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I moved from Finland to UK to USA, so I have personal experience with three rather different banking ecosystems. The payment systems in America are literally 3

by pavlov 5y ago

I moved from Finland to UK to USA, so I have personal experience with three rather different banking ecosystems. The payment systems in America are literally 30+ years behind Finland and UK. It's absurdly bad. People still send paper checks. There's no national infrastructure for bank transfers. You shouldn't give out your bank account number to anyone (unlike EU/UK where it's perfectly safe to post account numbers). Direct debit seems crazy unregulated. Credit cards and bank-specific transfer systems are used to patch the most glaring holes in this mess, which I'm sure pleases Visa/Mastercard and the banks themselves, but leaves everyone else worse off.

toomuchtodo 5y ago
The US Federal Reserve is implementing Instant Payments in 2023 [1]. The system is already in beta testing [2], and its development is ahead of schedule [3], going live a full year earlier than first projected. Fintech sees the writing on the wall with Paypal moving into crypto and brokerage services, and Visa attempting to acquire Plaid to move away from payments. Payment revenue is going to (rightfully so) plummet as the Fed fixes antiquated plumbing and drags the US into the 21st century (54 other countries already have instant payment systems [4]). One would expect banks and the Fed to eventually adopt similar infra that Europe is (per this submission), where card infra can use these Instant Payment ("FedNow") rails for C2C, C2B, and B2B payments (although, eventually, everyone will move to QR codes a la China; Zelle is beta testing QR code support for instant payments on their network [5]). US payments currently suck, but I wanted to share that progress is being. [1] https://corpgov.law.harvard.edu/2020/08/31/fednow-the-federal-reserves-planned-instant-payments-service/ https://corpgov.law.harvard.edu/2020/08/31/fednow-the-federa... [2] https://www.pymnts.com/news/faster-payments/2021/five-banks-test-fednow-real-time-payments-system/ https://www.pymnts.com/news/faster-payments/2021/five-banks-... [3] https://www.frbservices.org/financial-services/fednow/blog/updated-fednow-service-launch-to-2023.html https://www.frbservices.org/financial-services/fednow/blog/u... [4] https://www.frbservices.org/financial-services/fednow/instant-payments-education/trending-world-faster-instant-payments.html https://www.frbservices.org/financial-services/fednow/instan... [5] https://www.zellepay.com/support/how-do-i-use-zelle-qr-code https://www.zellepay.com/support/how-do-i-use-zelle-qr-code
- nicolinox 5y ago
  This is a good update, than you for the resources. One only point to add to your last one: Revolut, already very popular in Europe, is also present in USA now. QR codes are already supported, as well as instant phone to phone payments with either phone number, name alias (uniqueID).
  - toomuchtodo 5y ago
    But that's only within Revolut, which is a very small fintech compared to the aggregate of commercial US banks. Why would I use Revolut when I can use a US bank that supports Zelle today, or any US bank that will support Instant Payments in 18 months? Also, Wise today supports cross border P2P payments and are a more reputable firm than Revolut. I would recommend Wise over Revolut if someone was looking for such a feature.
plandis 5y ago
What are the problems you had in the US? From my perspective none of the things you list are really problems in my life. * I don’t even own checks and if I get one I take a photo from my banking app and have it deposited. * I only use my debit card for the very rare times I withdraw cash and instead just use a credit card that auto-pays from my bank directly each month in full. * If I want to transfer money between friends I just use Venmo. * I’ve never had fraud issues but my sister had her card skimmed in Europe and calling to report was enough to reverse the charges.
- pavlov 5y ago
  Well, for an anecdote, the process of renting an apartment was considerably easier in UK when it came time to send in payments. In London, once I'd signed a lease, the rental agency simply gave me account numbers for the deposit and other fees. I sent the payments to UK from my Finnish bank account at no extra cost (bank transfers within the EU/UK payment area are free). In New York, once I'd signed a lease, the rental agency told me I need to bring them seven cashier's checks by Monday for the deposit and various fees going to different destinations (condo management corporation, etc.) At this time I was in London, so shuffling physical pieces of paper from a bank into an office in NYC wasn't going to happen! Kindly the agency agreed to allow me to wire them the total sum, and they would "cut" the checks for a mere $15 / check. For seven checks, that was an extra $105 fee — for nothing really except to work around a system still built on 19th century assumptions of money. (I also had to pay fees to send the wire transfer, because Americans somehow believe that bank transfers cost tens of dollars to process.) Additional patchwork layers like Venmo don't solve these issues. Sending thousands of dollars to a landlord or management corporation isn't the same as sending $50 to a friend for dinner.
- jopsen 5y ago
  I had to pay a bill by typing numbers into an online bank along with an address that the physical check would then be mailed to. I thought the banker who told me they would send a check was joking. Or just using it as an metaphor for making a payment to the account. But no, at one point the check actually got lost and and then reappeared later so my balance with PG&E went positive. Oh, and it could only pay fixed amount at regular intervals. I eventually learned that most vendors would accept check numbers, and then magically withdraw from my account. So long as a checked a box that effectively allowed them to withdraw whatever they deemed I owed them. In Denmark I get an electronic statement of all the bills I have signed up for automatic payment. It just works. Oh, not to mention: to rent an apartment in the US I had to get a cashier's check. I'll admit I didn't even know that was a thing... (In Denmark banks don't accept checks anymore)
sparrc 5y ago
I've lived in the US and UK and generally agree with you. But one thing that got me is that it seems fairly easy to defraud the system in the UK with everyone so freely giving out their bank account numbers. What actually protects the bank account numbers in the UK/EU? Why do people seem totally unconcerned with giving out this information there?
- pavlov 5y ago
  What bad can you do with someone's IBAN account number? Nothing, unless a bank is somehow totally incompetent. It's basically the same as an email address. You can't read someone's email inbox just by knowing their address. Similarly, you can't send money out of a bank account just by knowing the number. (You could spam them with money, but most people wouldn't mind.)
  - jopsen 5y ago
    > Similarly, you can't send money out of a bank account just by knowing the number. You might if you walk into a branch with a little fake ID and a smile. Or you get a forced "vacation" in jail :) But yeah, it's not naturally assumed that you can just do something with those numbers.

