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> Typically, the apps offer their users a choice: payouts at the speed of banking, for free, or payouts at the speed of the Internet, for a small convenience fe
by kccqzy 5y ago
> Typically, the apps offer their users a choice: payouts at the speed of banking, for free, or payouts at the speed of the Internet, for a small convenience fee. Cash App charges 1.5% with a minimum of a quarter.
This is just another way the financial system (including fintech startups) preys on the poor. If you are well off, you wouldn't want to pay any convenience fee for the privilege of receiving money from a business a few days earlier. In fact, you can think of it as interest: from first principles if someone delays a payment to you, theoretically they should pay more because of interest; now if you opt for waiting 3 days and saving the 1.5% convenience fee, you would effectively earn an interest of 1/(1-0.015)-1 = 1.5% in 3 days. That's not even an annualized figure. If annualized it would be 1.5%/3*365=122% implied annual interest rate. No one in their right mind who does not have cash flow issues would opt for receiving debit card payments with such a fee.
> Many report that it transforms the nature of their interaction with the underlying application; delivery driving for casual drivers becomes something that you can burst up to fill an immediate cash need or mentally allocate against a particular desired expenditure (e.g. “Drive for 3 hours to afford a night out starting immediately after you log off.”)
If your cash flow is not an issue and have credit, this is how you would handle it: let's drive for 3 hours, receive the full payment amount in a few days instead of immediately, and put all the charges from the night out on a credit card, whose bill will become due in a month or two, with no interest. But the poor doesn't have a bank account or a credit card, so they suffer. They pay more in fees. That's the injustice of the system.
- dustintrex 5y agoIt's also another illustration of how backwards US payments infra is. In the EU, SEPA instant payments are just that: by law it can take a maximum of 10 seconds for the recipient to get paid, including across countries. And, of course, they're free. https://en.wikipedia.org/wiki/Single_Euro_Payments_Area https://en.wikipedia.org/wiki/Single_Euro_Payments_Area
- toomuchtodo 5y agoThe US Federal Reserve is building an instant payment system (FedNow) that goes live in 2023 [1] [2]. Payment providers are moving upmarket and to features that stave off churn (my analysis here) due to expected revenue destruction caused by a free alternative being available (a US version of SEPA). This is alluded to in the second half of this blog post. If payment revenue (interchange and the like) declines, and net interest is insufficient for providing large swaths of US deposit accounts, something is going to have to give (community and megabanks have a ton of pull in Congress, and neobanks are beholden to someone with a bank charter). I’m not in payments (but in adjacent financial services), so I’m happy to be corrected if any of this is wrong. [1] https://www.federalreserve.gov/paymentsystems/fednow_faq.htm https://www.federalreserve.gov/paymentsystems/fednow_faq.htm [2] https://www.frbservices.org/binaries/content/assets/crsocms/financial-services/fednow/fednow-product-sheet.pdf https://www.frbservices.org/binaries/content/assets/crsocms/...
- pc86 5y agoWhat do you think is most likely to "give" in this scenario?
- supertrope 5y agoThe Durbin Amendment to Dodd-Frank capped debit interchange revenue. Bank of America responded by raising the minimum balance to qualify for no fee checking to $1500.
- morsch 5y agoMaybe they're free where you are, but apparently in Germany banks, if they support it at all, charge 0.5 EUR on average. I've never used it.
- dustintrex 5y agoTechnically the regulation says that charging is allowed, it just has to be the same flat fee across the entire SEPA zone, whether it's domestic or international. Most banks found domestic fees unpalatable, so they just made everything free. In this, as many other things when it comes to e-payments, Germany seems to be a bit of an outlier.
- nottorp 5y agoFlat fee is the keyword. Not a percentage like with cards.
- Daedren 5y agoI mean, it's the same over here in Portugal as well. SEPA standard transfers are free, but SEPA instant transfers have a flat fee in every bank (Unless you have a sort of premium account) Perhaps your country's the outlier.
- kgwgk 5y agoIf Germany is an outlier, so are France, Italy, Spain, Portugal... Germany does seem an outlier in charging as well for _incoming_ instant payments though. (I may be wrong!)
- bserge 5y agoN26, a German bank, has unlimited free ATM withdrawals in most countries and only 3/mo in Germany. If not for all the laws, this country would be USA on steroids.
- deleted 5y ago[deleted]
- Tenoke 5y agoI don't know who supports it but I frequently wait days for SEPA transfers without seeing a more instant option in Germany. Occasionally it is instant (e.g. to those using my own bank) but I can never rely on it.
- tomp 5y agoYeah but the bank won't perform them at different hours of the day. So the transaction is practically instant, but the waiting time before the transactions starts (after you authorize it in the app) can be hours. Or instant, if you wish, for a fee.
- kerneis 5y ago> And, of course, they're free. In France, banks let you choose if you want to make an instant or regular SEPA transfer, and there's typically a 1€ fee for the instant version.
- lotsofpulp 5y ago> This is just another way the financial system (including fintech startups) prey on the poor. This is the way a government preys on the poor by not making electronic transfer of money a utility. The businesses are just doing business, no one sets out and says I want to screw the poor. The prices simply reflect the risks to the business. If society wants to subsidize those risks for the poor, then it should by creating a utility that allows quick and free transfers of money, and for all people to have free accounts.
- okwubodu 5y agoActively doing harm because nobody stopped them doesn’t absolve them, regardless of government passivity. In fact, doing it for that reason might actually make it worse.
- mattnewton 5y agoYou are right, but "it's just profitable and not illegal yet" is how we get all kinds of negative externalities, like dumped waste into rivers and this borderline usuriousness. I think it's worth regulating (but carefully)
- lotsofpulp 5y ago> I think it's worth regulating (but carefully) Hence the government needs to get its act together and make it a utility.
- ironmagma 5y agoThere’s a certain point where neglect becomes malice. The bystander effect has a name for a reason; it’s not the obvious way humans should behave.
- mattcwilson 5y agoNeither is compelling others to behave in a way that you, particularly, think is morally justified, and trying to lobby to have them forced to comply. Working for a business that doesn’t also happen to be charity isn’t neglecting the needy. Charging rates that fairly reflect the value of your work isn’t malice to those who can’t or don’t want to pay your rates.
- FunHearing3443 5y agoI get where you're coming from, but is the solution to simply not allow instant receiving of money? No one's being forced to use these apps.
- throwaway98797 5y agoThere’s social pressure. Who wants to be weird to avoid a small fee?
- afc 5y ago> 1.5% in 3 days. That's not even an annualized figure. If annualized it would be 1.5%/3*365=122% Your formula for annualized interest rate is incorrect. Interest compounds. 1.5% in 3 days is 612% annualized, not 122%, a large difference. You can compute this thus: pow(1.015, 365.0 / 3)
- anonymouse008 5y agoNow do payday loans… it’s sickening. When US leadership speaks about systemic racism, and they don’t talk about payday loans and overdraft fees I can’t take them seriously. It’s insulting
- kwere 5y agomaybe because is a political buzzword to weaken the opposition power and nothing more