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> The Fed’s new payments system will compete with privately-held The Clearing House, which was launched by a consortium of large banks in 2017. It processed 41.

> The Fed’s new payments system will compete with privately-held The Clearing House, which was launched by a consortium of large banks in 2017. It processed 41.2 million transactions valued at about US$18 billion in the second quarter. For someone like me who only uses Zelle and Venmo, haven't needed others - I wonder if this will make a difference and also when exactly will this private vs Fed gateway make a difference. Would there be any fees? I know private exchange came first but if Fed solution is free or cheaper, would they need to maintain the alternative?

cheriot 4y ago
Transfers within Venmo fake immediacy. If it depends on an ACH transfer (ie the money is coming from a bank account and not an existing Venmo balance) then the money will be taken back if the ACH fails. It's transfers between Venmo and a bank that would get faster.
- eru 4y ago
  Normal bank transfers can also be reversed, if something goes wrong, can't they? (Eg if there's fraud or whatever?)
  - tdeck 4y ago
    That's correct. ACH bank transfers can typically be reversed within 60 days, and even beyond that in some exceptional circumstances.
    - TMWNN 4y ago
      Does Zelle use ACH? My understanding is that Zelle transfers are permanent. (But then I thought that about Venmo.)
      - cheriot 4y ago
        There are stories of Venmo transfers that do not include ACH (ie the source of funds is a venmo balance) being difficult or impossible to reverse. That's purely a product choice by Paypal.
- lxgr 4y ago
  There‘s nothing fake about a bank or payment service provider giving you access to unsettled funds if they can be reasonably sure that they will ultimately be made whole. Banks are required to make the first $200 or so of a deposited check available immediately, and at that point it‘s not even clear if the check will clear, much less has the money already settled. What‘s important to have in real time is a payment guarantee, but of course it helps the receiving institution with liquidity management if the settlement itself is also instantaneous.
bern4444 4y ago
The biggest annoyance with Venmo is taking your money out takes a couple of days. Perhaps Venmo ends up using this to change that and move the money but I'd prefer to skip the middle man and transfer through the fed's service over pay pal's.
pm90 4y ago
It will make Venmo/Zelle obsolete as banks will offer fast transfers natively. So no need for another app just for transferring money. However Venmo does have a nicer UX so customers will likely stick around since its “fun”.
- Consultant32452 4y ago
  My credit union is integrated with Zelle. I had to go through a special process to do straight ACH transfers, they kept wanting to direct me to Zelle but I need to regularly do transfers beyond the Zelle limit (business payments). If this all works it will be an interesting culture shift.
- mellavora 4y ago
  Yes, because "transferring money" is a CORE BUSINESS FUNCTION of banks! Major step backwards for them to outsource this. Your absolutely right that you should not need another app or service to enable your bank to do its job.
hammock 4y ago
- syedkarim 4y ago
  https://www.stlouisfed.org/in-plain-english/who-owns-the-federal-reserve-banks https://www.stlouisfed.org/in-plain-english/who-owns-the-fed... The Federal Reserve Banks are not a part of the federal government, but they exist because of an act of Congress. Their purpose is to serve the public. So is the Fed private or public? The answer is both. While the Board of Governors is an independent government agency, the Federal Reserve Banks are set up like private corporations. Member banks hold stock in the Federal Reserve Banks and earn dividends. Holding this stock does not carry with it the control and financial interest given to holders of common stock in for-profit organizations. The stock may not be sold or pledged as collateral for loans. Member banks also elect six of the nine members of each Bank's board of directors.
  - eru 4y ago
    Well, in practice the Fed is at least as public as Amtrak is. Yes, both of them have some weird technical legal arrangements in theory, but they both do the bidding of their political overlords in practice. And the acts that brought them into existence could be changed at will.
- commoner 4y ago
  > 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. > Some observers mistakenly consider the Federal Reserve to be a private entity because the Reserve Banks are organized similarly to private corporations. For instance, each of the 12 Reserve Banks operates within its own particular geographic area, or District, of the United States, and each is separately incorporated and has its own board of directors. Commercial banks that are members of the Federal Reserve System hold stock in their District's Reserve Bank. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. In fact, the Reserve Banks are required by law to transfer net earnings to the U.S. Treasury, after providing for all necessary expenses of the Reserve Banks, legally required dividend payments, and maintaining a limited balance in a surplus fund. https://www.federalreserve.gov/faqs/about_14986.htm https://www.federalreserve.gov/faqs/about_14986.htm The Federal Reserve's audited annual financial statements are here: https://www.federalreserve.gov/aboutthefed/audited-annual-financial-statements.htm https://www.federalreserve.gov/aboutthefed/audited-annual-fi...
dqv 4y ago
The problem with Zelle is that you can only link it with one bank account. So if I need someone to Zelle my Last Coastal Credit Union account, I have to unassociate Zelle from Landfill Bank. Not ideal. I’m hoping the Fed solution fixes this.
- copperx 4y ago
  I have three bank accounts and it's difficult using Zelle. I use a different email with two, and a phone number with the other one. But sometimes I forget which account belongs to which email. It's idiotic.
  - bubblethink 4y ago
    use email+bank_name@gmail.com.
    - nichos 4y ago
      There's enough horror stories about Google and gmail to not trust them with something so important.
      - patch_cable 4y ago
        You could do the same thing with a different email provider.
- bubblethink 4y ago
  zelle uses email or phone as identity. So you can create as many zelle accounts as bank accounts with email aliases.
- mellavora 4y ago
  That's one problem with Zelle. Another is that if you live overseas it is really hard to get it to work, even with a pre-existing US bank account. And you can't make Zelle payments to someone who is not on Zelle. While in theory that's also true for ACH, bank wire transfers have been a thing basically since the invention of wires (telegraph). Sorry, in my experience Zelle is a major step backwards with severe loss of functionality and greatly increased risk exposure.
eru 4y ago
Yeah, I don't really know why the US needs a government-run payment system (that will enjoy numerous implicit subsidies and regulatory advantages), when the private sector can handle this. What's next, government grocery stores or shoe factories?
- nulbyte 4y ago
  Given the slow pace of the government, I would be okay with government run grocery stores. We would still be a good half a century away from them considering self checkout, so they would still staff human cashiers, which you don't find in private grocers, these days.
  - jonnybgood 4y ago
    Government run grocery stores exist in the US military. There's one on just about every US military base. It's called a commissary and they do have self-checkout. They operate like any other grocery store except there's no sales tax.
- hackernewds 4y ago
  Isn't it a scary precedent that the government wants to compete with private enterprise, while publically funded?
- mellavora 4y ago
  Eru has a decent HN reputation, so I'll engage. First, the private sector is not handling this well. Second, we are talking about core infrastructure of society. The question of what is best to solve this, business or government, is indeed complex. Business tends to work well when the value created is short-term and can be easily measured and captured by the entity creating that value. For example, a grocery store. Government tends to work well when the value created is long-term and diffuse, and doesn't have a single point of capture. For example, the road network which the grocery store relies on to get both its goods and its clients to the store. A nation-wide payments system seems to me to fall clearly into the second category. Note that eru is from Singapore, truly a great country where the government has many examples of striking a good balance along the above lines. It isn't perfect, but it is one of the best in the world.
armchairhacker 4y ago
Zelle and Venmo are difficult to reverse and filled with scammers. This is one of the reasons why paying large sums of money or digitally isn't easy. Will this be any better?

