrect sending limits that I have to call my bank to resolve). In India I mostly use Google Pay as my interface to UPI and wow, it's a magical user experience. Can't wait for there to be more competition in payments UX in the US once this service is set up.
- arrayjumper 6y ago
  I agree wholeheartedly. In my opinion, UPI has been an unmitigated success. Nearly everyone from a roadside street-food vendor to a 5 star hotel accepts UPI and it makes the whole flow of day-to-day payments entirely contactless which is especially useful with the COVID-19 situation. Now if only they could introduce some way to enable subscription payments, it'd be the cherry on top.
  - sandGorgon 6y ago
    already live. its called UPI Autopay https://www.moneycontrol.com/news/business/startup/exclusive-google-pay-phonepe-to-soon-offer-auto-debit-through-upi-5674061.html https://www.moneycontrol.com/news/business/startup/exclusive...
    - arrayjumper 6y ago
      Ohh. Thanks for linking this. I'm excited for this.
  - 6y ago
tehabe 6y ago
instant payments were just introduced in Germany, it is weird if you get the money the same day someone wire transfered it to your account. Wire transfers are very common in Germany, checks are almost gone. But these instant transfers are really new. Before those transfers were cleared once a day, I think.
- skrause 6y ago
  Same-day wire transwers were already common in Germany in the last few years with the old system (the settlement is done every few hours), except for a few slow banks. SEPA Instant is literally settled in a few seconds. I tried this out a while ago: Started the money transfer from one bank account to another, logged in into my second bank account immediately after and the money was already there.
shp0ngle 6y ago
ctrl-f "blockchain" 0 results, here or on the actual website you disappoint me, HN
sschueller 6y ago
Can the US also implement IBAN please?
codecamper 6y ago
Wow so they'll be able to print and deliver within seconds.
blahedo 6y ago
Nearly two decades ago, in 2002, I remember being appalled at how slow money transfer worked. If I deposited my paycheck at my bank, it could take two or three days before that money was available (and my bank compounded the sin by including the amount in the "total" for my account but not all of that money "in" my account was actually "available"). In late '02 I was so irritated by this[0] that I actually started cashing my paychecks at the issuing bank (which was across the street from the building where I worked) and walking the money to my own bank two blocks away and depositing it. Cash deposits were, I believe by federal law, immediately available. Even then, there was no excuse why physically walking cash from one place to another, with in-person interactions at both ends, should have been faster than a direct electronic transfer, but it was, by a factor of something like 150. Improved electronic infrastructure has been a LONG time coming. [0]The final straw was the time I deposited a check at the bank, then wrote a check on that money, put it in an envelope and mailed it, and the check still bounced. It still kind of boggles my mind that the system was that slow, although I kind of assume there was a certain amount of bank-being-gougy in there too.
- m463 6y ago
  I remember when I was younger hearing about "check kiting" which appeared to be the exact opposite of your bounced check ... somehow you could turn the slow money transfer around and build up a huge balance by playing with the delays.
antihero 6y ago
Is this going to be like FPS that we've had in the UK and works wonderfully? (It is so fast, that if I pay e.g my Monzo from my Starling, the received notification from my Monzo happens before the sent notification from my Starling. It's absolutely amazing and totally free for the consumer).
harshdeep 6y ago
India is having similar concept (UPI) in place from 3 years. About 40% transactions have moved to this new payment processing.
martin_bech 6y ago
What year is this??
xyst 6y ago
Assuming all banks adopt this standard in that specified timeframe, the existing P2P solutions (Apple Cash, Venmo, PayPal, Zelle, CashApp) will ultimately become useless. I wonder how these companies will pivot once banks begin to adopt this interbank service.
fesja 6y ago
In 2024, USA will reach the current present in Europe ;) Since 2017, the SEPA Instant Credit Transfer protocol is enabled in Europe. Which is basically what FedNow will be. Multiple apps and banks have built on top of it solutions for consumers and businesses. I interviewed Bizum, the success story of Spain related to instant payments. Here, "bizum" is a verb. 100% of banks supoort it. Everyone, kids and adults, use it to pay for beers, food or presents https://www.javierescribano.me/bizum/ https://www.javierescribano.me/bizum/
- Reason077 6y ago
  "Since 2017, the SEPA Instant Credit Transfer protocol is enabled in Europe. Which is basically what FedNow will be." The UK has had instant interbank payments (FASTER) since May 2008 ;) https://www.fasterpayments.org.uk/our-achievements https://www.fasterpayments.org.uk/our-achievements
- RivieraKid 6y ago
  In the Czech Republic all major banks support instant transfers AFAIK, but not sure what's the situation for EU transfers, when I send money to Degiro (stock broker) it's not instant. Also, I almost stopped using cash and just use my phone everywhere.
cymon 6y ago
This is quite a shame on the US part to be so much behind the times: Kenya has had a Real-Time Gross Settlement (RTGS) system for years supported by the central bank which works in near-realtime during working hours, and an even better one was recently introduced by a conglomeration of the local banks which works in real-time 24/7 called Pesalink: https://www.ipsl.co.ke/pesalink https://www.ipsl.co.ke/pesalink ..
- zo1 6y ago
  Agreed. What's an even bigger shame is that places like the US and UK don't have proper centralized and verified citizen databases and national identification documents linked to it.
