4 ms·

I've always heard ACH is slow, and the article mentions that Venmo uses it. So why then can I deposit my Venmo balance into my linked bank account almost instan

I've always heard ACH is slow, and the article mentions that Venmo uses it. So why then can I deposit my Venmo balance into my linked bank account almost instantly for a very small fee?

darkerside 3y ago
Because Venmo is willing to float you the money despite the risk it might not go through
- pbreit 3y ago
  Few understand that the movement of money and information about the movement of money happen on different schedules.
  - rodgerd 3y ago
    Banking is an eventually consistent system. People outside banks often find this surprising.
  - lxgr 3y ago
    In ACH, they generally happen together, and with at least a few hours of delay. That's why instant generally usually doesn't use it.
    - pbreit 3y ago
      They absolutely do not. That’s the whole point.
      - lxgr 3y ago
        Could you maybe elaborate instead of just disagreeing without references or even explanation? In ACH, as soon as you get the notification about an inbound credit transfer, it's effectively final. Whether it ultimately settles on the same day or 1-2 days later is irrelevant, since what matters is finality. ACH credit transfer clawbacks are very rare compared to ACH debit rejections (due to e.g. insufficient funds or fraud).
        pbreit 3y ago
        Some recipients might consider a valid initiation sufficient to fulfill. Others may way for settlement. Some may wait longer to see if there's a return. And then posting times and amounts can vary quite a bit.
- lxgr 3y ago
  How can Venmo be the one floating anything in GPs scenario when they are the sending entity? If anything, it's the receiving bank that would have to bear the risk of the payment never arriving after being notified about it out-of-band, somehow. There's no such mechanism that I'm aware of, though – instead instant deposits usually use debit card rails.
  - scrollaway 3y ago
    Venmo is sending money from Venmo bank accounts to your bank, through a direct integration. The receiving bank doesn’t bear any risk, Venmo is taking the risk. You are the person who is the beneficiary on the accounts this money sits on. So you are responsible for it. If an entity sends money on your behalf, they take the responsibility for the money you send. That means they are the ones with the processes that will trigger if money doesn’t clear as expected. Processes which may involve anything from reminder emails and push notifications, all the way to debt recovery companies, lawyers and thugs showing up at your door. Both entities have float. The question is who is taking legal risk.
    - lxgr 3y ago
      > The receiving bank doesn’t bear any risk, Venmo is taking the risk. What risk? Venmo is the sender here. Almost by definition, the sender doesn't have any risk: They either send money they have (in which case all is well), or promise to send money they don't have (which is the recipient's problem). If you're talking about the transaction that originally funded the to-be-paid-out balance, that's a completely different story. > Venmo is sending money from Venmo bank accounts to your bank, through a direct integration. Yes, and that "direct" integration is typically ACH (for transfers "in 3-5 days") or debit card rails (for "instant payouts"). It might also be RTP these days, and maybe soon will be FedNow, which are both cheaper than debit card push payments (although I don't see payment app providers stopping their very lucrative business of charging ~1% for instant payouts any time soon). For ACH, there is no risk to the recipient. since nobody is floating anything: It takes 3-5 days. For debit cards, there is also no risk since these payments are effectively final immediately after they're announced to the recipient, even though they don't settle instantly.
- pests 3y ago
  They don't mean Venmo-to-Venmo rather Venmo-to-Bank. A lot of apps like CashApp, Venmo, Uber Driver, Lyft Driver, etc give you two options for getting your money out of their app. Instant and Delayed. Delayed is usually free and deposits into a linked bank via ACH. Instant is immediate and is a reverse transaction on a linked debit card.
  - jqpabc123 3y ago
    Instant is immediate and is a reverse transaction on a linked debit card. This is RTP and it usually isn't free.
lxgr 3y ago
Instant deposits usually don't use ACH, but rather debit network rails. These are instant (at least the payment confirmation is, if not the settlement – but that's usually good enough for the use case. If you can really perform one using your account and routing number, it might also be RTP.
