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Why does the US seem so far behind when it comes to banking? - Chip and PIN has been in the UK since 2004 and mandatory since 2006. It wasn't until a decade la
by nerdawson 3y ago
Why does the US seem so far behind when it comes to banking?
- Chip and PIN has been in the UK since 2004 and mandatory since 2006. It wasn't until a decade later that the US caught up.
- Faster Payments allow for instant bank transfers (usually) between any bank account for free. Receiving transfers from clients in US (even with a US Wise bank account) was always a nightmare.
- Since the EU introduced Strong Customer Authentication, most new payments have to be authorised in your mobile banking app or by some other means of 2FA.
- Even before SCA, you'd have to get the Postcode (often digits that mattered) and CVV correct at the very least.
These measures seem like a way of banks shifting the responsibility for fraud onto the customer. In either case though, it's the customer who loses out. In a culture that accepts widespread card fraud, costs increase to offset it.
- arjvik 3y agoWe have 3D Secure, but it's almost never implemented on sites!
- _puk 3y agoDefine "We". With a UK card pretty much any transaction I do online requires me to Auth it in app. I even found I had to do it recently for things like car hire, and those websites are generally just wrappers around local company searches (though higher sums overall).
- BaseballPhysics 3y agoA massively diverse and deregulated banking sector. The US has literally thousands of small regional banks across 50 fairly independent states. Rolling out major new technologies in that environment is far far harder.
- cubefox 3y agoThe number of banks in the US seems perfectly normal. Germany has ~1500 for 80 million inhabitants, the US has ~4800 for 300 million.
- BaseballPhysics 3y agoFirst, compared to the rest of the EU, Germany is a weird outlier with the number of banks they have (which, by the way, has been declining steadily for 15 years). Setting that aside, you missed the "deregulated" part. As I understand it (and I grant my understanding is pretty cursory) Germany has a much stronger central regulating body, and is subject to overall EU regulations as well. The US has multiple regional banking authorities and a ton of responsibility is delegated to the states, and in general government intervention is seen as a last resort. So it's both structural and cultural.
- cubefox 3y ago> First, compared to the rest of the EU, Germany is a weird outlier with the number of banks they have (which, by the way, has been declining steadily for 15 years). Still, the absolute number itself seems to be not really the issue here. (I assume the number of US banks has similarly declined in the US, as fusions reduce cost.) > Setting that aside, you missed the "deregulated" part. Yeah, that part I don't object to.
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- _cenw 3y agoAnd also, a lot of german banks are actually federated with centralized IT departments (like Finanz Informatik) providing the entire bank as "blueprint". Yes, even if they aren't called Volksbank or Sparkasse. For instance, if you get an EC/GiroCard from DKB, the letter is suspiciously typeset in Sparkasse's corporate font.
- toomuchtodo 3y agohttps://www.npr.org/2023/05/16/1176513695/does-the-u-s-have-too-many-banks https://www.npr.org/2023/05/16/1176513695/does-the-u-s-have-... https://www.marketplace.org/2023/05/05/heres-why-the-u-s-has-so-many-banks/ https://www.marketplace.org/2023/05/05/heres-why-the-u-s-has...
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- mistrial9 3y ago> US seem so far behind when it comes to banking "ahead" and "behind" halt thinking, and turn the entire topic into some kind of number-line position. It is not. This is complex and actors on both sides of the Atlantic are playing in bad faith to exploit changes. Second you ignore the roles involved. Mid-20s person with steady job is a smaller and smaller part of the system-in-fact, for many reasons. Some people say that working 20-somethings are abused and disenfranchised, including in the EU and elsewhere.
- ActivePattern 3y agoAs a Canadian, it does feel like stepping out of a time machine when you pay at restaurants in the USA. Instead of using a terminal at the table to pay yourself, you need to give the server your card and wait for them to manually process it somewhere. Maybe things have progressed in recent years. But we haven't done it that way in Canada since the early 2000's.
- wpietri 3y agoThings have definitely changed here recently. At least in San Francisco, at-table terminals are now the norm in sit-down restaurants. Staff generally use the same device for order-taking and payment.
- baby_souffle 3y ago> Things have definitely changed here recently. At least in San Francisco, at-table terminals are now the norm in sit-down restaurants. Staff generally use the same device for order-taking and payment. I used to work in PoS industry. This tech is new-ish to the US but not to the rest of the first-world. 15 years ago, paying with a CC @ the table was common in Europe, but the terminal could ONLY do payments. The devices that have been rolling out to the US are more like android tablets in that they can run the order taking half of it, too. Selling hardware to a restaurant is tricky and "oh, no, this only allows you to move the payment portion to the table; staff still have to go to central spot to find a table that can accommodate guests and place their order" was basically a non-starter. The sales pitch is a lot easier now that everything can be done table-side.
- DarkGauss 3y agoWe still do not use chip-and-pin on credit cards in the US. We use chip-and-signature for most credit cards. I'm not saying there aren't credit cards with chip-and-PIN, there are a some. We do use chip-and-PIN on most debit cards, but even that can be bypassed on 99% of terminals to fall back to chip-and-signature.
- tlogan 3y agoIn my view, the U.S. is leading the way in this area. Europe seems to be shifting the burden of fraud prevention onto customers with methods like SMS notifications and pins. In contrast, in the U.S., banks and businesses are primarily responsible for dealing with fraud.