nicofcurti 6y ago
The European Union has the SEPA payments which support most big banks, it works just great
oneplane 6y ago
Welcome to 2005, you're gonna like it! /s To be fair, this has been the norm here for decades and it baffles most of us that some shady companies like venmo are used so much in the USA. The same with 'numbered accounts' or no-factor authentication where people can steal your money by knowing a single number.
dblock 6y ago
When I moved a couple of years ago I started banking with Fidelity which has 17-digit account numbers. Using those for ACH with ConEd resulted in them failing to bill me at the end of the month. I thought it was a typo and put the ACH numbers in again, only to fail and get disconnected and flagged at the end of next month plus some late fees. The whole problem was that the account number was too long. No error messages anywhere. Fidelity also has a 13-digit account number version that I've been using ever since. What a mess.
zaroth 6y ago
Based on reading through the PDF, I would summarize FedNow as a service which provides the low-level infrastructure to support near real-time money transfers between domestic US bank accounts. The system is implemented as a credit-only system - meaning payment transactions must always be initialized by the sender. The protocol is a full handshake between the banks which provides the ability for the receiving entity to confirm the account number of the destination account in real-time and provide confirmation to the sender that the transfer is accepted. This is notably different from ACH where errors can come hours or even days after the fact. Account identifiers appear to be standard bank account and routing numbers as they exist today -- I say this only because I couldn't find anything in the PDF saying otherwise. There is a section on using "Alias-based Payments" and on how directory services might be integrated or even centralized, but the current approach would rely on 3rd party directory services to facility "alias-based payments" (think Venmo). IMO a major security shortcoming of FedNow is that it reuses the existing account numbers. As a credit-only system, if a new (unique) account identifier was used then that number could be shared freely, printed on invoices or web pages, and handed out without any loss of safety, and used without the need for a directory service. Aliasing could be built on top this new unique number in 3rd party directories, but it would no longer be a security method, rather purely a usability one. The service will use ISO 20022 messaging standard (https://www.iso20022.org/ https://www.iso20022.org/) and will define both payment and non-payment message types which include the ability to attach meta-data such as invoice and receipt information, as well as to transmit a 'Request for Payment' to make up for the lack of debit transactions which would normally be used for recurring payments. In the 'Request for Payment' use-case, the account holder would be presented with a user interface provided by their banking institution, e.g. in their bank's mobile app) which would list pending requests for payment and provide the ability to approve payments. From what I can tell, there's nothing necessarily stopping a bank from providing a UI which could allow pre-approving future payment requests, e.g. by matching the date / amount / account number of the Payee, but if the 'Request for Payment' doesn't include the necessary meta-data it becomes increasingly difficult to not require the Payor to manually approve recurring requests. For the use-case of bill payments, I can only hope that the messaging format could be standardized to the point where something like the following could be possible; 1) Checking out at a retail store. The register computes the total amount due. 2) Select FedNow in our Apple Pay / Android Pay settings as the payment method and wave your device in front of the payment terminal. Here's where you would want NFC to be able to transfer a one-time-use secure identifier for where the payment request should be sent. 3) Phone presents a confirmation screen with the name of the store, total amount, and an Approve button. The one-time identifier sent in Step 2 could carry an implicit approval up to a certain amount (e.g. $250) 4) Full itemized receipt from the transaction is attached and automatically saved in the wallet. 5) Total amount charged is reduced by 1% as a bonus for not using a credit card. The key component of the system is a service which hides the long-standing / re-usable account identifiers from the POS system, and replaces it with a one-time use only identifier. At first glance it seems like such a system could conceivably be hacked on top of FedNow by a type of directory service that also acted as a proxy for the Payment Request messages.
idclip 6y ago
* hodling intensifies * They cant honestly beat the motivated masses that hold collectively billions in crypto currency.
lingxiaoling 6y ago
For those in the crypto world, one real-world use case I hear sometimes is faster inter-bank settlement, in essence providing a tech solution to a (semi?) regulatory problem. Does the Fed's actions meaningfully impact your value proposition?
uchman 6y ago
One of the many things that surprised me in the US was seemingly complicated means of transferring cash between bank accounts. This process has been trivial in Nigeria (and some other countries) for a long time now with the NIBSS settlement system. I look forward to hearing about the progress of this project and the possible impact to existing payment services such as Venmo, Cashapp, Paypal...
shawkinaw 6y ago
> 24x7x365 24x7x52?
rektide 6y ago
The Fed wants transfers to go through them. I hope not. What incompetent assholes. Hopefully the banks start taking making public consumer/business/bank facing standard apis seriously cause this is a shit show disaster. This is not a role the fed should be taking.
grognak420 6y ago
Boomer technology

