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An update on the Federal Reserve’s Instant Payments Service
- boomchinolo78 3y agoTime to go bigger on metals and crypto
- dcl 3y agoWhy?
- sneak 3y agoHard to be easily debased, hard to mass censor/prohibit payments to unpopular organizations.
- DiabloD3 3y agoSo, they just ban crypto, and then they take your precious metals. Think I'm kidding about the last one? The US government has already taken gold from citizens (by law, and without recourse) before, and nobody did anything about it.
- sneak 3y ago"just ban crypto" doesn't work. They tried that with cocaine already. They also didn't get a very large percentage of the privately held metals, either.
- ProllyInfamous 3y agoBecause BRICS will adopt a gold-backed currency to resolve oil transactions without USDollars. This should happen late August.
- senectus1 3y agolol BRICS is a predictable failure.
- ProllyInfamous 3y agoYou're not going to reliably bully people away from transaction their species-backed stores of value for petroleum. Particularly not dozens of non-USDollar-backed countries eager to transact differently. See: recent price of gold and bitcoin and oil (and stock market, in general) IE: NOT USD See, also: several countries request physical return of their alleged gold holdings
- treyd 3y agoIs there somewhere to read about this specific plan?
- ProllyInfamous 3y agoSee: https://duckduckgo.com/?t=h_&q=%22BRICS%22+gold-backed+currency&ia=web https://duckduckgo.com/?t=h_&q=%22BRICS%22+gold-backed+curre...
- TedDoesntTalk 3y agoWill this replace ACH transfers?
- hayksaakian 3y agohopefully! for now it will be up to financial institutions to implement the service and pass on the savings.
- voidfunc 3y agoPass on the savings... LOL.
- KingMachiavelli 3y agoIMO it depends on who ends up being responsible for fraud and insufficient funds. It sounds like FedNow will provide liquidity for instant settlement but the page doesn't make it clear what happens if the sender somehow has a insufficient balance. If a $500 FedNow transaction occurs and a $500 ACH transfer settle on the same day (and the account only has $500), who get's paid and who made the mistake? With ACH most banks/financial services provide some amount of instant funds but wait 1-3 days for the transfer to complete before providing the full balance. This is very useful since it gives the bank 1-3 days to be alerted of fraud, insufficient funds issues, etc. While ACH can technically be clawed back after 3 days, it's a much more difficult process which mitigates risk by forcing the sender through a lengthy fraud claim process.
- satvikpendem 3y agoThis would be great if it can cut down payment processor fees which are mainly driven by the rates that Visa and MasterCard charge, essentially as a duopoly power in the market. They also control what you can and can't buy, such as for example heavily frowning upon adult content, even if you are legally an adult.
- kyrra 3y agoWe already have debit card and the related networks (like Star) that are cheaper. People are just used to Visa, and like the rewards.
- mikepurvis 3y agoThat seems surprising to me as Canada's equivalent system (Interac) is very popular.
- lotsofpulp 3y agoGenerally, retailers like credit cards because people usually spend more money when they pay with credit cards. That is why you do not see major US retailers offer discounts for paying with cash/debit card/ACH. The only one I can think of is Target, that offers 5% off if you use Target Redcard, which can be linked to your bank account.
- oasisbob 3y agoUntil Dodd-Frank, the rules for discounts on cash transactions imposed by Visa and Mastercard by merchants were much more stringent. Many retailers had their hands tied, whether or not they wanted to provide a cash discount or credit card surcharge.
- lotsofpulp 3y agoSure, but that was 13 years ago. Retailers also always had the option of simply not accepting credit cards, and only accepting debit cards.
- happymellon 3y agoI always found it funny when dealing with the money transfer to folks in the US that they had to use terrible 3rd party apps to move money between accounts. You end up in situations where moving money can almost be impossible when the banks don't support the same apps. Here in the UK immediate transfers between accounts has been a thing for a very long time. Glad to see the US catching up, because sometimes the pace of technology is amazing and other times with much simpler things it's positively archaic.
- lotsofpulp 3y agoAll the major banks in the US have supported online ACH or Zelle money transfers for over a decade now. ACH takes a few days, Zelle is instant, but there has not been a need to use 3rd party apps for many years.
- radlad 3y agoIMO, Zelle qualifies as a terrible 3rd party app... My landlord takes payment via Zelle, and I tried to setup a payment from Discover but it told me that my limit was something ridiculously low like $500. I called to ask them to increase it and they said they were unable to. Meanwhile, I can send huge amounts from my Ally bank account with Zelle...
- lotsofpulp 3y agoSounds like your bank (Discover) is restricting you from transferring a certain amount of money. Why would you hold that against Zelle?
