6 ms·

Not having very much knowledge about the financial industry - is this also an issue with marketplaces that deal with fiat monies? i.e. Dwolla, Balanced, Stripe

by theswan 13y ago

Not having very much knowledge about the financial industry - is this also an issue with marketplaces that deal with fiat monies? i.e. Dwolla, Balanced, Stripe, Venmo, all serve as intermediaries for moving money - do these companies have bank accounts that hold onto massive sums of money? What protections would go into keep those accounts secure?

brycekahle 13y ago
Dwolla uses a credit union pool account. Taken from https://www.dwolla.com/security https://www.dwolla.com/security Dwolla, Inc. is an agent of Veridian Credit Union and all funds associated with your account in the Dwolla network are held in a pooled account at Veridian Credit Union. These funds are not eligible for individual insurance, and may not be eligible for share insurance by the National Credit Union Share Insurance Fund. Dwolla, Inc. is the operator of a software platform that communicates user instructions for funds transfers to Veridian Credit Union.
jfasi 13y ago
I have the sense that the protections in place on above-the-board, regulated financial services companies are more meaningful than those placed on companies dedicated to selling contraband. (That is: none)
beat 13y ago
Modern banking is over 100 years old. There is 100+ years of fraud protection processes, legal experience, etc built into the system, plus a huge and complex industry that has a vested interest in overall currency stability. Bitcoin and other digital currencies are learning firsthand what it means to "disrupt" on this scale. Part of that is learning the hard way what the old industry has known since before any of us were born.
- weavejester 13y ago
  Modern banking is also largely reversible, so stolen funds can often be recovered, and insurance covers the other cases. Bitcoin has the problem of having irreversible transactions, and it's also a lot more difficult to determine whether or not an account has been legitimately stolen from. I don't think it's the case that the current banking industry is insulated from theft due to superior security. From what I've heard from programmers working in the financial industry, the software there can be quite ropey, or at least no better than anywhere else.
  - beat 13y ago
    Reversible transactions are a security mechanism. And not all mainstream financial transactions are reversible - short term bank to bank loans, which can run in the tens of millions of dollars over periods of mere minutes, are not reversible within the transaction process itself (set up another transaction to balance the books if necessary). Of course, this is hardly a realm for consumers! Only a rarified few that have passed stringent regulatory requirements can participate in high-end mechanisms, and they can be booted out easily in case of fraud or failure. Irreversible, unregulated, software-driven money at the consumer level is a thief's wet dream. It's even more appealing than cash. Money can be stolen from halfway across the globe, anonymously. Digital currencies face security challenges that go far beyond those of the fiat currency so many people despise. Besides the theft problem, there's the crime problem. Digital currency is extremely convenient for high-dollar criminals like international drug and arms dealers. They're the first big customers, while mainstream businesses lag far, far behind in their own cautious way. This makes governments even more hostile, and civilians as well. And a currency that isn't accepted by the vast majority of legitimate businesses is not terribly useful. But to your other point... yeah, banking software is not necessarily a paragon of security, any more than any other big enterprise software. But consumer-facing parts are generally fairly limited in scope (worst breach I know of is the recent Target breach), and the really big-money parts are hidden well away from the world and buried under many layers of process as well as software security.
    - frankchn 13y ago
      An example of a "big-money" part of the banking system, Fedwire, the money transfer between banks run by the Federal Reserve, cleared an average of 2.85 trillion dollars per day in Q3 2013.
