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Why on earth isn’t the Federal Reserve providing an easy money moving service that also acts as a ledger? I know about FedNow but they could also back bone tran

Why on earth isn’t the Federal Reserve providing an easy money moving service that also acts as a ledger? I know about FedNow but they could also back bone transaction networks as the definitive payment pipe and cut out the middleware companies entirely To be honest Visa type services should be provided via the central bank (again, Visa itself isn’t a credit card issuer) so businesses don’t have to soak the payment percentages

tw04 3y ago
For the same reason we have tax preparation software and private health insurance (but somehow government flood insurance on vacation property). Valid historical reasons that no longer apply, and lots of lobbying.
- _factor 3y ago
  It’s almost like we need to sit down and rethink this system.
  - undersuit 3y ago
    Double down?
  - ponderings 3y ago
    I often think a full rewrite is needed. I woke up this morning with an odd thought. User interfaces are hard, they are not many but we have people who are really good at designing those, we also know how to user test them. Election programs are non binding, you can say one thing then do the exact opposite after winning. (Referenda are also complicated.) It doesn't seem to make sense in the modern age to be able to change your vote every x years. It's a great formula for [say] the 17th century. What if we designed a really neat configuration page for the government and allow people to change whatever settings exposed to them. You check a candidate you like and with each option their choice is the default. If you don't agree with something you simply change it. Then, one by one we take the topics away from the politicians so that they can focus on the rest of the work. For choosing the party you get 3 up and 3 down votes that you may spend however you like. A separate election is held to chose the team to populate and work on the interface so that gradually more and more topics get exposed. Their job would also be to research and estimate how familiar the population is with a topic along with a budget to educate the voter. It would be enlightening for the candidates as well. Eventually we can shut down the legacy system and have one or more nudgeable robot overlords. Don't worry, I'm sure the dream will fade in a few hours.
    - rrrrrrrrrrrryan 3y ago
      Seems like you've independently invented a form of liquid democracy: https://en.wikipedia.org/wiki/Liquid_democracy#:~:text=The%20concept%20of%20liquid%20democracy,a%20trusted%20person%20or%20party https://en.wikipedia.org/wiki/Liquid_democracy#:~:text=The%2.... It basically lets each citizen choose between direct or representative democracy, per issue, and does away with arbitrary things like election dates and even candidates (you can "elect" any other citizen to vote on your behalf, as can they). The only reason we don't have it is because it's basically impossible without software. Even very complex ranked choice voting can be tallied manually.
      - RandomLensman 3y ago
        We also don't know if the outcomes would be preferrable. Do we need to move democracy into a high-frequency trading kind of world to do the things we want to?
      - ponderings 3y ago
        The interesting thing in the moment was not the formula necessarily but the idea to start with the interface. If you are dealing with such monstrosity of an application all battles are lost at the interface level. It has to work for everyone, there is no room for excuses about dumb users, they are the target audience. While in the US the number seems infinite, in the Netherlands we have roughly 140 000 laws that each could have a series of check boxes and sliders. Say we all do 4 per day, that would be only 1460 annually. It would take 100 years which seems to long. At 40 per day it would require to much effort. If the interface is to work as desired a large amount of law needs to go. We should burn the books most worthy first. Experts can compete finding the most nonsensical laws. Short videos can be made to explain why the law exists. We assign a good number of test subjects to pick the least likeable ones until we have a good list of candidates unlikely to survive. There must be a good feedback report of the terrible implications after a law is deleted. I can see it already, naked people around camp fires, drinking booze in public, selling food after sundown, making music without a license, singing songs insulting the monarch.
    - _factor 3y ago
- wolverine876 3y ago
  The IRS now provides free tax filing.
  - tw04 3y ago
    >The IRS now provides free tax filing. For federal taxes only... and with silly limitations that exist... because lobbying? And oh by the way, the IRS isn't actually offering anything, they'll refer you to third parties that will then make money off of you if you have anything beyond the most basic filing, and also if you want to file state taxes. So no, they don't actually do that.
    - hnav 3y ago
      The IRS is piloting directfile.irs.gov this year, if you live in CA you can use it.
    - staringback 3y ago