- woodruffw 3y agoZelle's job is arguably to abstract over banks; the fact that they pretend to do instant settlement by using debit transactions (which are then subject to all kinds of weird per-bank and per-network limitations) means that they fail at this basic task.
- uneekname 3y agoIf this is what I think it is, I can't wait. My bank's Zelle experience is abysmal, and it's annoying to manage a Venmo balance. I will strongly consider switching banks if it means a convenient FedNow UX
- vxNsr 3y agoIf you’re willing to switch banks anyway, most of the too big to fail ones have a great Zelle experience, i bank w chase and BoA and both offer a pretty first class solution with Zelle (chase especially, as they actually created the precursor to what eventually morphed into zelle).
- uneekname 3y agoThis is great to know, thanks!
- seewhydee 3y agoIn my country (Singapore), the instant payments system was rolled out in 2017 but took several years to get traction. The pandemic seems to have marked a turning point: it's now accepted pretty much everywhere, and it's great. You can use it to pay plumbers, small-scale food vendors who don't take credit cards, car workshops, people on Craigslist, friends you split a bill with, etc. Very convenient.
- woodruffw 3y agoIt's petty of me, but I hope that FedNow utterly eradicates Zelle: I've spent my entire life in the mess that is the US's banking system, and every trouble I've ever had pales in comparison to the troubles that Zelle gives me on a near-daily basis.
- patch_cable 3y agoCan you say more? Zelle basically never worked for me at my local credit union (every single attempt to use it locked my account on suspicion of fraud), but I use it regularly with Chase with no issue. How do you hope FedNow will improve on the concept?
- georgeburdell 3y agoSame experience
- woodruffw 3y agoSure. I was a Chase customer for a long time, and I tried to enroll with Zelle through Chase. This failed in two separate ways: 1. I was unable to enroll through Chase: I got everything ranging from generic error pages, to server errors, to actual Java stack traces in both my email and browser. 2. I was unable to enroll directly through Zelle's site: their site would claim that I was already enrolled, invite me to log in, and then...not log in. It took weeks to get a combination of Chase and Zelle's customer service to (1) acknowledge the issue, and (2) diagnose it: Zelle appears to (or did) use US phone numbers as primary keys, and I was partially registered in two separate places. They didn't have a resolution available to me so I told them to delete my account entirely, which they said they did. Fast forward about 3 years: I'm no longer a Chase customer. For unrelated reasons, I am asked to attempt to use Zelle again. I try and enroll, only to discover that: 1. Zelle can only be linked to one bank at a time; 2. Chase never actually bothered to un-enroll me. At this point, I'm no longer a customer of Chase, and have no active account to reference. I can't log into either Chase or Zelle to "un-enroll" this account that doesn't exist, and neither is willing to do it for me. I end up convincing the person that wanted me to use Zelle that it's fundamentally broken, and ignore it. Fast forward another year: I am now forced to use Zelle. This time, somehow, my new bank is able to enroll me. I log into Zelle to make a payment; I am instantly banned for having "insufficient personal information" (how this is possible is unclear to me; it is literally linked to all the information on my bank account). I convince my bank to talk to Zelle and unban me, and finally things mostly "work": I can enter a crappy webview within my bank's app to send money through Zelle. Except that I still have to split it into smaller payments, since Zelle uses the debit network for settlement and won't let me send very modest amounts of money in single amounts. To summarize: after about 6 years of fighting, I can half-use Zelle by splitting already small payments into smaller payments. I have to be careful about when I split these payments, because if I do them on the wrong calendar intervals I exceed my "monthly limit" and have to wait another month to make essential payments. Getting to this state took literal dozens of phone calls with two banks and Zelle themselves. > How do you hope FedNow will improve on the concept? I hope none of the above will ever happen to me again.
- teraflop 3y agoI wish there was a bit more detail about this part: > The initial release of the FedNow Service will include features to help banks manage fraud risk and mitigate fraud losses. [...] In addition, there will be tools that help a financial institution investigate erroneous or suspected fraudulent transactions. Let's say Alice's "Bank A" processes a FedNow transfer of $1,000 to Bob at Bank B. What happens if Alice calls her bank and says the payment was unauthorized? If Bank A investigates, and finds evidence that Bob hacked Alice's account, do they then have to call up Bank B and persuade them to return the money? Does the Fed get involved as an arbiter? Or is Alice just out of luck? (To be fair, I'm not sure exactly how this happens behind the scenes with credit/debit cards, either.)
