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The article is factually incorrect when it talks about "SEPA payments", claiming they are a "pull" mechanism. What it probably meant to talk about, is SEPA Dire
by elric 5y ago
The article is factually incorrect when it talks about "SEPA payments", claiming they are a "pull" mechanism. What it probably meant to talk about, is SEPA Direct Debits -- where the counterpart charges your account, as opposed to you paying the counterpart. Given that these direct debit agreements are revokable at any point in time, I doubt the claims of very high fraud rate.
A normal SEPA payment, is a "push" affair. These have (for all intents and purposes, though not technically) been a thing ever since the euro was introduced, whereas SEPA Direct Debit is more recent, replacing many of the existing domestic direct debit schemes.
Then there's the Instant Payments bit: these are a thing but they're not used all that often (yet?). Most banks charge a hefty fee for an instant payment (mine charges €1.25). Some banks don't offer them at all. Adoption will grow and costs will decrease over time.
In most countries, payments within the same bank have been instant (and free) for a very long time. This is one of the reasons why many companies have accounts with multiple banks.
I'm sure some "weaker" european countries may have laxer fraud controls, but that's a temporary problem. ECB reporting is quite strict, and most banks do take fraud detection very seriously. Reputation is important for a bank, and if you're a truly disreputable bank you'll soon find yourself without friendly correspondent banks. Then you'll have a choice: fix your fraud problems, or become a useless island.
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- jkirsteins 5y agoI think it's less "factually incorrect" and more "nuanced and incomplete". As a European that moved between countries, I was very surprised when I learned that SEPA allows a "pull" mechanism even exists. I lived 30 years in Latvia without knowing this is a feature in SEPA because every single payment is a "push" mechanism. I'm not sure if banks can turn this feature off, or if it just culturally never gained traction. On the other hand, payments via banks are fairly widespread C2B, because every bank offers a (custom and horrible) API that merchants can implement. So users can authenticate directly with their bank as if it were PayPal, and authorize a SEPA payment to the merchant's bank account. In fact, services that care about user identity, will often use these bank APIs to perform authentication with a high degree of confidence about the received user information. Then I moved to France, and every bank interaction is "pull" based. While friction in Latvia came from authenticating before initiating the "push", in France the friction comes from agreeing to direct debiting, and signing various authorization slips. Sometimes electronically, but sometimes you have to send them by mail before you can start paying for a long-running service by bank (this makes it very undesirable for one-off purchases. In fact it is so cumbersome, that I prefer to pay for many services by credit card every month) > I doubt the claims of very high fraud rate. If I provide my account number to a service provider, they can debit it without me explicitly authorizing them (I have to sign an authorization usually, but there's nothing "technically" blocking the counterparty). I suppose that could lead to high fraud rates.
- mdp2021 5y ago> if banks can turn this feature off You have to demand it. (Some of them will propose their solution.) > if it just culturally never gained traction. Very few people have read the PSD2 directive. (This friend of mine met a bank consultant who mixed it with a gaming console.)
- BlueTemplar 5y agoYeah, lol, I remember when SEPA pull first came around about half a decade ago, and how many months later, I had to explain to my own bank how they were supposed to give me whitelist and/or blacklist options for the pullers. They claimed never have heard about it, while that directive was only a couple of pages long and readable by someone that didn't knew about any technical banking details !
- brnt 5y agoIf you like pull transfers, try the Netherlands. I was surprised at the low number of businesses offering it in France. In the NL, with nearly every recurring payment, including government, they are almost always the only way to pay: setting them up with an accord to direct debit your account.
- jacquesm 5y agoGovernment payments in the Netherlands can be done in installments using direct payments, but the direct debit ones are the easiest and that is why many people use them. Far less chance of missing a payment. But if you want to do it yourself for every payment you can. Better not miss any though.
- brnt 5y ago_If_ you get your salary on/before the 25th. Because changing the invoice date is almost never possible, and government agencies are even explicit about that.
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- hyperman1 5y agoI'd have to agree. Everything in the article about Europe is technically correct, but it is such a small slice of the SEPA payments. The article is so misleading it might as well be wrong. I make payments to the benelux, france, germany, spain and poland, and they go all over the push mechanism. Direct debit is for utilities, and that's about it. For fraud, my bank provides a gui with active agreements. While I can't cancel an agreement there, I can set a maximum frequency and amount. I put them at once per year max 0.0001 Euro until they get removed. Non recurring payments over direct debit (Or even worse Clarna) is an instant no. I take another payment method. If grabbing money from my bank without my control is the only option, that's a red flag. I consider the company sleazy enough to go find a competitor, even if it raises the cost.
- Semaphor 5y ago> Direct debit is for utilities, and that's about it. Here in Germany, bigger online stores offered it as well. I used to use it for Amazon several years ago.
- kwhitefoot 5y agoMy bank in Norway (SBanken, formerly Skandia Bank) allows me to specify a maximum amount that any creditor can ask for per month when using the equivalent of direct debits (and I also get notified in advance of every payment so that I can cancel either the individual payment or the whole agreement if I wish. This is all done via the web or app and takes effect immediately, no need to ask anyone at the bank to do anything. Here it is called AvtaleGiro.
