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FedNow is cool but it has nothing to do with B2C payments. Think: wires, but cheaper. Or ACH, but faster. Do you frequently pay for goods or services with wi
by loeg 2y ago
FedNow is cool but it has nothing to do with B2C payments. Think: wires, but cheaper. Or ACH, but faster. Do you frequently pay for goods or services with wires or literal ACH transfers? (No.)
- jasonjayr 2y agoNo, but only because the technology + processes for Wires + ACH are pretty complicated and slow. If they can be sped up, simplified with the same or better protections for account holders, then it would would be a game changer. Of course Visa/Mastercard/Amex/Discover are very well moneied interests, positioned pretty tightly in the market and have no incentive to help it's success along.
- loeg 2y agoI think it's likely people will build useful user experiences on top of FedNow. Or migrate existing uses (Zelle?). But it's just the boring settlement system in the background; not what end customers or businesses interact with directly.
- DesiLurker 2y agoZelle is an alternate payment schema by consortium of major banks. It was introduced a little head of time just to avoid fednow from gaining traction. I'll bet a few years from now they'll attack fednow for being bloated and unused and lobby to marginalize it. Fednow basically means no more overdraft fee. they wont let that happen.
- tyre 2y agoAs a consumer, I also have no incentive to help FedNow. Unless they are offering cash back on my taxes.
- throwaway48476 2y agoVisa charges 3%. Everything you buy could be 3% cheaper, that's better than cash back.
- sandmn 2y agoOr since prices are set up by retailers, they'll get extra 3% profit.
- cubefox 2y agoLuckily stores are in competition with each other.
- sandmn 2y agoThat's true for online stores but not necessarily offline, where it's hard to compare prices and it's much more convenient to go to store nearby even if they charge 10% more unless you're buying something expensive.
- throwaway48476 2y agoA lot of offline stores have website with prices.
- lxgr 2y agoI'd take my chances with some stores passing on the 3% in cheaper prices (thanks to competition) and others pocketing the profit over the status quo any day. It'd still be a net win for many people, and the end of what is effectively a redistribution from low-credit to high-credit (i.e. effectively poor to rich).
- dumbo-octopus 2y agoGas is already more than 3% cheaper with cash, rent tends to not accept credit, and for me at least the only significant other expense is dining out. If your goal with a tip is to put $X money in their hand, cash will do that more than 3% more efficiently, saving you the delta.
- AnthonyMouse 2y agoThe obvious incentive is that Visa is giving you 1-2% cash back while charging the merchant 3%+, so the merchant will give you a >2% discount to use FedNow. Or charge you the extra 3% to use Visa. But this is where we get into antitrust issues. Visa imposes a 3% cap on the surcharge you can add, but then typical processing fees (e.g. Stripe) are 2.9% + $0.30. For a $1 transaction that's >30%, but Visa caps the amount exposed to the customer at 3% -- and low value transactions are the exact market where the lower-fee competition would gain the most ground from having a price advantage. How is that not an antitrust violation?
- ac29 2y ago>But this is where we get into antitrust issues. Visa imposes a 3% cap Do you have a source for this? Anecdotally, I have seen >3% charges on card payments in B2B transactions.
- AnthonyMouse 2y agohttps://www.afslaw.com/perspectives/alerts/visa-reduces-its-merchant-surcharge-cap-3-effective-april-15-2023-merchants https://www.afslaw.com/perspectives/alerts/visa-reduces-its-... B2B transactions often have different rules. You can also nominally get around it by casting it as a "cash discount" instead of a "credit card surcharge" but that's designed to be anti-competitive too. You then have to advertise the higher price (eliminating the business merchants who accept lower cost competing payment methods would get from advertising the lower price) or produce cluttered ads full of asterisks and caveats, likewise designed to burden merchants who want to present competing payment methods as the default without refusing to accept Visa whatsoever.
- kelnos 2y agoIt depends for some of us, though. I have a credit card that gives me 5% back on Amazon purchases. Another card gives me 4.5% back on travel and dining expenses. That card also gives me 15% back on Lyft rides. Even if those businesss were to offer me a 2% or 3% discount to use FedNow, I would stick with the credit card. And on top of that, I really do value things the credit cards offer, like fraud protection. If I pay for something with a credit card and never receive the goods, I can get the card company to issue a chargeback, and pay nothing. If I buy something with FedNow and never receive the goods, that money is just gone.