- Animats 3y agoI'm wondering about that. This is a debit transaction that clears within seconds. The recipient has good funds immediately and can take them out of the destination bank, just like a wire transfer. Or, for that matter, cryptocurrency. ACH is daily. It really is a batch system, with a daily batch at 4:30 PM Eastern Time, and settles around 6 PM. There's a whole "undo" system built into ACH. FedNow does not have "undo". Credit card transactions have good consumer protections in US law. The whole concept of credit card transactions is that you buy something and pay for it. Both the "something bought" and "pay for" parts are logged. And you have to be a "merchant" to accept credit cards. So you can order stuff and get a refund if it doesn't show up. FedNow, like Zelle, seems to be only have a "pay for" part. It just sends money. Using this service with any unknown payee for anything you haven't already received (such as dinner) is probably a bad idea. The Fed's discussion of FedNow fraud is not comforting.[1] [1] https://www.frbservices.org/financial-services/fednow/instant-payments-education/fraud-and-instant-payments-the-basics.html https://www.frbservices.org/financial-services/fednow/instan...
- seewhydee 3y agoThere are tons of everyday use-cases where it's preferable to sacrifice fraud protection to achieve instantaneous money transfer. Credit card companies have normalized using credit cards (with their attendant fees) for all sorts of small-denomination transactions, like public transportation, where the fraud protection machinery of the credit card system is of negligible benefit; it's a rip-off.
- gsatic 3y agoFed is moving so slowly compared to China or India. Going to be left in the dust soon. They need to open settlements up to everyone not just "financial institutions". Fed deposit accounts for everyone or Interest bearing CBDCs should be rolled out to every one. The fucking banks need to be disintermediated from all transaction involving Depositors. Convert them to pure lenders. If the goal is to "improve settlement efficiency without introducing liquidity or credit risks" then provide a path to get the dumb sender and receiver banks out of the loop in every dumb transaction. If I want to send my grandma cash, why do 2 banks have to be sitting in the middle? It's 2023 get those fuckers out of the loop. So when the next bank collapses due to "credit and liquidity risks" they haven't thought about why should grandma worry about her savings?
- KingMachiavelli 3y agoIf you're actually interested in why the US banking is so fragmented, it's on purpose and it works very well. The US wants banks to be small to distribute risk and encourage local investment. Small banks and credit unions are much more willing to give small business loans, auto loans, etc. to people/clients with worse credit, etc. These policies only work if small and medium banks have depositors so that's why everyone has a different local bank, etc. > ...worry about her savings All deposit accounts are insured up to $250k and (given recent events) unlikely the Fed would even allow any regular persons deposits to be at risk. Essentially, the Fed can't loan or invest like small/medium banks can. The Fed can't go bankrupt so it has no real way to measuring risks when giving out loans which would make it impossible to price loans.
- lotsofpulp 3y agoWhat does any of that have to do with electronically sending and receiving money? gstatic is correct with this: >If I want to send my grandma cash, why do 2 banks have to be sitting in the middle? The US government should be offering electronic money accounts to everyone as a utility, and they should be constitutionally guaranteed (even to felons), with no ability to lose them. Anyone should be able to send and receive money at any time. In conjunction, US government should also provide identity verification services as a utility, utilizing the USPS, which they already use to verify identity for US passports. If people then want to invest their money, then they can make that choice individually.
- stilist 3y agoI think this is the first time I’ve ever seen ‘an update on’ something that wasn’t an end-of-life announcement.
- cuuupid 3y agoDoesn’t this essentially spell doom for Ripple and similar “CDBC” crypto plays in the US?
- msravi 3y agoOf all the articles on the instant payment service, this one is simultaneously the most honest and hilarious (https://www.wsj.com/articles/banks-newest-fed-headache-nonstop-instant-payments-8ac97c15 https://www.wsj.com/articles/banks-newest-fed-headache-nonst...) > FedNow could destabilize banks’ reliance on customer cash, fanning the flames of deposit flight > In addition to losing revenue from the time between a payment’s initiation and settlement, banks now have to worry about deposit flight outside of business hours. > The system isn’t expected to be ubiquitous in the U.S. for a few years. > ...customer deposits were sticky ...That assumption allowed bankers to comfortably borrow cash at low rates and lend for long periods at higher rates. > But instantaneous transactions allow customers to pull cash with ease, and without notice. That threatens smaller banks... Meanwhile, the rest of the world, including countries traditionally referred to as "third-world countries," have leapfrogged the US and provide instant payment and settlement without crying about the loss of revenue from the time between initiation and settlement, or a run on their banks.
- greatgib 3y agoThe funniest thing is when you see that you have multi thousand of billon of dollar sized banks, that are unable to pay agents to be able to process payments on week ends...
- nancyhn 3y agoRemember this story from a couple months ago? https://news.ycombinator.com/item?id=36041059 https://news.ycombinator.com/item?id=36041059 Does this system prevent abuse?
- raincom 3y agoUsing Fednow is no worse than using zelle/venmo/paypal when it comes to such abuse. Law enforcement agencies have direct access to banks these days.