- Dma54rhs 3y agoIt's not leading the way technically but for the end consumer it might be better. If I get charged unfairly my bank will tell me to go to the police. Americans can easily just refuse it.
- toyg 3y agoNot if you use a credit card; a quick call to Visa/MC/Amex will get your money back instantly in Europe too. The main difference is that, in Europe, debit cards are often used in the same way as a CC - except they are just a direct pipe to one's bank, and once the money comes down the pipe there is no easy way to push it back up.
- nerdawson 3y agoWhen you pay with a credit card, your bank is jointly liable for the goods or services delivered. It’s easy enough to get your money back when something goes wrong while being less open to abuse.
- daveoc64 3y agoIt's more the case that US Consumers are indirectly funding crime by banks turning a blind eye to fraud.
- tlogan 3y agoIt's curious that the same product isn't cheaper in Europe compared to the U.S., despite Europeans not funding fraud. I can't help but wonder where those extra savings go.
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- mnw21cam 3y agoChip and PIN isn't mandatory in the UK - it's just the default. My debit card is not Chip and PIN, because I asked the bank very nicely. The problem isn't the Chip and PIN itself, although it has been implemented less securely than it could be. The problem, as you point out, is that the liability for fraud has been shifted in law to the card holder, and that is what I objected to. See https://www.chipandspin.co.uk/ https://www.chipandspin.co.uk/ for more.
- np- 3y ago> In a culture that accepts widespread card fraud, costs increase to offset it. Maybe, maybe not, but this is a very simplistic way of looking at it. If credit card fraud is responsible for X% of total charges, they can spend effort to deal with it, OR they can simply not deal with it and keeping the transactions going while eating the cost, they may be able to serve Y% more customers where Y > X and thus end up with more profit in the long run. This works for a lot of businesses in America because the sheer scale is massive (take McDonalds for example, they would probably be better off processing their lunch rush quickly due to the margins they are making rather than take even 1 second to verify there is no fraud). This may not work in Europe, but IMO you're missing an entire dimension when analyzing the true costs. If the fraud/benefit scale ever tipped away from favoring the companies, I think we would see all these major fraud prevention mechanisms kick in almost immediately in the US.
- nerdawson 3y agoI recognise that for the likes of McDonalds, the friction probably isn’t a benefit. With that said, I can’t remember the last time I saw a POS terminal that wasn’t contactless. More often than not I’ll go out with nothing more than my phone knowing that regardless of where I end up, I’ll be able to pay. Features like SCA protect consumers and businesses alike.
- lxgr 3y ago> serve Y% more customers where Y > X and thus end up with more profit in the long run. That’s the micro/local view, and any rational company in the US will do something close to that. There is no local incentive to set the “fraud/friction” to anything other than their competitors. On the macro level though, if the dial is moved for everyone (i.e. by regulation; the card schemes have tried to make this happen via incentives in the form of the liability shift, but it still wasn’t enough), there’s a chance for increased total efficiency. The cool thing is that Europe is running this experiment currently – let’s see how it goes.
- ggregoire 3y agoWhat's super interesting to me, lot of countries that you would expect to be behind the US on that topic actually have state-of-the-art banking techs. Even the EU is behind some of the stuff I've seen in LATAM.
- mndgs 3y agoPlease, name an example. Particularly, EU being behind LATAM. As an expert, I'm honestly interested.
- 0xbadcafebee 3y ago> These measures seem like a way of banks shifting the responsibility for fraud onto the customer. Onto the vendor, not the customer. The customer can chargeback anything instantly, and the vendor is on the hook for the fraud. It's intentional, so the banks and payment processors can make more profits. By making it easier for customers to chargeback, they incentivize customers to buy more stuff, by getting the customer to feel more comfortable charging everywhere. Charging more stuff makes payment processors more money.
- creeble 3y agoNone of these comments seem relevant to TFA, which is specifically about card-not-present fraud. Chip and PIN doesn't work for internet payment. Bank transfers don't work well internationally. It is trivial to turn on AVS (address verification) and CVV, but it can result in more declined-yet-legitimate transactions. Sometimes that outweighs the fraud risk that these catch. The responsibility for fraud is pushed to the merchant, not the customer. Yes, customers pay higher prices because merchant fraud gets passed on eventually, but only in the sense that all fraud costs get passed on to consumers eventually.
- fnordpiglet 3y agoA lot of it has to do with legacy POS support and a strong disinclination on the merchants part to upgrade. Terminals are costly and configuration non trivial. Plus a strong “if it ain’t broke don’t fix it” culture and resistance to any change. Add to it a relatively weak consumer protection regulatory regime and you’ve got the US. I would say it’s not worse than most of the world though. Much of the world is rampant with fraud borne entirely by the consumer. For instance QR based bank transfers are popular in much of the world outside the western developed world. Fraud is insanely rampant but the ease and utility vs cash makes it acceptable. Transactions costs are near or actually zero and there’s no POS infrastructure. But people meticulously check their transactions because theft is so rampant. The banks and governments seem unconcerned though. As such I put the US somewhere in the midpoint globally for this space. There are some smaller economies with strong regulatory regimes that do better for sure. There are many more that do much worse. Obviously the goal is the better not the worse, but I think it’s cherry picking to lump the US into being the worst.