cheriot 4y ago

Transfers within Venmo fake immediacy. If it depends on an ACH transfer (ie the money is coming from a bank account and not an existing Venmo balance) then the money will be taken back if the ACH fails. It's transfers between Venmo and a bank that would get faster.

eru 4y ago
Normal bank transfers can also be reversed, if something goes wrong, can't they? (Eg if there's fraud or whatever?)
- tdeck 4y ago
  That's correct. ACH bank transfers can typically be reversed within 60 days, and even beyond that in some exceptional circumstances.
  - TMWNN 4y ago
    Does Zelle use ACH? My understanding is that Zelle transfers are permanent. (But then I thought that about Venmo.)
    - cheriot 4y ago
      There are stories of Venmo transfers that do not include ACH (ie the source of funds is a venmo balance) being difficult or impossible to reverse. That's purely a product choice by Paypal.
lxgr 4y ago
There‘s nothing fake about a bank or payment service provider giving you access to unsettled funds if they can be reasonably sure that they will ultimately be made whole. Banks are required to make the first $200 or so of a deposited check available immediately, and at that point it‘s not even clear if the check will clear, much less has the money already settled. What‘s important to have in real time is a payment guarantee, but of course it helps the receiving institution with liquidity management if the settlement itself is also instantaneous.

bern4444 4y ago

The biggest annoyance with Venmo is taking your money out takes a couple of days. Perhaps Venmo ends up using this to change that and move the money but I'd prefer to skip the middle man and transfer through the fed's service over pay pal's.

pm90 4y ago

It will make Venmo/Zelle obsolete as banks will offer fast transfers natively. So no need for another app just for transferring money. However Venmo does have a nicer UX so customers will likely stick around since its “fun”.

