FedACH, or "direct deposit", costs pennies wholesale [0]. The value proposition of Venmo/Zelle is not just that they're instant, but that the fees are not insane. Compare that to retail banks which charge upwards of $35 for a "next-day ACH".
The Fed should impose fee caps to encourage adoption.
[0] https://www.frbservices.org/resources/fees/ach-2019.html
Low fees, fast transfers, high volume/high value--you only get to pick two of the three. (Okay, maybe that doesn't quite work, but you get the idea.)
It's known to freeze large amount of cash balance without contacting you or getting anyone to talk to you about this.
[1]: I send you, good samaritan, $500 "by accident" and ask you to return it. You return it, my original transaction never clears, and I'm $500 richer.
Perhaps there still are modern equivalents to kiting. I dunno. But, yeah, in any event fraud is a real problem. It's why we can't have nice things, at least without paying an insurance premium.
Bitcoin is slow - it takes minimum 10 mins with high fees, or in times of congestion, hours or days with low fees. Faster payments takes minimum a few seconds, maximum 2 hours, for processing, no fees involved.
Bitcoin is expensive - fees are variable depending on congestion on the network, and current value of BTC. Faster Payments charge nothing to transfer 0.01 - 100,000.00 GBP (in reality, 10k - 100k, depending on your bank. I have banks that allow 25k and 50k) in a single transaction.
Bitcoin is a wonderful experiment, wonderful proof of trustless immutable transactions, but as far as a payment system goes, is only better in one way, and worse in many others.
If you want to accept venmo for commercial purposes or more cash than is usually allowed, they charge you as if it were a credit card transaction. 2.9% + 0.30.
Also, PayPal owns venmo now.
Is that still common? None of my banks / credit unions charges for incoming or outgoing ACH transfers.
The banks are making money on the float.
UK - Faster Payments Service (2008) https://en.wikipedia.org/wiki/Faster_Payments_Service
EU - SEPA Instant Credit (2017) https://en.wikipedia.org/wiki/Single_Euro_Payments_Area#SEPA...
Australia - New Payments Platform (2018) https://en.wikipedia.org/wiki/New_Payments_Platform
http://www.anterior.banxico.org.mx/sistemas-de-pago/servicio...
https://www.ecb.europa.eu/paym/target/tips/html/index.en.htm...
UPI is quite revolutionary. Launched in 2016 [0], UPI handles 882.3 million transactions with ~USD 21 billion in transaction value [1], as of July, 2019.
UPI is designed to be a payment utility by National Payments Corporation of India (NPCI). NPCI is not a governmental organisation but is formed by a collective of 56 Indian Banks including 10 core banks [2].
[0] - https://en.wikipedia.org/wiki/Unified_Payments_Interface [1] - https://www.medianama.com/2019/08/223-upi-transactions-grew-... [2] - https://www.npci.org.in/about-us-background
Being stuck in cheque clearing bank settlement delay is a royal pain.
International funds clearance and KYC remain problems.
(ie. CommBank will only use NPP for PayID payments, but banks like Up will use NPP for transfers for a BSB/Account number if the receiving banks supports it, not all banks are fully on the platform yet)
The downside is my teenagers can now shake me down for cash remotely
Compare that to Faster Payments which easily works with 250k with or without a PayID
https://www.bcb.gov.br/en/financialstability/paymentsystem
> Guidelines for the Brazilian Instant Payments Ecosystem: The Brazilian instant payments ecosystem will have a flexible and open participation structure and will be similar to the existing interbank electronic funds transfer (TED)—with greater availability, speed, and simpler addressing of payments. The transactions will be performed in a simple and fast way to different beneficiaries. Moreover, the BCB (Brazilian Central Bank) will develop a single settlement infrastructure.
My wife and I both have our own accounts with Barclays and joint accounts (and mortgage) with Nationwide, and I have a Monzo account for small day to day expenses. It takes me less than a minute to open the Barclays app, transfer some money to the joint account, and then open the Nationwide app to confirm the balance and do whatever I needed to do from there. Total money management game changer. I've done a four hop transfer from my savings to overpay the mortgage, in about three minutes.
The reason why banks are charging now for simple accounts, is that since we have negative interest rates (the lowest in the world), its actually damn difficult for banks to make a profit now with normal accounts since the traditional business model of the difference in interest rates is now actually reversed (the target rate is negative, yet on my account I have 0%...).
There do at least seem to be a few free (with no minimum balance) app-based checking/private accounts.
This removes a huge part of the mainstream rationale for digital alternative currencies.
"Treasury takes very seriously the role of the US Dollar as the world's reserve currency, and will continue our efforts to protect our country".
https://m.youtube.com/watch?v=zAICzg8ir50&t=370&feature=yout...
Libra can still provide hassle-free currency access from within supporting apps and Web sites. Also it can provide "free" transactions whereas FedNow won't be free.
For 99% of legal money senders this removes the need to consider Bitcoin or most shitcoins.
The only use case left for crypto, which Bitcoin itself has somewhat neglected, is anonymous uncensored payments. And that's the one that doesn't work because it's extremely hard to get in and out without being noticed.
Visa: https://developer.visa.com/capabilities/visa_direct Mastercard: https://www.mastercard.us/en-us/issuers/products-and-solutio...
According to https://www.forbes.com/sites/tomgroenfeldt/2019/03/15/visa-d... >50% of Uber/Lyft drivers opt to pay a 50 cent fee to get paid in real-time instead of via ACH.
