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Comment by _wp3r | Hacker News Reader

A wire transfer(IBAN/BIC transfer) is different from an ACH transfer.

ACH(EFTS in EU) in the US is generally free, but has a delay for clearing and has some mechanisms for reversal. This is primarily a digital check, and can be initiated by the receiver in that way.

A wire transfer is nearly immediate by comparison and offers almost no option for reversal. This option does usually have a fee and is generally reserved for large purchase transfers and emergency situations were verification of receipt is required. Such as buying a house. These transfers are processed via Fedwire inside the US and SWIFT out.

The guideline in the EU is that interstate can not cost more than intrastate, so most went to 0.

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> ACH(EFTS in EU) ... is primarily a digital check.

Well not exactly. I have set up ACH transfer between my dad and my account, but a couple of banks didn't let me. They are like both account holder should be the same. Bank told me that the only option I have is to wire the money.

On the other hand, I pay my employees through ACH (ADP take cares of it).

Most other countries allow direct person-to-person transfers with just a name and account number. In Australia you can put in someone's details and payment for something and it will be there the next morning, with no fees, directly through the government interbank system.

In the US if you want a fee-free transfer, you need to use your bank's app and take a photo of someone's check. And no, Paypal/Vinmo are not good alternatives. They're private transfer systems that are not federally mandated and regulated bank-to-bank transfers. I wrote a full post about this:

http://penguindreams.org/blog/the-american-banking-system-is...

This is a little outdated. Most banks finally got Zelle setup this year. It hasn't fully caught on but you can get free transfers between nearly all big banks and a lot of small banks simply by setting it up and knowing the persons email or phone number. I've been trying to get my friends to move off Venmo, but the option to do it is usually buried inside of the banking apps so it isn't as convenient.

It's still not quite the same. In Germany, Australia and NZ, you can send money to anyone at any bank, for free, and you don't need to use their phone number or e-mail address. It's mandated by the government.

It'd be more like the Federal Reserve enforcing free customer-to-customer ACH for everyone. There are some banks that do offer free person-to-person ACH (I believe 5/3 is one of them).

Zelle is basically the banks getting together and going around that critical lack of infrastructure. It does look like they have a lot of major and minor banks. Mine is still missing from the list though, and I suspect it will be years until everyone is supported or banks will feel they need to support it to enter the market. So no, the US is still way behind.

The same name thing is a Bank level restriction, not an ACH network level one.

>> but has a delay for clearing...

not only is there an ODFI-clearing house - RDFI delay caused by the actual "clearing" process - the whole flow starting from the merchant->payment processor step is a sequence of nightly batches with cutoff times factored in to boot.

from the merchant perspective, however, ACH payment is cheaper to process than a credit card payment and is way less likely to end up in a chargeback.

debit card transactions are all ACH then?

No. ACH is the digital equivalent of depositing a paper check. The debit networks are what you use to withdraw money from an ATM, and require entering a PIN, but most debit cards nowadays can also operate through credit card networks.

debit cards(not to be confused with bank cards) are closer to credit cards than ACH. in some cases - for example "signature debit" vs "pin debit" - just about identical from the flow perspective.

which is why you can use debit cards in most situations where you would use a credit card where instant check of funds availability and hold is required - e.g. hotel incidentals etc.

ACH works on a pull basis rather than a push basis. Instead of telling the bank "send $100 to account XXXXXXXXXX at bank YYYYYYYYY" you tell the bank "give me $100 from account XXXXXXXXXX at bank YYYYYYYYY". That makes it okay for paying a large business that is easy to track down if they take too much, but it makes it unsuitable for paying a normal person because they could just empty out your bank account and then disappear.

Just a heads up it actually works both ways. The originating depository financial institution (ODFI) can submit debits (pulls) or credits (pushes) which are then ultimately transmitted to the receiving depository financial institution (RDFI).

Often banks and credit unions will limit ACH origination to debits (pulls) in digital banking applications for risk and business reasons.

You are right that ACH (and most payment schemes in the US) have substantial deficiencies in terms of security, but that is counteracted with a strong justice system and consumer laws. You shouldn't really fear about someone emptying your bank account (unless you are a business) because Regulation E mandates that banks and credit unions make you whole for any fraudulent transaction reported within 60 days of the statement that includes the relevant transaction(s).

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