- AnthonyMouse 2y ago> with the same or better protections for account holders, then it would would be a game changer. This is really the one we need to fix on both ends. Right now we have a system where fraud is really easy, e.g. an incompetent merchant gets breached and the attackers get thousands of credit cards to use at innocent unrelated merchants. Then the attackers steal goods from those merchants and the merchants get chargebacks from the cardholders. This is crazy. What you want is a system where the merchant submits a payment request which is then either manually approved by the customer on their bank's website (e.g. for immediate delivery of goods) or has to be submitted and displayed on the customer's statement at least 30 days before the transfer, giving the customer that long to dispute it (e.g. recurring payments/subscriptions). That would eliminate the vast majority of fraud and also make it simple for customers to cancel subscriptions they don't want (just go to your bank's website and ban that merchant). The reason we don't have this is that the banks like getting credit card fees and chargeback fees, so they have no incentive to build it, and use regulatory capture and anticompetitive practices to keep anyone else from building it.
- loeg 2y agoWe don't have this because it would increase friction per transaction, which is a bad thing. Our high-trust system largely works, despite the susceptibility to some level of fraud.
- AnthonyMouse 2y agoThere is no reason it would need to increase friction per transaction. Right now to make the first purchase at a merchant you have to type your bank account or credit card number into the merchant's website. Instead the merchant would redirect you to your bank's website and you would authenticate with your bank. How is that any more difficult? It's just more secure, because the merchant is no longer in possession of everything someone would need to make fraudulent charges to your account at any other merchant.
- klez 2y ago> What you want is a system where the merchant submits a payment request which is then either manually approved by the customer on their bank's website (e.g. for immediate delivery of goods) That's how it works with my current bank and my previous one as well here in Italy: the first few transactions require manual approval via app, then the system "learns" that it's you and just notifies you there's been a transaction with your card. It never happened to me so I'm only speculating, but I suspect that, as soon as it detects suspicious activity, confirmation is requested again.
- pbreit 2y agoNo one cars about the speed in most payments. FedNow is as complicated as ACH and has even fewer protections.
- DesiLurker 2y agospeak for yourself, travel outside of US to see how well its implemented by even 3rd world countries like India. payment in seconds basically means you can use it (or a derivative) at PoS. that basically mean for vast majority of people who pay of their balances monthly, no income from visa transaction fees which can be 3%+ for small/mid retailers.
- doomrobo 2y agoIn Europe, this is not uncommon for online purchases. You put in your IBAN number and authorize the transaction
- cubefox 2y agoYes. In Germany there is Giropay, where you get redirected to your online banking (it remembers your bank), you have to log in, and submit the already pre-filled transaction. It's literally a normal bank transfer from the user perspective. Not something that happens on the server side.
- loeg 2y agoFedNow is analogous to SWIFT, not applications like Giropay / iDEAL / wero.
- cubefox 2y agoI don't know about the others, but Giropay just does a redirect to your online banking account and prefills the bank transfer form. The actual payment is literally the instant bank transfer solution. (I think it's called TIPS, not SWIFT.)
- ywvcbk 2y agoWouldn’t it be closer to SEPA? i.e. both are single currency, low cost and instant(?), effectively the opposite of SWIFT.
- pjmlp 2y agoYou can also pay with SEPA directly, although not everyone supports. However I consider that highly unsafe.
- lxgr 2y agoIt's a scheme layered on top of regular SEPA bank transfers. As such, it does not work across borders, for example, and not even with all German banks.
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- ashconnor 2y agoDoesn't seem impossible that a Venmo like service could be built on top of FedNow with instant bank settlement.
- lxgr 2y agoThat's exactly what Zelle already is: Settlement can optionally happen via RTP (which is roughly The Clearing House's alternative to FedNow).
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- SSLy 2y agoIn EU I can pay my company's taxes with a FedNow/UPI/Venmo-like system. Just punch a passcode in the bank's app when prompted by notification. Settled within 5 seconds.
- PaulDavisThe1st 2y agoNot sure that speed is so important for such transactions. I just paid my 3rd quarter estimated taxes in the USA (both federal and state). Both transactions came straight out of my bank the day after I submitted the payments. Perfectly fine. It is retail transactions where I and someone/something else trade money for goods that need the "instant" aspects of this.
- SSLy 2y agoOh yea we have this too of course.
- webninja 2y ago[flagged]
- op00to 2y agoYes. I pay my landscaper via ACH. I pay my kids school lunch via ACH.
- loeg 2y agoNo, you don’t. You put your bank account numbers (or theirs) and a dollar amount into some application that uses ACH in the backend.
- toomuchtodo 2y agoWalmart is preparing to release pay by bank functionality in their app next year, running on FedNow rails. They currently spend $1B+/year in interchange fees. Moving money is just moving information, and the marginal cost of doing so today is zero. https://news.ycombinator.com/item?id=41593450 https://news.ycombinator.com/item?id=41593450
- usehackernews 2y agoIt does. A2A / Pay By Bank is a growing payment method. Merchants will begin incentivizing it due to the cheaper costs relative to cards. We’ve implemented it and I’ve presented to the largest websites in the world about the opportunity as we are one of the early adopters. You’ll start to see it much more frequently.