      > For federal taxes only Why would the IRS provide a filing service for state income taxes? Go ask your state government to provide this if you want it. The IRS isn't the one collecting those taxes
  - a_vanderbilt 3y ago
    The problem still remains that they have a number in mind about what I owe and I'm not allowed to know it until I file. Just tell me what I owe and give me the option to approve it. The IRS provides free filing, but if your taxes are complex good luck. If you are the one who prepared them you absorb the liability when the IRS comes after you. The likes of TurboTax are still in favorable positions despite the free option now being available.
    - akira2501 3y ago
      > The problem still remains that they have a number in mind about what I owe and I'm not allowed to know it until I file. They can't. Too much of the tax code is subjective and based upon claimed circumstance. If they did know this, they wouldn't need auditors. > If you are the one who prepared them you absorb the liability when the IRS comes after you. The liability is typically just the difference between what you paid and what you owe. It's hard to believe most people are so bad at taxes their efforts would be mistaken for willful criminal fraud.
- theturtletalks 3y ago
  The old government nationalized railroads and private roads for this exact reason. When a utility becomes embedded into and it’s needed to even function in society, it needs to be nationalized. Regulatory capture has made that near impossible now. At least crypto throws another challenger in the ring and can give people and businesses an, albeit inferior, alternative.
  - akira2501 3y ago
    > it needs to be nationalized. I'm not sure trading three owners for one public one is the right direction to go, particularly since there are few limits to the number of providers that could be operating in this space. The article points this out, too, that it's incredibly expensive and difficult to start a new network from the ground up. This sounds like the thing you actually want to fix.
    - theturtletalks 3y ago
      Yes, realistically, it's not possible at this point. Ideally, it should be done so users have some sort of recourse. Visa/MC can straight up ban you from processing payments without rhyme or reason while they hide behind KYC/AML laws. The government can't hide behind these laws.
      - akira2501 3y ago
        > it's not possible at this point. I think cheap and ubiquitous internet access has changed the game here significantly and it seems far easier to bring new products and technologies into the merchant space than it ever has been before. > Visa/MC can straight up ban you from processing payments without rhyme or reason while they hide behind KYC/AML law Yes, but if you had a dozen other providers to turn to, this may not be an issue, and may force the established players to have a more transparent policy. > The government can't hide behind these laws. I would consider the "No Fly List" as a terrifying example of where this naivete inevitably ends.
    - PH95VuimJjqBqy 3y ago
- remarkEon 3y ago
  I think this sentiment is wrong. The reason we don't have free tax preparation software (or a tax system that doesn't require that) and don't have free health care is because of competence issues. Taxes seems like a different dimension of problem, so let's leave it aside for the moment. Do we really believe that the people that work in the government here (in the US) are actually competent enough to administer a public health care system? I don't. I'd like to be convinced otherwise. Maybe you mean to say that we'd, I don't know, outlay lobbying and redirect that economic activity toward paying market salaries to people who are, in fact, competent enough to administer a public healthcare system.
  - mnky9800n 3y ago
    I find it a bit dishonest to claim that healthcare cannot be publicly administered because of trust issues when it's cheaper everywhere else and administered publicly even in places with high corruption like Russia.
    - AnthonyMouse 3y ago
      It's cheaper everywhere else because it's so incompetently (or corruptly) regulated here. If you can't demonstrate an ability to solve that problem here, putting more of the system under the same regulators seems like doing things out of order. Pointing to Russia on costs also points to the other side of the problem: Their healthcare system is severely under-funded. That's one way to make it cost less.
  - nobody9999 3y ago
    >Do we really believe that the people that work in the government here (in the US) are actually competent enough to administer a public health care system? I don't. I'd like to be convinced otherwise. Sorry for the late reply. Belief is unnecessary. The US government has been administering Medicare[0] since 1965 -- longer than I've been alive. [0] https://en.wikipedia.org/wiki/Medicare_(United_States) https://en.wikipedia.org/wiki/Medicare_(United_States)
charcircuit 3y ago
They could even issue an official stablecoin that could interopt with other cryptocurrency ecosystems.
beojan 3y ago
Visa and Mastercard (and American Express) are international networks. How could any individual central bank provide that?
- bostik 3y ago