683 points by tigerlily 6y ago

adammunich 6y ago

Are wires about to get cheaper?

toomuchtodo 6y ago
This likely replaces (most) domestic wires, checks, ACH transfers, and other legacy funds transfer mechanisms. https://www.federalreserve.gov/newsevents/pressreleases/files/other20200806a1.pdf https://www.federalreserve.gov/newsevents/pressreleases/file...
- TedDoesntTalk 6y ago
  We will still need banks’ mobile apps to support this kind of transfer (FedNow). Considering that I’ve never been able to do wire transfers by mobile app with two major US banks (but Zelle transfer by mobile app? Of course!), I’m not confident this will replace Zelle, Venmo, etc for some time. Sure, in 10 years or so... but don’t hold your breath.
  - mixmastamyk 6y ago
    At least they’re finally working on it.
    - toomuchtodo 6y ago
      Indeed, having the infra in place is half the battle. Requiring banks provide access to the infra through their customer facing endpoints is just a bit of regulation away at that point. It'll take a while, but it's nice to know a decent end state is on the roadmap.

iou 6y ago

Does anything actually exist yet, is this just a notice of intent?

ffggvv 6y ago
>>> The target launch date for the service remains 2023 or 2024, with a more specific time frame to be announced after additional work is completed.
storedbox 6y ago
> The target launch date for the service remains 2023 or 2024, with a more specific time frame to be announced after additional work is completed. Sounds like it's just a notice of intent.
protomyth 6y ago
Here is the actual site https://www.frbservices.org/financial-services/fednow/index.html https://www.frbservices.org/financial-services/fednow/index.... - they have had a lot of milestones to get this done.

seibelj 6y ago

> The target launch date for the service remains 2023 or 2024, with a more specific time frame to be announced after additional work is completed. 4 years away, at least...

pfundstein 6y ago
Just to be pedantic, 2023 is less than 2½ years away, so not "4 years at least".
- auslegung 6y ago
  In my experience with government, 2.5 years easily becomes "4 years at least". Maybe that's what the person meant?
  - pfundstein 6y ago
    Maybe, but it's a moot point since I was being pedantic. Also it's usually not a problem with the government that causes the delay, rather the lowest bidder that they award the tender to.
  - culopatin 6y ago
    The FED is not government. And if it’s slow it’s because of the big impact it would have if they messed up, and because it’s already hard for them to hold a positive reputation without messing up.

tobinfricke 6y ago

Will this be anything like SEPA and the easy, cheap, fast, ubiquitous interbank transfers allowed in Europe? https://en.wikipedia.org/wiki/Single_Euro_Payments_Area https://en.wikipedia.org/wiki/Single_Euro_Payments_Area

Qworg 6y ago
Just the B2B part of SEPA.
- ATsch 6y ago
  Kind of typical. Wouldn't want the government to provide any useful service directly to it's citizens without some corporate middleman. Still a very good step though.

vxNsr 6y ago

>The rapid expenditure of COVID emergency relief payments highlighted the critical importance of having a resilient instant payments infrastructure with nationwide reach, especially for households and small businesses with cash flow constraints," The main issue with releasing cash as I understand it wasn’t that it wasn’t arriving fast enough; rather it was verifying the recipient was eligible and was who they say they were. The only way to solve that as I see it is with a national ID which I am more against the more I hear about the abuses that both democrats and republicans do with what little power they have to identify political enemies. Obviously ACH could be faster but when it comes to getting gov money back I just don’t see how the 2 extra days was the issue.

beaunative 6y ago
ACH could still be expedited even with the need to verifying identity. Technically it only need to demonstrate that the identity of receiver and the identity of the referred bank account are consistent, a national id won't be necessary. Fed is not technically a branch of the government.
- TheSoftwareGuy 6y ago
  The fed is absolutely an agency of the us government: https://www.federalreserve.gov/faqs/about_14986.htm https://www.federalreserve.gov/faqs/about_14986.htm >The Federal Reserve System is not "owned" by anyone. The Federal Reserve was created in 1913 by the Federal Reserve Act to serve as the nation's central bank. The Board of Governors in Washington, D.C., is an agency of the federal government and reports to and is directly accountable to the Congress.
  - JumpCrisscross 6y ago
    > fed is absolutely an agency of the us government It’s absolutely not a government agency but also absolutely not privately owned. It’s best thought of as a non-governmental entity that is strongly influenced—and sanctioned—by the government, but does not operate underneath it. This is why e.g. the Fed and Treasury negotiated how losses fell from the Main Street lending program. And if you visit a Fed, one of the first things their employees like to point out is that they’re NOT federal employees.

trollied 6y ago

We have this in the UK. It's called Faster Payments. https://en.wikipedia.org/wiki/Faster_Payments_Service https://en.wikipedia.org/wiki/Faster_Payments_Service Never had a problem with it. I use a few banks that are technically good, and I can send a payment from one to the other & get a push notification a couple of seconds after sending cash from one account to another. It's great!

stephen_g 6y ago
Yeah, we have a similar system called the "New Payments Platform" in Australia. You can use the traditional account/branch identifier numbers, or register a phone number or company number to an account. So people can generally just instantly transfer you money without even asking for details if they have your phone number.
- dalanmiller 6y ago
  Under the hood, it is currently significantly more expensive than BECS however.

ahmedfromtunis 6y ago

How come the US -- the biggest economy in the world, and home of the most sophisticated banking sector on the planet -- is still not equipped with such a system? Are banks resisting it and if yes, why would they?

