Bank transfers as a payment method | Hacker News Reader

Bank transfers as a payment method

bam.kalzumeus.com

376 pointsjbredeche323 comments

The article is factually incorrect when it talks about "SEPA payments", claiming they are a "pull" mechanism. What it probably meant to talk about, is SEPA Direct Debits -- where the counterpart charges your account, as opposed to you paying the counterpart. Given that these direct debit agreements are revokable at any point in time, I doubt the claims of very high fraud rate.

A normal SEPA payment, is a "push" affair. These have (for all intents and purposes, though not technically) been a thing ever since the euro was introduced, whereas SEPA Direct Debit is more recent, replacing many of the existing domestic direct debit schemes.

Then there's the Instant Payments bit: these are a thing but they're not used all that often (yet?). Most banks charge a hefty fee for an instant payment (mine charges €1.25). Some banks don't offer them at all. Adoption will grow and costs will decrease over time.

In most countries, payments within the same bank have been instant (and free) for a very long time. This is one of the reasons why many companies have accounts with multiple banks.

I'm sure some "weaker" european countries may have laxer fraud controls, but that's a temporary problem. ECB reporting is quite strict, and most banks do take fraud detection very seriously. Reputation is important for a bank, and if you're a truly disreputable bank you'll soon find yourself without friendly correspondent banks. Then you'll have a choice: fix your fraud problems, or become a useless island.

I think it's less "factually incorrect" and more "nuanced and incomplete".

As a European that moved between countries, I was very surprised when I learned that SEPA allows a "pull" mechanism even exists. I lived 30 years in Latvia without knowing this is a feature in SEPA because every single payment is a "push" mechanism. I'm not sure if banks can turn this feature off, or if it just culturally never gained traction.

On the other hand, payments via banks are fairly widespread C2B, because every bank offers a (custom and horrible) API that merchants can implement. So users can authenticate directly with their bank as if it were PayPal, and authorize a SEPA payment to the merchant's bank account.

In fact, services that care about user identity, will often use these bank APIs to perform authentication with a high degree of confidence about the received user information.

Then I moved to France, and every bank interaction is "pull" based. While friction in Latvia came from authenticating before initiating the "push", in France the friction comes from agreeing to direct debiting, and signing various authorization slips. Sometimes electronically, but sometimes you have to send them by mail before you can start paying for a long-running service by bank (this makes it very undesirable for one-off purchases. In fact it is so cumbersome, that I prefer to pay for many services by credit card every month)

> I doubt the claims of very high fraud rate.

If I provide my account number to a service provider, they can debit it without me explicitly authorizing them (I have to sign an authorization usually, but there's nothing "technically" blocking the counterparty). I suppose that could lead to high fraud rates.

> if banks can turn this feature off

You have to demand it. (Some of them will propose their solution.)

> if it just culturally never gained traction.

Very few people have read the PSD2 directive. (This friend of mine met a bank consultant who mixed it with a gaming console.)

Yeah, lol, I remember when SEPA pull first came around about half a decade ago, and how many months later, I had to explain to my own bank how they were supposed to give me whitelist and/or blacklist options for the pullers. They claimed never have heard about it, while that directive was only a couple of pages long and readable by someone that didn't knew about any technical banking details !

If you like pull transfers, try the Netherlands. I was surprised at the low number of businesses offering it in France. In the NL, with nearly every recurring payment, including government, they are almost always the only way to pay: setting them up with an accord to direct debit your account.

Government payments in the Netherlands can be done in installments using direct payments, but the direct debit ones are the easiest and that is why many people use them. Far less chance of missing a payment. But if you want to do it yourself for every payment you can. Better not miss any though.

_If_ you get your salary on/before the 25th. Because changing the invoice date is almost never possible, and government agencies are even explicit about that.

If you live that close to zero you have other problems. I would highly recommend reviewing your finances in great detail to figure out how you are going to create a small buffer.

Or, you know, your employer doesn't pay you the 25th.

But explaining anything outside of the typically Dutch circumstances is an unfortunate part of life for the not typically Dutch in the Netherlands. Its a deeply cultural thing, this extreme hang towards conformation to a defacto 'normal'.