    - weavejester 13y ago
      Sure, but the processes that make banking secure mostly rely on human interaction, insurance and centralisation, which are obviously difficult or impossible to apply to Bitcoin. The current batch of Bitcoin businesses are getting hard lessons in information security, whereas the mainline banking system can compensate for any deficiencies in their software with more traditional security processes. To me, one of the more interesting results of Bitcoin is how critical information security is to the businesses that deal in it, and how a flaw in their security can make companies vanish overnight. It really provides some darwinian pressure to get security right!
schoen 13y ago
The main protection overall is probably the reversibility of most kinds of transactions in the mainstream banking system (and the liability of banks to customers in many cases of fraud). At least, this kind of policy can be seen as a backstop to particular arrangements and policies like limiting the size or rate of transactions, requiring multiple authorizations for certain transactions, and so on. The reversibility of transactions has drawbacks (one that's of interest to me is that it serves as one motivation for reducing privacy and increasing data retention).
poolpool 13y ago
No because if there are bad charges on my card the bank absorbs them, I am refunded, and I am issued a new card in under 48 hours. If the bank itself collapses the FDIC insures my deposits. Then again if my drug dealer steals all my money I am shit out of luck, much like all the users of this site. I guess it isn't that different at all.
- dangrossman 13y ago
  > No because if there are bad charges on my card the bank absorbs them The transaction is reversed and the money comes back from the merchant it was sent to, your bank doesn't absorb any loss. The only victims of credit card fraud are the stores, not the consumers, not the banks, and not the unauthorized user of the card. Nobody who should have actual liability is actually punished in any way, just innocent retailers, for the most part.
fleitz 13y ago
The financial industry is just as insecure if you hold actual cash. The solution the industry has is not to hold cash. Since no one has money, and all the banks have insurance, they just reverse the transactions in 90% of cases, and in the other 10, like ATM fraud, use insurance. But seriously, go to a bank and try to withdraw $90K in cash. Also, if you make off with 90K in cash the finance industry has people with guns to go and get the cash back.
- mikeyouse 13y ago
  You could easily go to a bank and withdraw 90k in cash. There'd be paperwork involved, but even small bank vaults hold far more money than that. This chart is old (1992) but gives an indication of the amount of money in a bank vault: http://i.imgur.com/hVZWFR5.png http://i.imgur.com/hVZWFR5.png
  - pjc50 13y ago
    Quite a lot of banks will simply say "no, not with any amount of paperwork". It's over the AML threshold. Unless you're a business with a need for that quantity of cash.
    - mikeyouse 13y ago
      Quite a lot of banks will simply say "no, not with any amount of paperwork" You're going to need to provide a source for this statement. HSBC was just pilloried in the press for denying large withdrawals to the point that they reversed their policy. "Suspicious Transaction Reports" or "Currency Transaction Reports" only take a few minutes at most and can be completed online. The AML threshold applies whether you're using cash or a check, so you're basically saying that banks won't deal with transactions over $10,000 which is absurd. Nearly every bank and credit union has a 'Large Cash Withdrawal' policy that merely requires ~7 days' notice prior to the withdrawal so that they can order the cash. It also of course waives their liability if you lose that cash or get robbed, but that's to be expected.
  - fleitz 13y ago
waterlesscloud 13y ago
Well, there's liquor store robberies every day. Same idea, just a smaller scale. :-)
- rodgerd 13y ago
  Scale matters. (Likely more to the point: it's probably harder to clean out your own liquor store and claim robbers did it.)