mixmastamyk 6y ago
Special interests like it that way.
bichiliad 6y ago
There's a profit to be made on the funds held while seemingly-instant transactions settle. When you Venmo someone money, you send money to their Venmo account, which has to go through the 1-to-three-day-long ACH process to get to your actual bank account. If money sits in your Venmo account, interest can be accrued on it[0]. Plus, Venmo (and PayPal) has interest in being a trusted brand in financial transactions of other sorts, I'm sure. PayPal has a credit product now, for example. I would not be surprised if they have a rent-seeking lobbying interest in making federal bank transactions remain a worse experience than their own service. [0]:https://www.marketplace.org/2018/02/20/what-are-apps-venmo-doing-your-money/ https://www.marketplace.org/2018/02/20/what-are-apps-venmo-d...
jiqiren 6y ago
Because there are already alternatives for transactions that have to instantly settle - like SWIFT or FedWire.
- Qworg 6y ago
  Neither are instant.
throw0101a 6y ago
> is still not equipped with such a system? Inertia, at least partially. It's why chip-and-pin is still not a thing in many places: Old School credit card POS devices were distributed to a lot of places over the years, and those only had the magnetic strip readers. Replacing is time consuming and no one wants to go through the expense and effort of changing it in all the places that they're in (e.g., gas pumps). Sometimes it's handy to be a late/delayed adopter of technology and to skip a generation or two.

jperras 6y ago

Canadian here. This sounds like Interac eTransfer, which is available to any person sending/receiving money where the endpoints are Canadian banking institutions (all of them, I guess?). We've had this since 2003.

thinkloop 6y ago
E-transfer seems like what the American solution would have been - private banks integrating between themselves - whereas this fed solution seems like what Canada would have typically come up with. In fairness though, Canadian banks are so few and heavily regulated they can almost be considered government.
zymhan 6y ago
This has been such an ongoing issue in the US that a massive industry has sprung up to fill the void for "instant transfers". Paypal, Venmo, Apple/Google Pay, Square Cash, etc are all because the US financial transfer system is hopelessly outdated.
- deleted 6y ago
  [deleted]
peteretep 6y ago
> We've had this since 2003. As much fun as it is to come up with Canadian supremacy, _everyone_ except the Americans has had this for a long time.

mike503 6y ago

I thought (and maybe just my personal conspiracy feeling) that banks lagged on transactions mainly to hold on to the cash longer and get interest. Secondary thought was just poor old technology debt. Something akin to hearing that payroll at a large company was a batch job dumping a ton of text files to a share or something and the bank slurped them up for direct deposit.

logosmonkey 6y ago
This was my assumption as well. For any large company I've always assumed refund times were 100% based around earning interest.
Qworg 6y ago
Partially this is due to self interest - holding the cash longer and getting interest - but most of it is actually due to self protection. Small banks have less cushion to recover from fraud, have less people to process payments quickly, and generally lack technological sophistication. NACHA represents all of the various institutions, from JPM down to the First Bank of Your Hometown, so it has limited flexibility in adopting new things that increase cost/requirements.

pfundstein 6y ago

Nearly all first world countries enjoy instant payments at the point of sale and person to person. It boggles my mind that it has taken this long and a pandemic to even set the gears in motion, all while battling ridiculous levels of cheque and credit card fraud.

mixmastamyk 6y ago
Not to mention potentially malicious rent-seeking third parties inserted and selling financial info.
- orthecreedence 6y ago
  Why is this downvoted? We have three major credit bureaus, and only just recently one got hacked and leaked everyone's info. Finance in the US is full of third-party jackasses that make money by doing nothing other than acting as gatekeepers. It's the definition of rent-seeking.
  - mixmastamyk 6y ago
    Yes, was also thinking unnecessary players like venmo or mobile pay. Weren't needed in places with modern banking.
kome 6y ago
Americans have such a strange relationship with technology... the most innovative startups, and yet the worse infrastructure. here in Europe it's the contrary :) and btw: the service will be active in 2023 or 2024... while I enjoy immediate transfers bank to bank since years...
- api 6y ago
  Its because a generation or two of Americans were propagandized heavily that anything socialized will immediately lead to Soviet communism. If we build infrastructure Lenin will rise from the dead and transform into a giant mech warrior and wade across the Atlantic to destroy us all.

TedDoesntTalk 6y ago

Planet Money did a piece on ACH seven years ago. It’s a batch system written in COBOL in the 1970s: https://www.npr.org/transcripts/229224964 https://www.npr.org/transcripts/229224964 And that’s why the Feds want to replace it, not refactor it.

tyingq 6y ago
Your Visa transactions are running through older TPF 360 assembler. Old isn't an excuse for bad.
- TedDoesntTalk 6y ago
  It’s not bad. It is simply a product of its time: according to planet money in that 2013 piece, ACH batch processing runs only once per day and only during bank hours (no weekends, etc). Presumably, increasing that frequency would break something in the system or it would already have been done. In the ‘70s, no one predicted 24/7 banking or even ATMs let alone internet payments. I remember my father using an ATM for the first time in 1981, I think. Perhaps it was 1980. But we had to drive 7 miles to get to it. Stocks were still traded in fractions, not decimals!
  - lyrrad 6y ago
    Things have improved somewhat since then, with the introduction of Same Day ACH, which provides two additional ACH processing periods each business day. https://www.nacha.org/rules/same-day-ach-moving-payments-faster-phase-3 https://www.nacha.org/rules/same-day-ach-moving-payments-fas... It's more expensive than regular ACH transactions. The above page seems to indicate the sending bank has to pay the receiving bank 5.2 cents per same day transaction on top of regular ACH fees (that appear to be 0.0185 cents per transaction sent or received for 2020).
  - tcbawo 6y ago
    Funnily enough, US stocks were trading in fractions until 2001!
  - 6y ago

justinzollars 6y ago

With this tech the Fed will now be able to buy junk bonds with monopoly money at light speed.