  See SEPA payments in EU: https://en.wikipedia.org/wiki/Single_Euro_Payments_Area https://en.wikipedia.org/wiki/Single_Euro_Payments_Area Or UPI in India: https://en.wikipedia.org/wiki/Unified_Payments_Interface https://en.wikipedia.org/wiki/Unified_Payments_Interface So to answer your question: with law on your side. You limit price gouging, and mandate interoperability with a cheaper system.
  - kgwgk 3y ago
    That’s an example of regulation - not of a central bank providing anything.
    - RandomLensman 3y ago
      TARGET, i.e., cross-border interbank, is operated by the European central banks
  - arcticbull 3y ago
    SEPA is roughly the same as FedNow, which is has been live for almost 8 months now. It's not comparable to VisaNet.
phonon 3y ago
What's wrong with debit cards? (Besides exempt transactions, which can be fixed.) https://www.federalreserve.gov/paymentsystems/regii-average-interchange-fee.htm https://www.federalreserve.gov/paymentsystems/regii-average-...
deleted 3y ago
[deleted]
arcticbull 3y ago
Everyone seems to forgot that a cheaper, regulated option exists, and it's Durbin debit cards. But nobody wants to use them because they don't offer the same benefits vanilla credit cards. People choose the more expensive option because it better meets the needs of customers. The middle man doesn't really take all that much - most of interchange goes to the cost of loan origination, insurance and most importantly cash back and rewards programs. There's no annual fee 2% cash back cards. It's a little disingenuous to say the 1.5-3.5% interchange fee "mostly goes to middle men" when most of it goes right back into your pocket in one way or another.
- AnthonyMouse 3y ago
  > There's no annual fee 2% cash back cards. It's a little disingenuous to say the 1.5-3.5% interchange fee "mostly goes to middle men" when most of it goes right back into your pocket in one way or another. There are two problems with this. The first is that not everybody is eligible for the no annual fee 2% cash back cards, and the people who aren't are the people in financial straits, so this is effectively a tax on the poor. The second is that it's an anti-competition measure. Sure, maybe you get 2% out of the 3% the merchant is charged, but then you refuse to use a competing payments system because you want your 2%. And then we're stuck with the incumbents forever because anything new and different can't build a network effect when customers would have to pay a de facto 2% tax on everything they buy in order to use it. Which is exactly what happens to your debit cards -- and then people are subject to the whims of Visa and their opaque capricious KYC implementation.
  - arcticbull 3y ago
    > Which is exactly what happens to your debit cards -- and then people are subject to the whims of Visa and their opaque capricious KYC implementation. Not really. The merchant decides what kind of card to accept and how to route. It's just that customers will choose not to visit your establishment if you only accept debit, even if you have lower prices. Because they like the perks of a credit card. The reality is the merchants pay a blended average of about 1.8% and they do so because people spend more on credit cards. It's relatively cheap, super fast, very easy and secure. KYC is hardly capricious. Visa, issuers and acquirers have no interest in cutting off customers because, and this is true, cut off customers don't make them money. There is room for something like 'payment network neutrality' where legislation requires networks to process all legal transactions. Things can be better. > And then we're stuck with the incumbents forever because anything new and different can't build a network effect when customers would have to pay a de facto 2% tax on everything they buy in order to use it. I don't buy this either. The last few years saw the development of a whole new network in BNPLs. And guess what, it's not cheaper, at all. They charge 4% or more and they don't kick any of it back to customers. The value in credit networks is in the loan origination, the insurance and to an extent the rewards. The credit networks do just fine in Europe where interchange is capped at 0.2% for debit and 0.3% for credit, and I haven't really seen a wellspring of competition. What I do see is a dearth of loyalty programs, which is a tradeoff you can choose to make.
finfrastrcuture 3y ago
The problem is fraud + disputes. Who's liable for people sending money to fraudsters? For letting fraudsters operate on the platform? See the fraud issues of Zelle, which is basically a free money moving service comparable to FedNow. The service the networks provide is a way for all participants (banks, people, businesses, etc) to trust one another, as well as a healthy rules-based system to address disputes. Getting this working is not trivial.
- no_wizard 3y ago
  >The problem is fraud + disputes Banks pay fees today around this to the payment networks. The Fed could simply charge a tiny fee per transaction to the bank to cover this. It would be much less expensive than Visa and Mastercard, since there is no service fee on top. To clarify, I never said it be 100% free, but it would dramatically lower and standardize fees. As far as trust goes, if you can't trust the central bank, we have bigger problems don't we?