by theswan 13y ago

brycekahle 13y ago

Dwolla uses a credit union pool account. Taken from https://www.dwolla.com/security https://www.dwolla.com/security Dwolla, Inc. is an agent of Veridian Credit Union and all funds associated with your account in the Dwolla network are held in a pooled account at Veridian Credit Union. These funds are not eligible for individual insurance, and may not be eligible for share insurance by the National Credit Union Share Insurance Fund. Dwolla, Inc. is the operator of a software platform that communicates user instructions for funds transfers to Veridian Credit Union.

jfasi 13y ago

I have the sense that the protections in place on above-the-board, regulated financial services companies are more meaningful than those placed on companies dedicated to selling contraband. (That is: none)

beat 13y ago

Modern banking is over 100 years old. There is 100+ years of fraud protection processes, legal experience, etc built into the system, plus a huge and complex industry that has a vested interest in overall currency stability. Bitcoin and other digital currencies are learning firsthand what it means to "disrupt" on this scale. Part of that is learning the hard way what the old industry has known since before any of us were born.

weavejester 13y ago
Modern banking is also largely reversible, so stolen funds can often be recovered, and insurance covers the other cases. Bitcoin has the problem of having irreversible transactions, and it's also a lot more difficult to determine whether or not an account has been legitimately stolen from. I don't think it's the case that the current banking industry is insulated from theft due to superior security. From what I've heard from programmers working in the financial industry, the software there can be quite ropey, or at least no better than anywhere else.
- beat 13y ago
  Reversible transactions are a security mechanism. And not all mainstream financial transactions are reversible - short term bank to bank loans, which can run in the tens of millions of dollars over periods of mere minutes, are not reversible within the transaction process itself (set up another transaction to balance the books if necessary). Of course, this is hardly a realm for consumers! Only a rarified few that have passed stringent regulatory requirements can participate in high-end mechanisms, and they can be booted out easily in case of fraud or failure. Irreversible, unregulated, software-driven money at the consumer level is a thief's wet dream. It's even more appealing than cash. Money can be stolen from halfway across the globe, anonymously. Digital currencies face security challenges that go far beyond those of the fiat currency so many people despise. Besides the theft problem, there's the crime problem. Digital currency is extremely convenient for high-dollar criminals like international drug and arms dealers. They're the first big customers, while mainstream businesses lag far, far behind in their own cautious way. This makes governments even more hostile, and civilians as well. And a currency that isn't accepted by the vast majority of legitimate businesses is not terribly useful. But to your other point... yeah, banking software is not necessarily a paragon of security, any more than any other big enterprise software. But consumer-facing parts are generally fairly limited in scope (worst breach I know of is the recent Target breach), and the really big-money parts are hidden well away from the world and buried under many layers of process as well as software security.
  - frankchn 13y ago
    An example of a "big-money" part of the banking system, Fedwire, the money transfer between banks run by the Federal Reserve, cleared an average of 2.85 trillion dollars per day in Q3 2013.
  - weavejester 13y ago
    Sure, but the processes that make banking secure mostly rely on human interaction, insurance and centralisation, which are obviously difficult or impossible to apply to Bitcoin. The current batch of Bitcoin businesses are getting hard lessons in information security, whereas the mainline banking system can compensate for any deficiencies in their software with more traditional security processes. To me, one of the more interesting results of Bitcoin is how critical information security is to the businesses that deal in it, and how a flaw in their security can make companies vanish overnight. It really provides some darwinian pressure to get security right!

schoen 13y ago

The main protection overall is probably the reversibility of most kinds of transactions in the mainstream banking system (and the liability of banks to customers in many cases of fraud). At least, this kind of policy can be seen as a backstop to particular arrangements and policies like limiting the size or rate of transactions, requiring multiple authorizations for certain transactions, and so on. The reversibility of transactions has drawbacks (one that's of interest to me is that it serves as one motivation for reducing privacy and increasing data retention).

poolpool 13y ago

No because if there are bad charges on my card the bank absorbs them, I am refunded, and I am issued a new card in under 48 hours. If the bank itself collapses the FDIC insures my deposits. Then again if my drug dealer steals all my money I am shit out of luck, much like all the users of this site. I guess it isn't that different at all.

dangrossman 13y ago
> No because if there are bad charges on my card the bank absorbs them The transaction is reversed and the money comes back from the merchant it was sent to, your bank doesn't absorb any loss. The only victims of credit card fraud are the stores, not the consumers, not the banks, and not the unauthorized user of the card. Nobody who should have actual liability is actually punished in any way, just innocent retailers, for the most part.

fleitz 13y ago

The financial industry is just as insecure if you hold actual cash. The solution the industry has is not to hold cash. Since no one has money, and all the banks have insurance, they just reverse the transactions in 90% of cases, and in the other 10, like ATM fraud, use insurance. But seriously, go to a bank and try to withdraw $90K in cash. Also, if you make off with 90K in cash the finance industry has people with guns to go and get the cash back.

mikeyouse 13y ago
You could easily go to a bank and withdraw 90k in cash. There'd be paperwork involved, but even small bank vaults hold far more money than that. This chart is old (1992) but gives an indication of the amount of money in a bank vault: http://i.imgur.com/hVZWFR5.png http://i.imgur.com/hVZWFR5.png
- pjc50 13y ago
  Quite a lot of banks will simply say "no, not with any amount of paperwork". It's over the AML threshold. Unless you're a business with a need for that quantity of cash.
  - mikeyouse 13y ago
    Quite a lot of banks will simply say "no, not with any amount of paperwork" You're going to need to provide a source for this statement. HSBC was just pilloried in the press for denying large withdrawals to the point that they reversed their policy. "Suspicious Transaction Reports" or "Currency Transaction Reports" only take a few minutes at most and can be completed online. The AML threshold applies whether you're using cash or a check, so you're basically saying that banks won't deal with transactions over $10,000 which is absurd. Nearly every bank and credit union has a 'Large Cash Withdrawal' policy that merely requires ~7 days' notice prior to the withdrawal so that they can order the cash. It also of course waives their liability if you lose that cash or get robbed, but that's to be expected.
- fleitz 13y ago

waterlesscloud 13y ago

Well, there's liquor store robberies every day. Same idea, just a smaller scale. :-)

rodgerd 13y ago
Scale matters. (Likely more to the point: it's probably harder to clean out your own liquor store and claim robbers did it.)