woodruffw 6y ago

Settlement between banks in the United States is astoundingly complicated, for (fascinating, terrifying) historical reasons. FedNow is a huge step towards fixing holes that private companies have been papering over for over two decades. Blatant self promotion: for anybody interested in learning more about the Automated Clearing House system (which FedNow will eventually supplement) and interbank settlement in general, I wrote a summary of much of it here: https://blog.yossarian.net/2019/12/25/A-shallow-dive-into-the-American-banking-system https://blog.yossarian.net/2019/12/25/A-shallow-dive-into-th...

JMTQp8lwXL 6y ago
The history of credit cards is also somewhat wild: unsolicited cards arrived activated in the mail, and consequently, a huge volume of credit card fraud was born. Consumer protections came a few years later cleaning up obvious issues. But looking at that story, it seemed awfully reminiscent of the Uber model.
- bfieidhbrjr 6y ago
  "A piece of the action" is a great book on the history of this.
hashtagmarkup 6y ago
"Astoundingly" complicated???? ACH/NACHA isn't any more complicated than any other API. If anything it's easier than most if you're used to string processing, because the file format is just 80 character rows with 9 different types of rows starting with that numerical digit. The schema is well defined. In many cases a "transaction" is executed by simply FTPing an .ach file. What did you find so complicated?
- woodruffw 6y ago
  As I mentioned in the blog post: * ACH-formatted transactions are supposed to be 80 character rows, but ACH emitters play loose and fast with that. 81 (CR/LF) and 82 (CR+LF) character entries are common enough in the wild that financial communities regularly complain about them. ACH transactions are supposed to be concatenative, so it wouldn't surprise me to learn that most real-world ACH handling code needs to handle 80, 81, and 82-character records in the same stream. * The envelope and hierarchy of ACH is extremely simple. The internal state machine isn't: there are plenty of overlapping entry classes[1], obscure return codes, common misuse of said codes, and rider entries (like addenda information). The records for international settlements are shockingly complex; no ODFIs or RDFIs seem to follow the rules about not clawing back money after various contest periods expire. [1]: When do I use CIE entries versus PPD? Do I use WEB for a recurring utility payment that was initiated online?

grizzles 6y ago

This has little to no chance of coming into service. It's absolutely a direct threat to Visa & 100+ others. They will make sure that this is killed in Congress + legislation will likely be written prohibiting the Fed from creating something like this ever again. [1] https://www.propublica.org/article/congress-is-about-to-ban-the-government-from-offering-free-online-tax-filing-thank-turbotax https://www.propublica.org/article/congress-is-about-to-ban-... PS I knew I'd get these downvotes. The comment stands. Uncomfortable things should be said.

antihero 6y ago
Visa and Mastercard are doing just fine in the UK, it would be highly inconvenient to have to bank transfer to every merchant you interact with.

classics2 6y ago

PayPal be like o.O

tehjoker 6y ago

The government will do everything to make the financial system work for banks and nothing to make it work for people.

triceratops 6y ago
"The rapid expenditure of COVID emergency relief payments highlighted the critical importance of having a resilient instant payments infrastructure with nationwide reach, especially for households and small businesses with cash flow constraints," said Federal Reserve Board Governor Lael Brainard." It sure sounds like this particular thing is good for "the people". It'll take away some business from industries that prey on the poor, like check-cashing.
- tehjoker 6y ago
  There are some minor benefits from faster payments, but I assure you that people with lots of money to move are the ones welcoming this and asking for it.
  - triceratops 6y ago
    You're vastly underestimating the benefits to regular people. You haven't lived in a country with instant, universal electronic payments.

lelc 6y ago

If anyone from the FED is reading this I have this advice: don't use ISO20022! (I've been working on the brazilian instant payments project, known as PIX). It's an overly-complicated-try-to-solve-everything standard that promises interoperability but only delivers pain and misery. Since each country has its own standards for person and account identification, in dealing with these local realities, the ISO20022 adds quite a lot of complexity. But all this cost does not result in interoperability. In fact, each payment scheme end up with a localized version of the standard, incompatible with others. What could have been a clean API, ends up a mess.

kovek 6y ago
What would be an alternative?
- amluto 6y ago
  A brand new protocol.
  - rudolph9 6y ago
    https://xkcd.com/927/ https://xkcd.com/927/
    - themacguffinman 6y ago
      A standard backed by the US government isn't going to be just another standard.
      - protomyth 6y ago
        Yeah, there is an amazing amount of power to force adoption if the Fed tells banks, that to continue to be banks, they must adopt this data standard.
      - iagovar 6y ago
        Why don't just copy what's in use in other countries? For example, sending and receiving money in the EU is pretty simple, you only need their IBAN, and maybe their name (AFAIK some countries require it). I'm not even aware of what's going on in the background, but from the user perspective its easy and free.