- westurner 3y ago
  ;"Why we can't have nice things, why we can't just email money on the internet" From "FedNow FAQ" https://news.ycombinator.com/item?id=32515531 https://news.ycombinator.com/item?id=32515531 : > W3C ILP Interledger Protocol [1] specifies addresses [2]: [...] >> Neighborhoods are leading segments with no specific meaning, whose purpose is to help route to the right area. At this time, there is no official list of neighborhoods, but the following list of examples should illustrate what might constitute a neighborhood: >> - crypto. for ledgers related to decentralized crypto-currencies such as Bitcoin, Ethereum, or XRP. >> - sepa. for ledgers in the Single Euro Payments Area. >> - dev. for Interledger Protocol development and early adopters > From "ILP Addresses - v2.0.0" [2]: >> Example Global Allocation Scheme Addresses >> - g.acme.bob - a destination address to the account "bob" held with the connector "acme" >> - g.us-fed.ach.0.acmebank.swx0a0.acmecorp.sales.199.~ipr.cdfa5e16-e759-4ba3-88f6-8b9dc83c1868.2 - destination address for a particular invoice, which can break down as follows: >> -- Neighborhoods: us-fed., ach., 0. >> -- Account identifiers: acmebank., swx0a0., acmecorp., sales, 199 (An ACME Corp sales account at ACME Bank) >> -- Interactions: ~ipr, cdfa5e16-e759-4ba3-88f6-8b9dc83c1868, 2* > And from [3] "Payment Pointers and Payment Setup Protocols": >> The following payment pointers resolve to the specified endpoint URLS: $example.com -> https://example.com/.well-known/pay $example.com/invoices/12345 -> https://example.com/invoices/12345 $bob.example.com -> https://bob.example.com/.well-known/pay $example.com/bob -> https://example.com/bob > The WebMonetization spec [4] and docs [5] specifies the `monetization` <meta> tag for indicating where supporting browsers can send payments and micropayments: <meta name="monetization" content="$wallet.example.com/alice"> ILP also specifies settlement; From "Fed expects to launch long-awaited Faster Payments System by 2023" (2022) https://news.ycombinator.com/item?id=32658402 https://news.ycombinator.com/item?id=32658402 : > And then you realize you're sharing payment address information over a different but comparably-unsecured channel in a non-stanfardized way; From https://github.com/interledger/rfcs/blob/master/0009-simple-payment-setup-protocol/0009-simple-payment-setup-protocol.md#relation-to-other-protocols https://github.com/interledger/rfcs/blob/master/0009-simple-... : >> Relation to Other Protocols: SPSP is used for exchanging connection information before an ILP payment or data transfer is initiated > To do a complete business process, [there's] signaling around transactions, which then necessarily depend upon another - hopefully also cryptographically-secured and HA Highly Available - information system with API version(s) and database schema(s) unless there's something like Interledger SPSP Simple Payment Setup Protocol and Payment Pointers [...] Clearing (finance) > US: https://en.wikipedia.org/wiki/Clearing_(finance)#United_States_clearing_system https://en.wikipedia.org/wiki/Clearing_(finance)#United_Stat... ACH Network: https://en.wikipedia.org/wiki/ACH_Network https://en.wikipedia.org/wiki/ACH_Network : > The Federal Reserve's FedACH and The Clearing House Payments Company's Electronic Payments Network (EPN) are the two ACH operators in the United States.[3] From https://news.ycombinator.com/item?id=28232243 https://news.ycombinator.com/item?id=28232243 : > FWIU, each trusted ACH (US 'Direct Deposit') party has a (one) GPG key that they use to sign transaction documents sent over now (S)FTP on scout's honor - on behalf of all of their customers' accounts. Payment rail: https://en.wikipedia.org/wiki/Payment_rail https://en.wikipedia.org/wiki/Payment_rail EFT: Electronic Funds Transfer: https://en.wikipedia.org/wiki/Electronic_funds_transfer https://en.wikipedia.org/wiki/Electronic_funds_transfer From "Ask HN: What security is in place for bank-to-bank EFT?" (2021) : https://news.ycombinator.com/item?id=26111184 https://news.ycombinator.com/item?id=26111184 : > AFAIU, no existing banking transaction systems require the receiver to confirm in order to receive a funds transfer. [...] > ILP: Interledger Protocol > RFC 32 > "Peering, Clearing and Settling" describes how ~EFT with Interledger works: https://interledger.org/rfcs/0032-peering-clearing-settlement/ https://interledger.org/rfcs/0032-peering-clearing-settlemen...
kevin_thibedeau 3y ago
That's how Zelle works. It's just a front end to ACH with delayed reconciliation while creating the appearance of instant transfers.