- kentrf 5y ago«AvtaleGiro» is such a time saver. Utilities, electricity, internet, road tax, insurance and almost all kinds of recurring payments happens automatically and electronically.
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- vesinisa 5y ago> Most banks charge a hefty fee for an instant payment (mine charges €1.25). Interesting. In my country (Finland) all banks that have joined the TIPS (SEPA Instant Settlement) always use it automatically if the destination bank supports it as well - at no extra charge to the account holder of course. Are you sure you are talking about TIPS / SCT Inst payments? Either way, your bank is not allowed to charge extra fees for cross-border SEPA transfers (as compared to domestic.)
- sofixa 5y agoYep. Entirely depends on the bank - in France neobanks ( e.g. Boursorama, Aumax, Fortuneo, N26 ) have them for free, while old banks usually charge you a small fee.
- hocuspocus 5y agoBoursorama and Fortuneo aren't neobanks ;)
- sofixa 5y agoKind of. They're newer than the old classical ones, and don't have a physical retail network. Everything is done via a website or app.
- Semaphor 5y agoHuh. N26 in Germany charges me for instant payments.
- newaccount74 5y agoIt depends on your bank. My Austrian bank charges a ridiculous fee of 8€ for an instant SEPA transfer.
- ThrowAwayIRUK 5y agoInteresting! So, TIPS is just one of the available clearing mechanisms available for the SEPA Inst scheme. (The other one is RT1, which is live a little bit longer) Currently, there is no "regulatory forced" interoperability between RT1 and TIPS, though the 4CB are discussing it. (Esp. since RT1 is a private clearing mechanism, while TIPS is the one operated by the 4CB) And, regarding fee: You are wrong - depending on the local jurisdiction (esp. consumer rights), a bank may for sure charge for processing SEPA SCT Instant messages. Over here, SEPA Instant transactions are around 0,50EUR - 1,00EUR, currently; some are also offering them for free. DISCLAIMER: Lead Payment Engineer at an European Challenger Bank, i'm implementing that stuff in the backend, i'm mainly talking to our central bank.
- sofixa 5y agoIt's even worse than that in terms of correctness, because the author confuses the EU ( economic and political bloc), Europe ( the continent) and the eurozone ( countries in a monetary union with the single currency, euro). SEPA is a thing for euro-denominated transfers in the EU and some extra countries ( UK, Norway, etc.). Belarus, a country in Europe, but outside the EU and eurozone, aren't in SEPA . Romania, inside the EU but not in the eurozone, are in SEPA. Montenegro are outside of the EU and eurozone, use the euro, but aren't in SEPA.
- pell 5y agoThe stories of the Euro as the main currency in Montenegro and Kosovo (which both don't belong to the Eurozone) are very interesting: https://en.m.wikipedia.org/wiki/Montenegro_and_the_euro https://en.m.wikipedia.org/wiki/Montenegro_and_the_euro https://en.m.wikipedia.org/wiki/Kosovo_and_the_euro https://en.m.wikipedia.org/wiki/Kosovo_and_the_euro
- grncdr 5y ago> Given that these direct debit agreements are revokable at any point in time, I doubt the claims of very high fraud rate. I think the claim is that because SEPA direct debits can be revoked within a very long window after settlement, it's more common that payments are revoked after goods/services have been provided (leaving businesses holding the bag). Whether this fits the precise definition of fraud I'm not sure, the payment was valid and successful, but later reversed. It would be a more interesting claim if there were some empirical comparisons included, but it certainly matches my experience. Edited to add: another common form of fraud is somebody providing legitimate bank details of an unwitting victim. At least for some banks in Germany, the bank does not actually enforce authorisation from the account holder when a new direct debit mandate is introduced. The fraudster receives goods/services for free as long as the victim doesn't notice the charges.
- Bombthecat 5y agoAnd here is a life pro tip: if you struggle to get end a contract, even though you are right. Just tell them you will talk to the bank and remove the mandate for sepa from your account. Doing this isn't an issue. But, if it happens to often, it will rise a fraud flag at the bank, firms usually try to avoid that :) Did that two times already. They act real quick, out of a sudden :)
- AniseAbyss 5y agoThe only very high fraud rate I ever hear about are credit cards. And that happens because Visacard just washes their hands from it leaving merchants holding the bag. With SEPA payments fraud would cost the banks money so any company abusing it would be blacklisted.
- MilaM 5y agoBecause the rules governing SEPA Direct Debits are very consumer friendly, it might be somewhat risky for businesses to use this payment method. To keep fraud at check as a creditor, you have to do some due diligence like checking credit scores or know your customer very well. From the consumers perspective though, at least where I live, direct debit is regarded as a secure and convenient method for recurring payments. A consumer can revoke a fraudulent payment within 8 weeks. It's as easy as clicking a button in your online banking. If the counterparty can not prove that it was explicitly authorized by the consumer to make SEPA Direct Debits, the payment can be revoked for up to 13 months.