FYI: millions of Dutch have these kinds of problems. Look up the working poor, its a big group there. IMHO all native Dutch should be forced a few weeks internship with a budget council service, there are so many incorrect preconceptions about poverty. Including who it hits, which definitely includes people who thought they could never possibly be hit, did their finances right, etc.

I do but I still don't like having large changes in my "live" account. So I have an agreement with my landlord that I only pay around the 8th, after all the money came in. (Via programmed to repeat SEPA push, have to remember to change it every spring when the rent increases.)

SEPA 'pull', aka merchant initiated transfers require a one time authorization, repeat debits require a one time authorization for the first payment and can be re-run afterwards (used for subscriptions), and can be revoked up to 90 days after the payment was done.

> a one time authorization

Yes, but how well defined, or how loose, is that "authorization"?

The account owner can control the frequency and the maximum amount per period. It's not the case that some random entity can just grab all your money.

> The account owner can control

Unfortunately, that depends on the implementation of security the bank adopted. I assume you are mentioning a detail in the PSD2 directive. The banks, especially after national legislation following the directive, may adapt but not overlap it.

Take as an example the rule in the directive, that NFC based payments should require PIN based confirmation every five transactions: not all banks implemented this.

With my bank that requires me to use a device they sent me (a hardware token), my bank card, my pin and a secondary authorization where I use the hardware token to process a challenge and then type in the response.

Pretty good now; the legislation mandates multi-factor authentication by the issuing bank. So customer has to prove presence directly with their bank to authorise the payment.

There is also dynamic linking (ie you are shown the amount but also a unique code that the payment requestor also showed you) so you are confident it is the same transaction.

Were old transactions grandfathered in, or did Germany implement the laws differently? Because I never had to do any authorization besides checking a box that I allow them to debit my account (either on paper or online). All my existing ones predate PSD2, though.

I'm fairly certain that SEPA mandate identifiers for recurring direct debits existed for years before PSD2. the way it works from the merchant perspective is you include the mandate identifier and a "type" to indicate if this is a first/recurring debit. The merchant only finds out about any problems some days (or months) later.

How your bank presents (or doesn't present) a new SEPA mandate to you for approval is up to them. I'd guess that at least some of them never show you anything, and assume that you will notice and revoke the payment if it was unexpected or fraudulent.

Neither Postbank, N26, nor the 2 Sparkasse branches I’ve been a customer of ever showed me anything for approval, so I guess it’s not very common.

In fact it is so cumbersome, that I prefer to pay for many services by credit card every month)

Phone and the gym are the only services that I do not pay by card, but not even by my choosing. Netflix gave me no option. Utilities are bulk included with the rent (transfer) so yeah, just those two.

Oh and I know the card number and codes by heart in case I need to buy anything. Verification is done by SMS.

SEPA has 4 message types, currently:

- PUSH: - SCT Standard - SCT Instant

- PULL: - SDD Core - SDD B2B

As a bank, you are not forced to support all of them; also, it depends on the local consumer behaviour: in some countries, pull mechanisms are not that widely accepted

DISCLAIMER: Lead Payment Engineer at an European Challenger Bank, i'm implementing that stuff in the backend, i'm mainly talking to our central bank.

> I'm not sure if banks can turn this feature off, or if it just culturally never gained traction.

Yes, the accounts in my bank (in Finland) default to SEPA Direct Debit off.

For recurring utility payments etc. we instead use Finvoice e-invoicing (https://www.finanssiala.fi/en/topics/finvoice-standard/). The customer enables e-invoices on a per-issuer basis directly from their bank web interface, with an option for auto-pay and payment limits. The payments are processed as regular SEPA payments. The e-invoice goes directly to customer's bank, replacing paper/e-mail invoices.

For paying one-time online purchases the user is redirected to their bank to authorize a one-time SEPA transfer (other non-SEPA payment methods like cards and MobilePay are common, too).

I'd have to agree. Everything in the article about Europe is technically correct, but it is such a small slice of the SEPA payments. The article is so misleading it might as well be wrong.

I make payments to the benelux, france, germany, spain and poland, and they go all over the push mechanism. Direct debit is for utilities, and that's about it.