I've always heard ACH is slow, and the article mentions that Venmo uses it. So why then can I deposit my Venmo balance into my linked bank account almost instantly for a very small fee?

darkerside 3y ago

Because Venmo is willing to float you the money despite the risk it might not go through

pbreit 3y ago
Few understand that the movement of money and information about the movement of money happen on different schedules.
- rodgerd 3y ago
  Banking is an eventually consistent system. People outside banks often find this surprising.
- lxgr 3y ago
  In ACH, they generally happen together, and with at least a few hours of delay. That's why instant generally usually doesn't use it.
  - pbreit 3y ago
    They absolutely do not. That’s the whole point.
    - lxgr 3y ago
      Could you maybe elaborate instead of just disagreeing without references or even explanation? In ACH, as soon as you get the notification about an inbound credit transfer, it's effectively final. Whether it ultimately settles on the same day or 1-2 days later is irrelevant, since what matters is finality. ACH credit transfer clawbacks are very rare compared to ACH debit rejections (due to e.g. insufficient funds or fraud).
      - pbreit 3y ago
        Some recipients might consider a valid initiation sufficient to fulfill. Others may way for settlement. Some may wait longer to see if there's a return. And then posting times and amounts can vary quite a bit.
lxgr 3y ago
How can Venmo be the one floating anything in GPs scenario when they are the sending entity? If anything, it's the receiving bank that would have to bear the risk of the payment never arriving after being notified about it out-of-band, somehow. There's no such mechanism that I'm aware of, though – instead instant deposits usually use debit card rails.
- scrollaway 3y ago
  Venmo is sending money from Venmo bank accounts to your bank, through a direct integration. The receiving bank doesn’t bear any risk, Venmo is taking the risk. You are the person who is the beneficiary on the accounts this money sits on. So you are responsible for it. If an entity sends money on your behalf, they take the responsibility for the money you send. That means they are the ones with the processes that will trigger if money doesn’t clear as expected. Processes which may involve anything from reminder emails and push notifications, all the way to debt recovery companies, lawyers and thugs showing up at your door. Both entities have float. The question is who is taking legal risk.
  - lxgr 3y ago
    > The receiving bank doesn’t bear any risk, Venmo is taking the risk. What risk? Venmo is the sender here. Almost by definition, the sender doesn't have any risk: They either send money they have (in which case all is well), or promise to send money they don't have (which is the recipient's problem). If you're talking about the transaction that originally funded the to-be-paid-out balance, that's a completely different story. > Venmo is sending money from Venmo bank accounts to your bank, through a direct integration. Yes, and that "direct" integration is typically ACH (for transfers "in 3-5 days") or debit card rails (for "instant payouts"). It might also be RTP these days, and maybe soon will be FedNow, which are both cheaper than debit card push payments (although I don't see payment app providers stopping their very lucrative business of charging ~1% for instant payouts any time soon). For ACH, there is no risk to the recipient. since nobody is floating anything: It takes 3-5 days. For debit cards, there is also no risk since these payments are effectively final immediately after they're announced to the recipient, even though they don't settle instantly.
pests 3y ago
They don't mean Venmo-to-Venmo rather Venmo-to-Bank. A lot of apps like CashApp, Venmo, Uber Driver, Lyft Driver, etc give you two options for getting your money out of their app. Instant and Delayed. Delayed is usually free and deposits into a linked bank via ACH. Instant is immediate and is a reverse transaction on a linked debit card.
- jqpabc123 3y ago
  Instant is immediate and is a reverse transaction on a linked debit card. This is RTP and it usually isn't free.

lxgr 3y ago

Instant deposits usually don't use ACH, but rather debit network rails. These are instant (at least the payment confirmation is, if not the settlement – but that's usually good enough for the use case. If you can really perform one using your account and routing number, it might also be RTP.