tw04 3y ago

For the same reason we have tax preparation software and private health insurance (but somehow government flood insurance on vacation property). Valid historical reasons that no longer apply, and lots of lobbying.

_factor 3y ago
It’s almost like we need to sit down and rethink this system.
- undersuit 3y ago
  Double down?
- ponderings 3y ago
  I often think a full rewrite is needed. I woke up this morning with an odd thought. User interfaces are hard, they are not many but we have people who are really good at designing those, we also know how to user test them. Election programs are non binding, you can say one thing then do the exact opposite after winning. (Referenda are also complicated.) It doesn't seem to make sense in the modern age to be able to change your vote every x years. It's a great formula for [say] the 17th century. What if we designed a really neat configuration page for the government and allow people to change whatever settings exposed to them. You check a candidate you like and with each option their choice is the default. If you don't agree with something you simply change it. Then, one by one we take the topics away from the politicians so that they can focus on the rest of the work. For choosing the party you get 3 up and 3 down votes that you may spend however you like. A separate election is held to chose the team to populate and work on the interface so that gradually more and more topics get exposed. Their job would also be to research and estimate how familiar the population is with a topic along with a budget to educate the voter. It would be enlightening for the candidates as well. Eventually we can shut down the legacy system and have one or more nudgeable robot overlords. Don't worry, I'm sure the dream will fade in a few hours.
  - rrrrrrrrrrrryan 3y ago
    Seems like you've independently invented a form of liquid democracy: https://en.wikipedia.org/wiki/Liquid_democracy#:~:text=The%20concept%20of%20liquid%20democracy,a%20trusted%20person%20or%20party https://en.wikipedia.org/wiki/Liquid_democracy#:~:text=The%2.... It basically lets each citizen choose between direct or representative democracy, per issue, and does away with arbitrary things like election dates and even candidates (you can "elect" any other citizen to vote on your behalf, as can they). The only reason we don't have it is because it's basically impossible without software. Even very complex ranked choice voting can be tallied manually.
    - RandomLensman 3y ago
      We also don't know if the outcomes would be preferrable. Do we need to move democracy into a high-frequency trading kind of world to do the things we want to?
    - ponderings 3y ago
      The interesting thing in the moment was not the formula necessarily but the idea to start with the interface. If you are dealing with such monstrosity of an application all battles are lost at the interface level. It has to work for everyone, there is no room for excuses about dumb users, they are the target audience. While in the US the number seems infinite, in the Netherlands we have roughly 140 000 laws that each could have a series of check boxes and sliders. Say we all do 4 per day, that would be only 1460 annually. It would take 100 years which seems to long. At 40 per day it would require to much effort. If the interface is to work as desired a large amount of law needs to go. We should burn the books most worthy first. Experts can compete finding the most nonsensical laws. Short videos can be made to explain why the law exists. We assign a good number of test subjects to pick the least likeable ones until we have a good list of candidates unlikely to survive. There must be a good feedback report of the terrible implications after a law is deleted. I can see it already, naked people around camp fires, drinking booze in public, selling food after sundown, making music without a license, singing songs insulting the monarch.
  - _factor 3y ago
wolverine876 3y ago
The IRS now provides free tax filing.
- tw04 3y ago
  >The IRS now provides free tax filing. For federal taxes only... and with silly limitations that exist... because lobbying? And oh by the way, the IRS isn't actually offering anything, they'll refer you to third parties that will then make money off of you if you have anything beyond the most basic filing, and also if you want to file state taxes. So no, they don't actually do that.
  - hnav 3y ago
    The IRS is piloting directfile.irs.gov this year, if you live in CA you can use it.
  - staringback 3y ago
    > For federal taxes only Why would the IRS provide a filing service for state income taxes? Go ask your state government to provide this if you want it. The IRS isn't the one collecting those taxes