by pavlov 5y ago

toomuchtodo 5y ago

The US Federal Reserve is implementing Instant Payments in 2023 [1]. The system is already in beta testing [2], and its development is ahead of schedule [3], going live a full year earlier than first projected. Fintech sees the writing on the wall with Paypal moving into crypto and brokerage services, and Visa attempting to acquire Plaid to move away from payments. Payment revenue is going to (rightfully so) plummet as the Fed fixes antiquated plumbing and drags the US into the 21st century (54 other countries already have instant payment systems [4]). One would expect banks and the Fed to eventually adopt similar infra that Europe is (per this submission), where card infra can use these Instant Payment ("FedNow") rails for C2C, C2B, and B2B payments (although, eventually, everyone will move to QR codes a la China; Zelle is beta testing QR code support for instant payments on their network [5]). US payments currently suck, but I wanted to share that progress is being. [1] https://corpgov.law.harvard.edu/2020/08/31/fednow-the-federal-reserves-planned-instant-payments-service/ https://corpgov.law.harvard.edu/2020/08/31/fednow-the-federa... [2] https://www.pymnts.com/news/faster-payments/2021/five-banks-test-fednow-real-time-payments-system/ https://www.pymnts.com/news/faster-payments/2021/five-banks-... [3] https://www.frbservices.org/financial-services/fednow/blog/updated-fednow-service-launch-to-2023.html https://www.frbservices.org/financial-services/fednow/blog/u... [4] https://www.frbservices.org/financial-services/fednow/instant-payments-education/trending-world-faster-instant-payments.html https://www.frbservices.org/financial-services/fednow/instan... [5] https://www.zellepay.com/support/how-do-i-use-zelle-qr-code https://www.zellepay.com/support/how-do-i-use-zelle-qr-code