To use a bank transfer you need to enter details (phone number or a bank number and account number) and then need either a description or reference number to match it to at the other side. And even with the New Payments Platform (fast payments), it can still take 30 seconds or so to come through. That's fine when paying an invoice or sending money to friends, but too cumbersome at a point of sale.
And they were sending signals pretty soon after the launch that they were wanted real-time payments.
I believe that pre-dates Libra but quite some time.
> The rapid evolution of technology presents a pivotal opportunity for the Federal Reserve and the payment industry to modernize the nation's payment system and establish a safe and efficient foundation for the future.
https://www.federalreserve.gov/newsevents/pressreleases/file...
“...In its simplest form, a completed payment through the FedNow Service involving two participating banks would have the following steps.103 To start, a sender would initiate a payment through its bank, by submitting instructions to it using an end-user interface outside the FedNow Service. After the sender’s bank authenticates the sender and validates the payment, it would submit a payment message to a Reserve Bank using the FedNow Service. The FedNow Service would authenticate the sender’s bank and validate the payment message, for example, by verifying that the message meets the FedNow format specifications. Before the Reserve Bank executes the payment message, the service would place a provisional hold on funds in the master account of the sender’s bank and would then send an inquiry message to the receiver’s bank seeking confirmation that the receiver’s bank, among other things, maintains a valid account for the receiver included in the payment message received by the Reserve Bank. If the receiver’s bank sends a positive response to the inquiry, the FedNow Service would execute the payment for the Reserve Banks by sending a payment message forward with an advice of credit to the receiver’s bank and nearly simultaneously processing a final debits and final credit to the master accounts of the sender’s bank and receiver’s bank, respectively.104 The banks are responsible for debiting and crediting their customers’ accounts and providing further notification to their customers that the payment has been completed. The entire process would take place within seconds...”
Edit: Also submitted here
https://news.ycombinator.com/item?id=20616846
with this even better source
https://www.federalreserve.gov/newsevents/pressreleases/othe...
It's a reminder that blockchain solutions aren't as useful if there actually is a trusted central entity, upon whose sterling reputation the global economy relies in the first place, to record transactions. And it does speak to a mission to regulate and facilitate interstate commerce. If they get the branding and execution right this could be huge for enabling micro-entrepreneurship. Of course, they won't get it right, but one can dream.
There is thus an opportunity for standards, a need for federation, and a need to make it easy for big players to offer liquidity.
As far as I understand, e.g. Ripple and Stellar solve basically exactly the 24x7x365 RTGS problem that FedNow intends to solve; and, they allow all sorts of assets to be plugged into the network. Could FedNow just use a different UNL (Unique Node List) with participating banks operating trusted validators and/or offering liquidity ("liquidity provisioning")?
Notably, Ripple is specifically positioned to do international interbank real time gross settlement (RTGS) and remittances. Ripple could integrate with FedNow directly. Most efficiently, if it complies with KYC/AML requirements, FedNow could operate an XRP Ledger. Or, each bank could operate XRP Ledgers. https://xrpl.org/become-an-xrp-ledger-gateway.html
Getting thousands of banks to comply with an evolving API / EDI spec is no small task. Blockchain solutions require API compliance, have solutions for governance where there are a number of stakeholders seeking to reach consensus, and lack single points of failure.
Here's to hoping that we've learned something about decentralizing distributed systems for resiliency.
>> In contrast, the XRP Ledger requires 80 percent of validators on the entire network, over a two-week period, to continuously support a change before it is applied. Of the approximately 150 validators today, Ripple runs only 10. Unlike Bitcoin and Ethereum — where one miner could have 51 percent of the hashing power — each Ripple validator only has one vote in support of an exchange or ordering a transaction. https://news.ycombinator.com/item?id=19195050
So, you want to get banks onboard with only one s'coin USD stablecoin; but you don't want to deal with exchanges or FOREX or anything because that's a different thing? And, this is not just yet another ACH with lower clearance time?
> Interledger Architecture
https://interledger.org/rfcs/0001-interledger-architecture/
> Interledger provides for secure payments across multiple assets on different ledgers. The architecture consists of a conceptual model for interledger payments, a mechanism for securing payments, and a suite of protocols that implement this design.
> The Interledger Protocol (ILP) is the core of the Interledger protocol suite. Colloquially, the whole Interledger stack is sometimes referred to as "ILP". Technically, however, the Interledger Protocol is only one layer in the stack.
> Interledger is not a blockchain, a token, nor a central service. Interledger is a standard way of bridging financial systems. The Interledger architecture is heavily inspired by the Internet architecture described in RFC 1122, RFC 1123 and RFC 1009.
[...]
> You can envision the Interledger as a graph where the points are individual nodes and the edges are accounts between two parties. Parties with only one account can send or receive through the party on the other side of that account. Parties with two or more accounts are connectors, who can facilitate payments to or from anyone they're connected to.
> Connectors provide a service of forwarding packets and relaying money, and they take on some risk when they do so. In exchange, connectors can charge fees and derive a profit from these services. In the open network of the Interledger, connectors are expected to compete among one another to offer the best balance of speed, reliability, coverage, and cost.
Why should we prefer an immutable, cryptographically-signed blockchain solution over SQL/BigTable/MQ for FedNow?
Blockchain and payments standards: https://news.ycombinator.com/item?id=19813340
... Here's the notice and request for comment PDF: "Docket No. OP – 1670: Federal Reserve Actions to Support Interbank Settlement of Faster Payments" https://www.federalreserve.gov/newsevents/pressreleases/file...
"Federal Reserve announces plan to develop a new round-the-clock real-time payment and settlement service to support faster payments" https://www.federalreserve.gov/newsevents/pressreleases/othe...