For fraud, my bank provides a gui with active agreements. While I can't cancel an agreement there, I can set a maximum frequency and amount. I put them at once per year max 0.0001 Euro until they get removed.

Non recurring payments over direct debit (Or even worse Clarna) is an instant no. I take another payment method. If grabbing money from my bank without my control is the only option, that's a red flag. I consider the company sleazy enough to go find a competitor, even if it raises the cost.

My bank in Norway (SBanken, formerly Skandia Bank) allows me to specify a maximum amount that any creditor can ask for per month when using the equivalent of direct debits (and I also get notified in advance of every payment so that I can cancel either the individual payment or the whole agreement if I wish. This is all done via the web or app and takes effect immediately, no need to ask anyone at the bank to do anything. Here it is called AvtaleGiro.

«AvtaleGiro» is such a time saver. Utilities, electricity, internet, road tax, insurance and almost all kinds of recurring payments happens automatically and electronically.

> Direct debit is for utilities, and that's about it.

Here in Germany, bigger online stores offered it as well. I used to use it for Amazon several years ago.

Klarna has been aggressive in trying to push consumers into acknowledging Klarna to pull from their accounts lately. People are used to Klarna here (Sweden), with their "pay on invoice in 14 days for no additional fee" since long, but now they're trying to leverage that into getting customers setup with their bank accounts. Of course they are not going to use this to explicitly steal from customers but still you wonder what can go wrong giving other entities this access..

I would not trust Klarna for anything.

Klarna's use of dark patterns on the web for leading people into debt over choosing other payment methods has been outlawed in Sweden, but I've read that they have continued doing it in other countries.

Quite frankly the practice of requiring bank credentials from consumers should be entirely banned via some laws. It pries on gullible people.

>Direct debit is for utilities, and that's about it.

I think the only party that can draw money directly from my bank account is my bank itself for my mortgage. For everything else, I have e-invoices, where the invoice comes directly to my bank account, so I receive a paper invoice maybe once a year from somewhere. And for e-invoices I can just set auto-accept limits, so any phone bill that is less than 10€ will get automatically accepted and for any phone bills greater than 10€, I need to manually accept it on my bank's website/app.

Actually, I have SEPA Direct Debit disabled on my bank account settings now that I checked it, so I guess I've never used it. I guess my bank just has direct access anyways for mortgage payments.

> I make payments to the benelux, france, germany, spain and poland, and they go all over the push mechanism. Direct debit is for utilities, and that's about it.

SEPA direct debit is a really really popular thing in Germany. Most utilities prefer (quite understandably) to pull from you instead of waiting for your transfer. Even landlords usually give you an agreement form to pull your rent out of your account.

I got used to that and recently tried to use a Polish bank account to pay on Amazon and surprisingly it didn't work. Amazon has sent me an automated email with a demand for a (push) transfer, sadly with added fee for the trouble.

Most people in Poland actually do transfers manually, direct debit is not really a thing. On the other hand there's this BLIK thing for instant transfers, even across banks.

> I got used to that and recently tried to use a Polish bank account to pay on Amazon and surprisingly it didn't work. Amazon has sent me an automated email with a demand for a (push) transfer, sadly with added fee for the trouble.

That might be a function of Poland not being in the euro zone. AFAIK SEPA Direct Debit is only for transfers in Euro. Even if you tried to use a Euro bank account in Poland, either your bank or Amazon might not have bothered to implement it.

Yep, I did use an EUR account. You may be right about the lack of proper implementation.

Did you have Marketplace charges? These are USD only.

When they launched the SEPA direct debit option a couple years ago I tried it and the debit bounced back.

Eventually I did not have the need for marketplace instances anymore, then I tried it again and it worked.

> SEPA direct debit is a really really popular thing in Germany. Most utilities prefer (quite understandably) to pull from you instead of waiting for your transfer. Even landlords usually give you an agreement form to pull your rent out of your account.

Landlords benefit from it because it makes it harder for your to lower your rent in case there are issues with the place that warrant it. If they can withdraw the rent directly, you'd have to undo that payment, pay the lowered amount manually etc. which makes it more hassle for you and also increases the risk of screwing up.