nicolinox 5y ago
This is a good update, than you for the resources. One only point to add to your last one: Revolut, already very popular in Europe, is also present in USA now. QR codes are already supported, as well as instant phone to phone payments with either phone number, name alias (uniqueID).
- toomuchtodo 5y ago
  But that's only within Revolut, which is a very small fintech compared to the aggregate of commercial US banks. Why would I use Revolut when I can use a US bank that supports Zelle today, or any US bank that will support Instant Payments in 18 months? Also, Wise today supports cross border P2P payments and are a more reputable firm than Revolut. I would recommend Wise over Revolut if someone was looking for such a feature.

plandis 5y ago

What are the problems you had in the US? From my perspective none of the things you list are really problems in my life. * I don’t even own checks and if I get one I take a photo from my banking app and have it deposited. * I only use my debit card for the very rare times I withdraw cash and instead just use a credit card that auto-pays from my bank directly each month in full. * If I want to transfer money between friends I just use Venmo. * I’ve never had fraud issues but my sister had her card skimmed in Europe and calling to report was enough to reverse the charges.

pavlov 5y ago
Well, for an anecdote, the process of renting an apartment was considerably easier in UK when it came time to send in payments. In London, once I'd signed a lease, the rental agency simply gave me account numbers for the deposit and other fees. I sent the payments to UK from my Finnish bank account at no extra cost (bank transfers within the EU/UK payment area are free). In New York, once I'd signed a lease, the rental agency told me I need to bring them seven cashier's checks by Monday for the deposit and various fees going to different destinations (condo management corporation, etc.) At this time I was in London, so shuffling physical pieces of paper from a bank into an office in NYC wasn't going to happen! Kindly the agency agreed to allow me to wire them the total sum, and they would "cut" the checks for a mere $15 / check. For seven checks, that was an extra $105 fee — for nothing really except to work around a system still built on 19th century assumptions of money. (I also had to pay fees to send the wire transfer, because Americans somehow believe that bank transfers cost tens of dollars to process.) Additional patchwork layers like Venmo don't solve these issues. Sending thousands of dollars to a landlord or management corporation isn't the same as sending $50 to a friend for dinner.
jopsen 5y ago
I had to pay a bill by typing numbers into an online bank along with an address that the physical check would then be mailed to. I thought the banker who told me they would send a check was joking. Or just using it as an metaphor for making a payment to the account. But no, at one point the check actually got lost and and then reappeared later so my balance with PG&E went positive. Oh, and it could only pay fixed amount at regular intervals. I eventually learned that most vendors would accept check numbers, and then magically withdraw from my account. So long as a checked a box that effectively allowed them to withdraw whatever they deemed I owed them. In Denmark I get an electronic statement of all the bills I have signed up for automatic payment. It just works. Oh, not to mention: to rent an apartment in the US I had to get a cashier's check. I'll admit I didn't even know that was a thing... (In Denmark banks don't accept checks anymore)

sparrc 5y ago

I've lived in the US and UK and generally agree with you. But one thing that got me is that it seems fairly easy to defraud the system in the UK with everyone so freely giving out their bank account numbers. What actually protects the bank account numbers in the UK/EU? Why do people seem totally unconcerned with giving out this information there?

pavlov 5y ago
What bad can you do with someone's IBAN account number? Nothing, unless a bank is somehow totally incompetent. It's basically the same as an email address. You can't read someone's email inbox just by knowing their address. Similarly, you can't send money out of a bank account just by knowing the number. (You could spam them with money, but most people wouldn't mind.)
- jopsen 5y ago
  > Similarly, you can't send money out of a bank account just by knowing the number. You might if you walk into a branch with a little fake ID and a smile. Or you get a forced "vacation" in jail :) But yeah, it's not naturally assumed that you can just do something with those numbers.