jawns 6y ago

There was a technology that I started seeing about 10-15 years ago (I believe Paypal used it at some point) where bank payments happened "instantaneously" because they were backed by a credit card on file. The bank settlement still took the same amount of time under the hood, but because the credit card acted as a backstop, there was an appearance of an instant payment. I was always surprised at how few merchants adopted this. Hopefully, FedNow will make it totally obsolete.

supernova87a 6y ago

What I really want this payment system to do is eliminate the direct debit system from checking accounts and return some real security to banking. Secure, irrevocable payments, only initiated by me, from my account to others. No more system that allows mistake debits or others to accidentally/maliciously deduct from my checking account, such that I have to be watching for errors and ask for them to be fixed. Or wondering if someone's payment to me might be reversed. Or having my (or your) parents fall victim to an advance fee scam with bounced checks 2 weeks after deposit. Ridiculous. It's well past time for this. Or at least now give me the choice to have those loopholes eliminated from my checking account.

uoylj 6y ago
You're describing Bitcoin.
jonahbenton 6y ago
There will be banks that offer products for handling pulls differently, it's a product decision, various features around this are available for the big boys, just haven't trickled down to the masses. But this decade they will. Has nothing to do with Fed Now. Irrevocability- for consumer payments there will always be revocability. Humans doing stuff make mistakes, and need to be able to "take it back." At the ledger level, all transactions are irrevocable. You apply other transactions on top to implement recovability.
- Silhouette 6y ago
  Irrevocability- for consumer payments there will always be revocability. And yet, if you go into a store and buy something with cash, you have never been able to just arbitrarily reverse that payment and keep the goods several months later, and the sky has not fallen. Humans doing stuff make mistakes, and need to be able to "take it back." And what about the humans who didn't make a mistake, but simply chose to abuse the system at the expense of whoever they transferred the money to? Certainty and security are important for those on both sides of a transaction. If you have a dispute, that's what legal systems are there for. The quasi-judicial role that financial services play in resolving disputes, often with little regulatory oversight and absolutely no requirement to be neutral or objective, is long overdue for retirement.

marmshallow 6y ago

What does this change from my perspective? No more waiting 2-3 business days for all my transfers between banks or 3rd parties?

harikb 6y ago

One thing I don't see mention regarding the existing US ACH (or whatever interbank) system is that there is absolutely no verification or security in this system. Just like verification of paper check signature and a whole lot of other financial items - most banks allow anything until questioned. The easiest and cost effective way is to let it happen and reimburse for failures. 1. I have linked a non-joint account in my name at bank A to another (non-joint) account of my wife at bank B (accidentally) without any verification of any kind. I call BS on anyone claiming they magically checked the home address link or know we are married. 2. I have walked in to my bank and did a wire transfer of a large amount without any kind of verification. They didn't check my ID. I am not kidding. I did enter my ATM card and PIN. Then why do they have a $500 or $1000 limit at ATM. If someone did get my ATM card and PIN, they just had to appear confident and walk in to the branch. This is one of the largest banks in the US. 3. Because my wife doesn't like to deal with customer service of various financial items (credit-cards, 401k etc). I regularly call and just say I am her (clearly feminine name) and the conversation carries on as if nothing is surprising/suspicious. 4. On the other extreme, IRS's "MyIRS" site let us authenticate yourself (first time setup) using a security question that allows one to type any financial account number. CC, Bank, 401k, whatever. I mean how tf did they get all that data on me? legally? Why does IRS need my CC number? IMHO, the only thing keeping us secure is that nobody from outside US has really tried to mess around with US banks.

ragona 6y ago
Regarding your last sentence, I think that’s true for, well, basically the entire world. Our security sucks in general. Humans aren’t as mean as they seem, or maybe they just generally suck at it.
- harikb 6y ago
  I was only expecting something like OTP enforced by bank (not a choice by customer). Yes, I get the SMS / insecure transport problem, but other countries do this.
- illektr1k 6y ago
  You guys might enjoy https://en.wikipedia.org/wiki/Truth-default_theory https://en.wikipedia.org/wiki/Truth-default_theory

bitxbit 6y ago

Here’s a thought: come up with an online payment platform with ZERO txn fees. You only pay 1% when you cash out. It can be done and it will be done.

btian 6y ago

> The target launch date for the service remains 2023 or 2024 Does anyone in fin tech know why it takes so long? My understanding is this achieves the same goal as wire transfer, which already exists today, but is for whatever reason super expensive. Why is wire transfer so expensive?

at_a_remove 6y ago
Just as a hunch, but maybe "move fast and break things" doesn't really resonate with the people who are concerned about where billions of dollars are.

crystaln 6y ago

What are the chances this is not going to be a debacle, take 10 years, and late with disappointing dated features?

neltnerb 6y ago

I suppose they already have a complete log of all your transactions, so may as well make it function better.

iknowstuff 6y ago

Is this kinda like SCT Inst for the Eurozone? https://www.europeanpaymentscouncil.eu/what-we-do/sepa-instant-credit-transfer https://www.europeanpaymentscouncil.eu/what-we-do/sepa-insta...

wprapido 6y ago

That's pretty much the norm in every developed country and many developing countries.