Not exactly:

You could sign a contract with your landlord, then revoke the so called "SEPA mandate" afterwards and you can forcibly switch to "manual payment" each month, since the SEPA mandate is not necessarily required or a "legally-necessary intrinsic component of the contract" (check for example: https://deutschesmietrecht.de/mietvertrag/662-mietzahlung-ei... )

Tough, depends on which type of relation you want to have to your landlord ;-)

True, that works as well.

Either way as a tenant it's best to do manual payments (even if they're automated on your end) each month so that lowering rent, if necessary, is straightforward.

I'm not sure how it's with other banks, but on both my NL banks revoking the permission is 2 clicks away. If there is an issue that escalates to the need to partially withhold payment, that is the least of your hurdles in NL since you need to get permission from an independent government commission.

I find Blik to be one of the best payment methods ever invented.

It gives you a one-time-use 6-digit code that is valid for no more than two minutes. When the code is given to a merchant, either on line or in person, you get a popup with the amount and merchant name which you need to manually approve. You can give that code out over the phone to a family member who's currently at the store buying things for you, or to a child who's trying to get something for themselves. This is extremely convenient while still being secure, and it allows for secure payments on shared, malware-infested computers.

Some online services also give you the option to remember your device for future use. If you decide to do so, you will get a notification the next time you're trying to pay there, which you still need to approve. This is more convenient than typing in a code, while still being as secure.

This system is pretty resistant to fraud (you always need to approve the amount in your banking app), while allowing for irreversible payments, which merchants like.

> This system is pretty resistant to fraud (you always need to approve the amount in your banking app), while allowing for irreversible payments, which merchants like.

This sounds like a great system, except that irreversible payment part. That’s only a feature for merchants and usually gets used to harm consumers in my experience.

There are also some third parties which utilize the fact that transfers within the same bank are instant - they have bank accounts in all of those and a settlement system built on top of that. You transfer the money to them, and then they send a transfer directly from the bank of recipient. It's nearly instant, but has some limits to it (several thousand euros).

In fact it's quite jarring when you have companies try to do something in Polish market and they don't do basic research into payment methods.

Take for example Luxxotica - I was buying some glasses as a gift yesterday, and they support two payment methods:

- card payment

- PayPal

Paypal hasn't been popular for years with all the other alternatives, and many people are wary of using cards to buy goods over the internet. In fact my card payment was blocked (which essentially never happens in any other methods) and I went to buy the glasses physically at a reseller.

>You transfer the money to them, and then they send a transfer directly from the bank of recipient

Since few years banks also provide APIs for redirecting to transfer form prefilled with payment processor details, so you don't have to enter them manually.

From what I know there is also a different reason for the weirdnesses in Germany. Banks actually charged quite a lot for online transactions from your bank card. German shops are very cost sensitive here (why in many some time ago in most places you could not pay with credit card). So what they do is they use an intermediate that collects all those signed mandates. It even worked fully offline like with credit cards in the old days. It is crazy if you try to read the terms and conditions on a standard supermarket bill.

Fully agree. In Germany we have a widely used push mechanism (giropay) where you approve the online payment using an app or a dedicated hardware device. It's instant, free for buyer and seller, push, and requires explicit consent for each transfer from the buyer.

It's supported by all major electronics stores. The only exception is Amazon who will do a SEPA pull instead. But there the bank grants you 6 weeks to cancel the deduction if you want to.

Not correct:

Giropay does in fact include fees, though these are usually covered by the seller. (check for example: https://www.unternehmerportal.info/giropay/)

DISCLAIMER: Lead Payment Engineer at an European Challenger Bank, i'm implementing that stuff in the backend, i'm mainly talking to our central bank.

I'm honestly surprised. I've been using it as the seller with a Deutsche Bank business account for a few years now and I never paid any per-transaction fees.

Interestingly, some of the in-person debit card payments I make from my German bank appear to work internally as direct debits. They appear as "SEPA-ELV-LASTSCHRIFT" on statement. Other card payments are just called "KARTENZAHLUNG". Interestingly, the Lastschrift (direct debit) payments seem reversible on my bank interface, so I could get the money back (presumably invoking letters from the company and debt collectors).