- a_vanderbilt 3y ago
  The problem still remains that they have a number in mind about what I owe and I'm not allowed to know it until I file. Just tell me what I owe and give me the option to approve it. The IRS provides free filing, but if your taxes are complex good luck. If you are the one who prepared them you absorb the liability when the IRS comes after you. The likes of TurboTax are still in favorable positions despite the free option now being available.
  - akira2501 3y ago
    > The problem still remains that they have a number in mind about what I owe and I'm not allowed to know it until I file. They can't. Too much of the tax code is subjective and based upon claimed circumstance. If they did know this, they wouldn't need auditors. > If you are the one who prepared them you absorb the liability when the IRS comes after you. The liability is typically just the difference between what you paid and what you owe. It's hard to believe most people are so bad at taxes their efforts would be mistaken for willful criminal fraud.
theturtletalks 3y ago
The old government nationalized railroads and private roads for this exact reason. When a utility becomes embedded into and it’s needed to even function in society, it needs to be nationalized. Regulatory capture has made that near impossible now. At least crypto throws another challenger in the ring and can give people and businesses an, albeit inferior, alternative.
- akira2501 3y ago
  > it needs to be nationalized. I'm not sure trading three owners for one public one is the right direction to go, particularly since there are few limits to the number of providers that could be operating in this space. The article points this out, too, that it's incredibly expensive and difficult to start a new network from the ground up. This sounds like the thing you actually want to fix.
  - theturtletalks 3y ago
    Yes, realistically, it's not possible at this point. Ideally, it should be done so users have some sort of recourse. Visa/MC can straight up ban you from processing payments without rhyme or reason while they hide behind KYC/AML laws. The government can't hide behind these laws.
    - akira2501 3y ago
      > it's not possible at this point. I think cheap and ubiquitous internet access has changed the game here significantly and it seems far easier to bring new products and technologies into the merchant space than it ever has been before. > Visa/MC can straight up ban you from processing payments without rhyme or reason while they hide behind KYC/AML law Yes, but if you had a dozen other providers to turn to, this may not be an issue, and may force the established players to have a more transparent policy. > The government can't hide behind these laws. I would consider the "No Fly List" as a terrifying example of where this naivete inevitably ends.
  - PH95VuimJjqBqy 3y ago
remarkEon 3y ago
I think this sentiment is wrong. The reason we don't have free tax preparation software (or a tax system that doesn't require that) and don't have free health care is because of competence issues. Taxes seems like a different dimension of problem, so let's leave it aside for the moment. Do we really believe that the people that work in the government here (in the US) are actually competent enough to administer a public health care system? I don't. I'd like to be convinced otherwise. Maybe you mean to say that we'd, I don't know, outlay lobbying and redirect that economic activity toward paying market salaries to people who are, in fact, competent enough to administer a public healthcare system.
- mnky9800n 3y ago
  I find it a bit dishonest to claim that healthcare cannot be publicly administered because of trust issues when it's cheaper everywhere else and administered publicly even in places with high corruption like Russia.
  - AnthonyMouse 3y ago
    It's cheaper everywhere else because it's so incompetently (or corruptly) regulated here. If you can't demonstrate an ability to solve that problem here, putting more of the system under the same regulators seems like doing things out of order. Pointing to Russia on costs also points to the other side of the problem: Their healthcare system is severely under-funded. That's one way to make it cost less.
- nobody9999 3y ago
  >Do we really believe that the people that work in the government here (in the US) are actually competent enough to administer a public health care system? I don't. I'd like to be convinced otherwise. Sorry for the late reply. Belief is unnecessary. The US government has been administering Medicare[0] since 1965 -- longer than I've been alive. [0] https://en.wikipedia.org/wiki/Medicare_(United_States) https://en.wikipedia.org/wiki/Medicare_(United_States)