koopuluri 6y ago

I moved to India at the start of the year and there's the Universal Payment Interface (UPI) here that essentially allows a Venmo like interface to transfer $ instantaneously from any bank account to another - by simply using the recipient's phone number or a QR code. There are multiple apps that interface with UPI, and the barrier to entry isn't high - allowing for good competition on the UX. Literally every person I've met here or wanted to transact with in some way accepts payments via UPI... heck I was forced (or rather "strongly recommended") to pay a bribe to a cop that they were able to accept via UPI. I felt like I stepped into the future. Transferring money to a friend w/ a different bank in the US is such a hassle if they don't have Venmo (and more than half in my circle don't), and I've had horrendous experiences with Zelle (terrible UX, confusing and often incorrect sending limits that I have to call my bank to resolve). In India I mostly use Google Pay as my interface to UPI and wow, it's a magical user experience. Can't wait for there to be more competition in payments UX in the US once this service is set up.

arrayjumper 6y ago
I agree wholeheartedly. In my opinion, UPI has been an unmitigated success. Nearly everyone from a roadside street-food vendor to a 5 star hotel accepts UPI and it makes the whole flow of day-to-day payments entirely contactless which is especially useful with the COVID-19 situation. Now if only they could introduce some way to enable subscription payments, it'd be the cherry on top.
- sandGorgon 6y ago
  already live. its called UPI Autopay https://www.moneycontrol.com/news/business/startup/exclusive-google-pay-phonepe-to-soon-offer-auto-debit-through-upi-5674061.html https://www.moneycontrol.com/news/business/startup/exclusive...
  - arrayjumper 6y ago
    Ohh. Thanks for linking this. I'm excited for this.
- 6y ago

tehabe 6y ago

instant payments were just introduced in Germany, it is weird if you get the money the same day someone wire transfered it to your account. Wire transfers are very common in Germany, checks are almost gone. But these instant transfers are really new. Before those transfers were cleared once a day, I think.

skrause 6y ago
Same-day wire transwers were already common in Germany in the last few years with the old system (the settlement is done every few hours), except for a few slow banks. SEPA Instant is literally settled in a few seconds. I tried this out a while ago: Started the money transfer from one bank account to another, logged in into my second bank account immediately after and the money was already there.

shp0ngle 6y ago

ctrl-f "blockchain" 0 results, here or on the actual website you disappoint me, HN

sschueller 6y ago

Can the US also implement IBAN please?

codecamper 6y ago

Wow so they'll be able to print and deliver within seconds.

blahedo 6y ago

Nearly two decades ago, in 2002, I remember being appalled at how slow money transfer worked. If I deposited my paycheck at my bank, it could take two or three days before that money was available (and my bank compounded the sin by including the amount in the "total" for my account but not all of that money "in" my account was actually "available"). In late '02 I was so irritated by this[0] that I actually started cashing my paychecks at the issuing bank (which was across the street from the building where I worked) and walking the money to my own bank two blocks away and depositing it. Cash deposits were, I believe by federal law, immediately available. Even then, there was no excuse why physically walking cash from one place to another, with in-person interactions at both ends, should have been faster than a direct electronic transfer, but it was, by a factor of something like 150. Improved electronic infrastructure has been a LONG time coming. [0]The final straw was the time I deposited a check at the bank, then wrote a check on that money, put it in an envelope and mailed it, and the check still bounced. It still kind of boggles my mind that the system was that slow, although I kind of assume there was a certain amount of bank-being-gougy in there too.

m463 6y ago
I remember when I was younger hearing about "check kiting" which appeared to be the exact opposite of your bounced check ... somehow you could turn the slow money transfer around and build up a huge balance by playing with the delays.

antihero 6y ago

Is this going to be like FPS that we've had in the UK and works wonderfully? (It is so fast, that if I pay e.g my Monzo from my Starling, the received notification from my Monzo happens before the sent notification from my Starling. It's absolutely amazing and totally free for the consumer).

harshdeep 6y ago

India is having similar concept (UPI) in place from 3 years. About 40% transactions have moved to this new payment processing.

martin_bech 6y ago

What year is this??

xyst 6y ago

Assuming all banks adopt this standard in that specified timeframe, the existing P2P solutions (Apple Cash, Venmo, PayPal, Zelle, CashApp) will ultimately become useless. I wonder how these companies will pivot once banks begin to adopt this interbank service.

fesja 6y ago

In 2024, USA will reach the current present in Europe ;) Since 2017, the SEPA Instant Credit Transfer protocol is enabled in Europe. Which is basically what FedNow will be. Multiple apps and banks have built on top of it solutions for consumers and businesses. I interviewed Bizum, the success story of Spain related to instant payments. Here, "bizum" is a verb. 100% of banks supoort it. Everyone, kids and adults, use it to pay for beers, food or presents https://www.javierescribano.me/bizum/ https://www.javierescribano.me/bizum/

Reason077 6y ago
"Since 2017, the SEPA Instant Credit Transfer protocol is enabled in Europe. Which is basically what FedNow will be." The UK has had instant interbank payments (FASTER) since May 2008 ;) https://www.fasterpayments.org.uk/our-achievements https://www.fasterpayments.org.uk/our-achievements
RivieraKid 6y ago
In the Czech Republic all major banks support instant transfers AFAIK, but not sure what's the situation for EU transfers, when I send money to Degiro (stock broker) it's not instant. Also, I almost stopped using cash and just use my phone everywhere.