When using the girocard there's two ways the retailer can take the amount. Either instantly, or using Lastschrift. The latter is cheaper, but the retailer doesn't have the guarantee that your account actually has sufficient balance to pay. If I remember correctly, the latter method requires you to sign the receipt.

Yeah, that's where the fun algorithms trying to predict reliability from the set of products you're buying comes in...

It's getting rarer, though. The cost difference is eroding and signing is too slow for supermarket checkout lanes.

The tables have also turned and some retailers now earn money from the banks for supplying their customers with cash (i. e. you pay by card and get an extra x00 in cash).

Actually, in the first case, its not instantly take, instead it is marked as a "abgesicherte laschrift", which is equivalent to enter card+PIN, meaning you can't revoke those. Though, sure you can, but it will end up with nice discussions with your bank :)

Depends on which card you have used and which scheme was used to process;

In general, "double scheme cards" (MC + Maestro on one card) should offer you the option to choose, while at the POS, which scheme should be used; the thing is, the merchant is not required to offer you this question, and there is a "default scheme" on such cards. This means, in cases the merchant does not ask you, the default scheme is chosen, which is usually the one that brings in more fees for the bank/PSP.

And: Depending on the contract between you and your bank, it maybe that you couldn't revoke the "lastschrift", yes.

I just want to say that I really appreciate your 'insider' comments in this thread. I have always found payments technologies a fascinating and underappreciated topic.

Not correct:

SEPA SDD Core + SDD B2B are working crossborder; though you're right that these are not deployed regularly/seldom.

DISCLAIMER: Lead Payment Engineer at an European Challenger Bank, i'm implementing that stuff in the backend, i'm mainly talking to our central bank.

> Most banks charge a hefty fee for an instant payment (mine charges €1.25).

Interesting. In my country (Finland) all banks that have joined the TIPS (SEPA Instant Settlement) always use it automatically if the destination bank supports it as well - at no extra charge to the account holder of course. Are you sure you are talking about TIPS / SCT Inst payments? Either way, your bank is not allowed to charge extra fees for cross-border SEPA transfers (as compared to domestic.)

Yep. Entirely depends on the bank - in France neobanks ( e.g. Boursorama, Aumax, Fortuneo, N26 ) have them for free, while old banks usually charge you a small fee.

Huh. N26 in Germany charges me for instant payments.

Boursorama and Fortuneo aren't neobanks ;)

Kind of. They're newer than the old classical ones, and don't have a physical retail network. Everything is done via a website or app.

It depends on your bank. My Austrian bank charges a ridiculous fee of 8€ for an instant SEPA transfer.

Interesting!

So, TIPS is just one of the available clearing mechanisms available for the SEPA Inst scheme. (The other one is RT1, which is live a little bit longer)

Currently, there is no "regulatory forced" interoperability between RT1 and TIPS, though the 4CB are discussing it. (Esp. since RT1 is a private clearing mechanism, while TIPS is the one operated by the 4CB)

And, regarding fee: You are wrong - depending on the local jurisdiction (esp. consumer rights), a bank may for sure charge for processing SEPA SCT Instant messages. Over here, SEPA Instant transactions are around 0,50EUR - 1,00EUR, currently; some are also offering them for free.

DISCLAIMER: Lead Payment Engineer at an European Challenger Bank, i'm implementing that stuff in the backend, i'm mainly talking to our central bank.

> And, regarding fee: You are wrong - depending on the local jurisdiction (esp. consumer rights), a bank may for sure charge for processing SEPA SCT Instant messages.

They didn't say that banks cannot charge for SCT Instant.

They said that banks can't charge more for international than they do for domestic.

Then, your "universal sentence" is not matching, since you didn't mention the transfer way:

for sure i can charge you more for a SWIFT or T2 EU-transaction than i do for a SEPA EU-transaction.

It's even worse than that in terms of correctness, because the author confuses the EU ( economic and political bloc), Europe ( the continent) and the eurozone ( countries in a monetary union with the single currency, euro). SEPA is a thing for euro-denominated transfers in the EU and some extra countries ( UK, Norway, etc.).