westurner 3y ago
;"Why we can't have nice things, why we can't just email money on the internet" From "FedNow FAQ" https://news.ycombinator.com/item?id=32515531 https://news.ycombinator.com/item?id=32515531 : > W3C ILP Interledger Protocol [1] specifies addresses [2]: [...] >> Neighborhoods are leading segments with no specific meaning, whose purpose is to help route to the right area. At this time, there is no official list of neighborhoods, but the following list of examples should illustrate what might constitute a neighborhood: >> - crypto. for ledgers related to decentralized crypto-currencies such as Bitcoin, Ethereum, or XRP. >> - sepa. for ledgers in the Single Euro Payments Area. >> - dev. for Interledger Protocol development and early adopters > From "ILP Addresses - v2.0.0" [2]: >> Example Global Allocation Scheme Addresses >> - g.acme.bob - a destination address to the account "bob" held with the connector "acme" >> - g.us-fed.ach.0.acmebank.swx0a0.acmecorp.sales.199.~ipr.cdfa5e16-e759-4ba3-88f6-8b9dc83c1868.2 - destination address for a particular invoice, which can break down as follows: >> -- Neighborhoods: us-fed., ach., 0. >> -- Account identifiers: acmebank., swx0a0., acmecorp., sales, 199 (An ACME Corp sales account at ACME Bank) >> -- Interactions: ~ipr, cdfa5e16-e759-4ba3-88f6-8b9dc83c1868, 2* > And from [3] "Payment Pointers and Payment Setup Protocols": >> The following payment pointers resolve to the specified endpoint URLS: $example.com -> https://example.com/.well-known/pay $example.com/invoices/12345 -> https://example.com/invoices/12345 $bob.example.com -> https://bob.example.com/.well-known/pay $example.com/bob -> https://example.com/bob > The WebMonetization spec [4] and docs [5] specifies the `monetization` <meta> tag for indicating where supporting browsers can send payments and micropayments: <meta name="monetization" content="$wallet.example.com/alice"> ILP also specifies settlement; From "Fed expects to launch long-awaited Faster Payments System by 2023" (2022) https://news.ycombinator.com/item?id=32658402 https://news.ycombinator.com/item?id=32658402 : > And then you realize you're sharing payment address information over a different but comparably-unsecured channel in a non-stanfardized way; From https://github.com/interledger/rfcs/blob/master/0009-simple-payment-setup-protocol/0009-simple-payment-setup-protocol.md#relation-to-other-protocols https://github.com/interledger/rfcs/blob/master/0009-simple-... : >> Relation to Other Protocols: SPSP is used for exchanging connection information before an ILP payment or data transfer is initiated > To do a complete business process, [there's] signaling around transactions, which then necessarily depend upon another - hopefully also cryptographically-secured and HA Highly Available - information system with API version(s) and database schema(s) unless there's something like Interledger SPSP Simple Payment Setup Protocol and Payment Pointers [...] Clearing (finance) > US: https://en.wikipedia.org/wiki/Clearing_(finance)#United_States_clearing_system https://en.wikipedia.org/wiki/Clearing_(finance)#United_Stat... ACH Network: https://en.wikipedia.org/wiki/ACH_Network https://en.wikipedia.org/wiki/ACH_Network : > The Federal Reserve's FedACH and The Clearing House Payments Company's Electronic Payments Network (EPN) are the two ACH operators in the United States.[3] From https://news.ycombinator.com/item?id=28232243 https://news.ycombinator.com/item?id=28232243 : > FWIU, each trusted ACH (US 'Direct Deposit') party has a (one) GPG key that they use to sign transaction documents sent over now (S)FTP on scout's honor - on behalf of all of their customers' accounts. Payment rail: https://en.wikipedia.org/wiki/Payment_rail https://en.wikipedia.org/wiki/Payment_rail EFT: Electronic Funds Transfer: https://en.wikipedia.org/wiki/Electronic_funds_transfer https://en.wikipedia.org/wiki/Electronic_funds_transfer From "Ask HN: What security is in place for bank-to-bank EFT?" (2021) : https://news.ycombinator.com/item?id=26111184 https://news.ycombinator.com/item?id=26111184 : > AFAIU, no existing banking transaction systems require the receiver to confirm in order to receive a funds transfer. [...] > ILP: Interledger Protocol > RFC 32 > "Peering, Clearing and Settling" describes how ~EFT with Interledger works: https://interledger.org/rfcs/0032-peering-clearing-settlement/ https://interledger.org/rfcs/0032-peering-clearing-settlemen...

kevin_thibedeau 3y ago

That's how Zelle works. It's just a front end to ACH with delayed reconciliation while creating the appearance of instant transfers.