charcircuit 3y ago

They could even issue an official stablecoin that could interopt with other cryptocurrency ecosystems.

beojan 3y ago

Visa and Mastercard (and American Express) are international networks. How could any individual central bank provide that?

bostik 3y ago
See SEPA payments in EU: https://en.wikipedia.org/wiki/Single_Euro_Payments_Area https://en.wikipedia.org/wiki/Single_Euro_Payments_Area Or UPI in India: https://en.wikipedia.org/wiki/Unified_Payments_Interface https://en.wikipedia.org/wiki/Unified_Payments_Interface So to answer your question: with law on your side. You limit price gouging, and mandate interoperability with a cheaper system.
- kgwgk 3y ago
  That’s an example of regulation - not of a central bank providing anything.
  - RandomLensman 3y ago
    TARGET, i.e., cross-border interbank, is operated by the European central banks
- arcticbull 3y ago
  SEPA is roughly the same as FedNow, which is has been live for almost 8 months now. It's not comparable to VisaNet.

phonon 3y ago

What's wrong with debit cards? (Besides exempt transactions, which can be fixed.) https://www.federalreserve.gov/paymentsystems/regii-average-interchange-fee.htm https://www.federalreserve.gov/paymentsystems/regii-average-...

deleted 3y ago

[deleted]

arcticbull 3y ago

Everyone seems to forgot that a cheaper, regulated option exists, and it's Durbin debit cards. But nobody wants to use them because they don't offer the same benefits vanilla credit cards. People choose the more expensive option because it better meets the needs of customers. The middle man doesn't really take all that much - most of interchange goes to the cost of loan origination, insurance and most importantly cash back and rewards programs. There's no annual fee 2% cash back cards. It's a little disingenuous to say the 1.5-3.5% interchange fee "mostly goes to middle men" when most of it goes right back into your pocket in one way or another.

AnthonyMouse 3y ago
> There's no annual fee 2% cash back cards. It's a little disingenuous to say the 1.5-3.5% interchange fee "mostly goes to middle men" when most of it goes right back into your pocket in one way or another. There are two problems with this. The first is that not everybody is eligible for the no annual fee 2% cash back cards, and the people who aren't are the people in financial straits, so this is effectively a tax on the poor. The second is that it's an anti-competition measure. Sure, maybe you get 2% out of the 3% the merchant is charged, but then you refuse to use a competing payments system because you want your 2%. And then we're stuck with the incumbents forever because anything new and different can't build a network effect when customers would have to pay a de facto 2% tax on everything they buy in order to use it. Which is exactly what happens to your debit cards -- and then people are subject to the whims of Visa and their opaque capricious KYC implementation.
- arcticbull 3y ago
  > Which is exactly what happens to your debit cards -- and then people are subject to the whims of Visa and their opaque capricious KYC implementation. Not really. The merchant decides what kind of card to accept and how to route. It's just that customers will choose not to visit your establishment if you only accept debit, even if you have lower prices. Because they like the perks of a credit card. The reality is the merchants pay a blended average of about 1.8% and they do so because people spend more on credit cards. It's relatively cheap, super fast, very easy and secure. KYC is hardly capricious. Visa, issuers and acquirers have no interest in cutting off customers because, and this is true, cut off customers don't make them money. There is room for something like 'payment network neutrality' where legislation requires networks to process all legal transactions. Things can be better. > And then we're stuck with the incumbents forever because anything new and different can't build a network effect when customers would have to pay a de facto 2% tax on everything they buy in order to use it. I don't buy this either. The last few years saw the development of a whole new network in BNPLs. And guess what, it's not cheaper, at all. They charge 4% or more and they don't kick any of it back to customers. The value in credit networks is in the loan origination, the insurance and to an extent the rewards. The credit networks do just fine in Europe where interchange is capped at 0.2% for debit and 0.3% for credit, and I haven't really seen a wellspring of competition. What I do see is a dearth of loyalty programs, which is a tradeoff you can choose to make.

finfrastrcuture 3y ago

The problem is fraud + disputes. Who's liable for people sending money to fraudsters? For letting fraudsters operate on the platform? See the fraud issues of Zelle, which is basically a free money moving service comparable to FedNow. The service the networks provide is a way for all participants (banks, people, businesses, etc) to trust one another, as well as a healthy rules-based system to address disputes. Getting this working is not trivial.

no_wizard 3y ago
>The problem is fraud + disputes Banks pay fees today around this to the payment networks. The Fed could simply charge a tiny fee per transaction to the bank to cover this. It would be much less expensive than Visa and Mastercard, since there is no service fee on top. To clarify, I never said it be 100% free, but it would dramatically lower and standardize fees. As far as trust goes, if you can't trust the central bank, we have bigger problems don't we?