- ThrowAwayIRUK 5y agoSEPA SDD Core has one big advantage for (trustworthy) customers of a merchant: it's fucking cheap for the merchant :-) and with cheap, i mean, reeeeeaaalllyyyy cheap (well, depending on your PSP/etc.) for a bank, the "purchasing costs" per one SEPA SDD at your central bank is in the fractions of the fractions of a cent. (you can check the rates on your local central bank website)
- kristianc 5y agoNot much of this applies to the UK. Faster Payments are almost ubiquitous here, and Authorized Push Payment fraud is a huge problem.
- tialaramex 5y agoFaster Payments is the law in the UK, normal high street banks have to provide Faster Payments on ordinary current accounts. The banks actually shipped it without a working backend, I don't know if they completed it afterwards but initially it's just trust, Alice's bank tells Bob's bank she sent Bob £100 and Bob's bank do the database update and trust Alice's bank is good for the money later. Push Payment fraud presumably subsided enormously after they changed the rules so it's interactive. Now you provide account number and name, the banks algorithmically decide if the name you provided is correct and if not tell the sender there is a problem. So push fraudsters need a fake account name and that's harder. Passing KYC checks for some random mule is do-able but good luck persuading the bank your name is Big Corp Electricity so that the push fraud works.
- ThrowAwayIRUK 5y agoNot really: SEPA has several message types: - SCT Standard is a push - SCT Inst is a push - SDD Core is a pull - SDD B2B is a pull
- neom 5y agoCazy how civilized the Canadian system is. You can whip open your banking app, enter the email of anyone with a Canadian bank account, link is generated, money is instintly deposited. People basically use this for everything except regular debt purchases (and even then, in instances that you forget your wallet, non-chain stores will usually let you etransfer someone). It's how I pay rent etc. No fees. It's been like this for ~15 years
- OJFord 5y agoSo instead of 'which number do you want me to send your money to' it's 'which email address do you want me to send your money to'? Great?
- moberley 5y agoThe recipient token can also be a phone number capable of receiving a text message.
- OJFord 5y agoSure fine, to be clear I meant bank account number - using an email address (or phone number) isn't clearly better to me (I think it's worse?) in any way, that's all.
- neom 5y agoDon't you need more than just an account number? Either way yes, it's a lot easier to put someones email address into a box and a $ and hit send. I'd love to know who you bank with such that you can just give an account number, no name etc and have the money move, in my 30 years of banking (Scotland, Canada, USA) I've never heard of that.
- OJFord 5y agoName (only optionally checked), sort code & account number (which are not meaningfully distinct to an end user and I meant both by 'account number'). UK. Email seems at best no better to me, since why would I assume the address I use to speak to someone is the same one they use for their bank account? Or the particular bank account they want the money sent to?
- zimbatm 5y agoAnd with 2.0 banks like Monzo, the account holder gets notified of the Direct Debit setup, how much is likely to be debited, and can easily cancel it from the app. That reduces the risk of fraud quite a lot. In exchange, it saves a lot of time both for the customer and utility provider as the risks of mistakes are reduced considerably. Invoices get paid on time.
- dogma1138 5y agoWith HSBC it’s the same, with the added security of a TUN code that is generated with a physical token for bank transfers. That said canceling a direct debit on your end even if it’s fraudulent isn’t something you should do as it can wreck your credit score in the UK since you’ll be in debt and depending on the account it can show up as a missed payment immediately even before it going to debt collector/judgement. If there is a fraudulent transaction you have to contact the bank and file a claim.
- sildur 5y agoRevolut offers free SEPA instant payments.
- ThrowAwayIRUK 5y ago>> ..In most countries, payments within the same bank have been instant (and free).. << Which is quite simple: First, its internaly only an exchange of liabilites in your balanace sheet. Second, it does not involve any outgoing gateways/interfaces. Third, if you are using a SaaS-corebanking-solution, those types of transactions are usually excluded in your contract. From that perspective, it is absolutely useful.
- BlueTemplar 5y agoAlso, in the case of push, depending on the bank it might take two business days for the target account to be added as a push option. (So that you have time to notice that someone has breached your account and stop them from emptying your accounts ?)
- t0mas88 5y agoThe fee on instant transactions is really country specific. Netherlands doesn't have fees and banks automatically pick the instant option if available. I've heard similar things from for example the nordics.
- leokennis 5y agoIn The Netherlands, over 90% of all domestic payments initiated by “regular people” are SEPA Instant Payments, meaning booked on the other persons account no matter their bank within 5 seconds. They’re free to send and receive. Source: I worked on implementing Instant Payments at the biggest Dutch bank.
- Tijdreiziger 5y agoWait, so direct debit and iDEAL together account for less than 10% of consumer payments? That's shockingly low.
- leokennis 5y agoNo, SDD is a lot of the total transaction volume. Everyone has a mortgage, phone plan, energy contract etc. and that is all SDD. iDeal is of course the default for webshops, it’s big too. But the 90% I referred to are “person to person” payments.
- Tijdreiziger 5y agoAh, that makes more sense. I'm still a bit surprised that iDEAL payment requests ('Tikkie') account for less than 10%.