cymon 6y ago

This is quite a shame on the US part to be so much behind the times: Kenya has had a Real-Time Gross Settlement (RTGS) system for years supported by the central bank which works in near-realtime during working hours, and an even better one was recently introduced by a conglomeration of the local banks which works in real-time 24/7 called Pesalink: https://www.ipsl.co.ke/pesalink https://www.ipsl.co.ke/pesalink ..

zo1 6y ago
Agreed. What's an even bigger shame is that places like the US and UK don't have proper centralized and verified citizen databases and national identification documents linked to it.

nicofcurti 6y ago

The European Union has the SEPA payments which support most big banks, it works just great

oneplane 6y ago

Welcome to 2005, you're gonna like it! /s To be fair, this has been the norm here for decades and it baffles most of us that some shady companies like venmo are used so much in the USA. The same with 'numbered accounts' or no-factor authentication where people can steal your money by knowing a single number.

dblock 6y ago

When I moved a couple of years ago I started banking with Fidelity which has 17-digit account numbers. Using those for ACH with ConEd resulted in them failing to bill me at the end of the month. I thought it was a typo and put the ACH numbers in again, only to fail and get disconnected and flagged at the end of next month plus some late fees. The whole problem was that the account number was too long. No error messages anywhere. Fidelity also has a 13-digit account number version that I've been using ever since. What a mess.

zaroth 6y ago

Based on reading through the PDF, I would summarize FedNow as a service which provides the low-level infrastructure to support near real-time money transfers between domestic US bank accounts. The system is implemented as a credit-only system - meaning payment transactions must always be initialized by the sender. The protocol is a full handshake between the banks which provides the ability for the receiving entity to confirm the account number of the destination account in real-time and provide confirmation to the sender that the transfer is accepted. This is notably different from ACH where errors can come hours or even days after the fact. Account identifiers appear to be standard bank account and routing numbers as they exist today -- I say this only because I couldn't find anything in the PDF saying otherwise. There is a section on using "Alias-based Payments" and on how directory services might be integrated or even centralized, but the current approach would rely on 3rd party directory services to facility "alias-based payments" (think Venmo). IMO a major security shortcoming of FedNow is that it reuses the existing account numbers. As a credit-only system, if a new (unique) account identifier was used then that number could be shared freely, printed on invoices or web pages, and handed out without any loss of safety, and used without the need for a directory service. Aliasing could be built on top this new unique number in 3rd party directories, but it would no longer be a security method, rather purely a usability one. The service will use ISO 20022 messaging standard (https://www.iso20022.org/ https://www.iso20022.org/) and will define both payment and non-payment message types which include the ability to attach meta-data such as invoice and receipt information, as well as to transmit a 'Request for Payment' to make up for the lack of debit transactions which would normally be used for recurring payments. In the 'Request for Payment' use-case, the account holder would be presented with a user interface provided by their banking institution, e.g. in their bank's mobile app) which would list pending requests for payment and provide the ability to approve payments. From what I can tell, there's nothing necessarily stopping a bank from providing a UI which could allow pre-approving future payment requests, e.g. by matching the date / amount / account number of the Payee, but if the 'Request for Payment' doesn't include the necessary meta-data it becomes increasingly difficult to not require the Payor to manually approve recurring requests. For the use-case of bill payments, I can only hope that the messaging format could be standardized to the point where something like the following could be possible; 1) Checking out at a retail store. The register computes the total amount due. 2) Select FedNow in our Apple Pay / Android Pay settings as the payment method and wave your device in front of the payment terminal. Here's where you would want NFC to be able to transfer a one-time-use secure identifier for where the payment request should be sent. 3) Phone presents a confirmation screen with the name of the store, total amount, and an Approve button. The one-time identifier sent in Step 2 could carry an implicit approval up to a certain amount (e.g. $250) 4) Full itemized receipt from the transaction is attached and automatically saved in the wallet. 5) Total amount charged is reduced by 1% as a bonus for not using a credit card. The key component of the system is a service which hides the long-standing / re-usable account identifiers from the POS system, and replaces it with a one-time use only identifier. At first glance it seems like such a system could conceivably be hacked on top of FedNow by a type of directory service that also acted as a proxy for the Payment Request messages.

idclip 6y ago

* hodling intensifies * They cant honestly beat the motivated masses that hold collectively billions in crypto currency.

lingxiaoling 6y ago

For those in the crypto world, one real-world use case I hear sometimes is faster inter-bank settlement, in essence providing a tech solution to a (semi?) regulatory problem. Does the Fed's actions meaningfully impact your value proposition?

uchman 6y ago

One of the many things that surprised me in the US was seemingly complicated means of transferring cash between bank accounts. This process has been trivial in Nigeria (and some other countries) for a long time now with the NIBSS settlement system. I look forward to hearing about the progress of this project and the possible impact to existing payment services such as Venmo, Cashapp, Paypal...

shawkinaw 6y ago

> 24x7x365 24x7x52?

rektide 6y ago

The Fed wants transfers to go through them. I hope not. What incompetent assholes. Hopefully the banks start taking making public consumer/business/bank facing standard apis seriously cause this is a shit show disaster. This is not a role the fed should be taking.

grognak420 6y ago

Boomer technology