Consultant32452 4y ago
My credit union is integrated with Zelle. I had to go through a special process to do straight ACH transfers, they kept wanting to direct me to Zelle but I need to regularly do transfers beyond the Zelle limit (business payments). If this all works it will be an interesting culture shift.
mellavora 4y ago
Yes, because "transferring money" is a CORE BUSINESS FUNCTION of banks! Major step backwards for them to outsource this. Your absolutely right that you should not need another app or service to enable your bank to do its job.

hammock 4y ago

syedkarim 4y ago
https://www.stlouisfed.org/in-plain-english/who-owns-the-federal-reserve-banks https://www.stlouisfed.org/in-plain-english/who-owns-the-fed... The Federal Reserve Banks are not a part of the federal government, but they exist because of an act of Congress. Their purpose is to serve the public. So is the Fed private or public? The answer is both. While the Board of Governors is an independent government agency, the Federal Reserve Banks are set up like private corporations. Member banks hold stock in the Federal Reserve Banks and earn dividends. Holding this stock does not carry with it the control and financial interest given to holders of common stock in for-profit organizations. The stock may not be sold or pledged as collateral for loans. Member banks also elect six of the nine members of each Bank's board of directors.
- eru 4y ago
  Well, in practice the Fed is at least as public as Amtrak is. Yes, both of them have some weird technical legal arrangements in theory, but they both do the bidding of their political overlords in practice. And the acts that brought them into existence could be changed at will.
commoner 4y ago
> 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. > Some observers mistakenly consider the Federal Reserve to be a private entity because the Reserve Banks are organized similarly to private corporations. For instance, each of the 12 Reserve Banks operates within its own particular geographic area, or District, of the United States, and each is separately incorporated and has its own board of directors. Commercial banks that are members of the Federal Reserve System hold stock in their District's Reserve Bank. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. In fact, the Reserve Banks are required by law to transfer net earnings to the U.S. Treasury, after providing for all necessary expenses of the Reserve Banks, legally required dividend payments, and maintaining a limited balance in a surplus fund. https://www.federalreserve.gov/faqs/about_14986.htm https://www.federalreserve.gov/faqs/about_14986.htm The Federal Reserve's audited annual financial statements are here: https://www.federalreserve.gov/aboutthefed/audited-annual-financial-statements.htm https://www.federalreserve.gov/aboutthefed/audited-annual-fi...

dqv 4y ago

The problem with Zelle is that you can only link it with one bank account. So if I need someone to Zelle my Last Coastal Credit Union account, I have to unassociate Zelle from Landfill Bank. Not ideal. I’m hoping the Fed solution fixes this.

copperx 4y ago
I have three bank accounts and it's difficult using Zelle. I use a different email with two, and a phone number with the other one. But sometimes I forget which account belongs to which email. It's idiotic.
- bubblethink 4y ago
  use email+bank_name@gmail.com.
  - nichos 4y ago
    There's enough horror stories about Google and gmail to not trust them with something so important.
    - patch_cable 4y ago
      You could do the same thing with a different email provider.
bubblethink 4y ago
zelle uses email or phone as identity. So you can create as many zelle accounts as bank accounts with email aliases.
mellavora 4y ago
That's one problem with Zelle. Another is that if you live overseas it is really hard to get it to work, even with a pre-existing US bank account. And you can't make Zelle payments to someone who is not on Zelle. While in theory that's also true for ACH, bank wire transfers have been a thing basically since the invention of wires (telegraph). Sorry, in my experience Zelle is a major step backwards with severe loss of functionality and greatly increased risk exposure.

eru 4y ago

Yeah, I don't really know why the US needs a government-run payment system (that will enjoy numerous implicit subsidies and regulatory advantages), when the private sector can handle this. What's next, government grocery stores or shoe factories?

nulbyte 4y ago
Given the slow pace of the government, I would be okay with government run grocery stores. We would still be a good half a century away from them considering self checkout, so they would still staff human cashiers, which you don't find in private grocers, these days.
- jonnybgood 4y ago
  Government run grocery stores exist in the US military. There's one on just about every US military base. It's called a commissary and they do have self-checkout. They operate like any other grocery store except there's no sales tax.
hackernewds 4y ago
Isn't it a scary precedent that the government wants to compete with private enterprise, while publically funded?
mellavora 4y ago
Eru has a decent HN reputation, so I'll engage. First, the private sector is not handling this well. Second, we are talking about core infrastructure of society. The question of what is best to solve this, business or government, is indeed complex. Business tends to work well when the value created is short-term and can be easily measured and captured by the entity creating that value. For example, a grocery store. Government tends to work well when the value created is long-term and diffuse, and doesn't have a single point of capture. For example, the road network which the grocery store relies on to get both its goods and its clients to the store. A nation-wide payments system seems to me to fall clearly into the second category. Note that eru is from Singapore, truly a great country where the government has many examples of striking a good balance along the above lines. It isn't perfect, but it is one of the best in the world.

armchairhacker 4y ago

Zelle and Venmo are difficult to reverse and filled with scammers. This is one of the reasons why paying large sums of money or digitally isn't easy. Will this be any better?