Belarus, a country in Europe, but outside the EU and eurozone, aren't in SEPA . Romania, inside the EU but not in the eurozone, are in SEPA. Montenegro are outside of the EU and eurozone, use the euro, but aren't in SEPA.

The stories of the Euro as the main currency in Montenegro and Kosovo (which both don't belong to the Eurozone) are very interesting:

https://en.m.wikipedia.org/wiki/Montenegro_and_the_euro

https://en.m.wikipedia.org/wiki/Kosovo_and_the_euro

> Given that these direct debit agreements are revokable at any point in time, I doubt the claims of very high fraud rate.

I think the claim is that because SEPA direct debits can be revoked within a very long window after settlement, it's more common that payments are revoked after goods/services have been provided (leaving businesses holding the bag). Whether this fits the precise definition of fraud I'm not sure, the payment was valid and successful, but later reversed. It would be a more interesting claim if there were some empirical comparisons included, but it certainly matches my experience.

Edited to add: another common form of fraud is somebody providing legitimate bank details of an unwitting victim. At least for some banks in Germany, the bank does not actually enforce authorisation from the account holder when a new direct debit mandate is introduced. The fraudster receives goods/services for free as long as the victim doesn't notice the charges.

And here is a life pro tip: if you struggle to get end a contract, even though you are right. Just tell them you will talk to the bank and remove the mandate for sepa from your account. Doing this isn't an issue. But, if it happens to often, it will rise a fraud flag at the bank, firms usually try to avoid that :)

Did that two times already. They act real quick, out of a sudden :)

The only very high fraud rate I ever hear about are credit cards. And that happens because Visacard just washes their hands from it leaving merchants holding the bag.

With SEPA payments fraud would cost the banks money so any company abusing it would be blacklisted.

Because the rules governing SEPA Direct Debits are very consumer friendly, it might be somewhat risky for businesses to use this payment method. To keep fraud at check as a creditor, you have to do some due diligence like checking credit scores or know your customer very well.

From the consumers perspective though, at least where I live, direct debit is regarded as a secure and convenient method for recurring payments. A consumer can revoke a fraudulent payment within 8 weeks. It's as easy as clicking a button in your online banking. If the counterparty can not prove that it was explicitly authorized by the consumer to make SEPA Direct Debits, the payment can be revoked for up to 13 months.

SEPA SDD Core has one big advantage for (trustworthy) customers of a merchant:

it's fucking cheap for the merchant :-)

and with cheap, i mean, reeeeeaaalllyyyy cheap (well, depending on your PSP/etc.)

for a bank, the "purchasing costs" per one SEPA SDD at your central bank is in the fractions of the fractions of a cent. (you can check the rates on your local central bank website)

Not much of this applies to the UK. Faster Payments are almost ubiquitous here, and Authorized Push Payment fraud is a huge problem.

Faster Payments is the law in the UK, normal high street banks have to provide Faster Payments on ordinary current accounts. The banks actually shipped it without a working backend, I don't know if they completed it afterwards but initially it's just trust, Alice's bank tells Bob's bank she sent Bob £100 and Bob's bank do the database update and trust Alice's bank is good for the money later.

Push Payment fraud presumably subsided enormously after they changed the rules so it's interactive. Now you provide account number and name, the banks algorithmically decide if the name you provided is correct and if not tell the sender there is a problem. So push fraudsters need a fake account name and that's harder. Passing KYC checks for some random mule is do-able but good luck persuading the bank your name is Big Corp Electricity so that the push fraud works.

Not really:

SEPA has several message types:

- SCT Standard is a push - SCT Inst is a push - SDD Core is a pull - SDD B2B is a pull

Cazy how civilized the Canadian system is. You can whip open your banking app, enter the email of anyone with a Canadian bank account, link is generated, money is instintly deposited. People basically use this for everything except regular debt purchases (and even then, in instances that you forget your wallet, non-chain stores will usually let you etransfer someone). It's how I pay rent etc. No fees. It's been like this for ~15 years

So instead of 'which number do you want me to send your money to' it's 'which email address do you want me to send your money to'? Great?

The recipient token can also be a phone number capable of receiving a text message.

Sure fine, to be clear I meant bank account number - using an email address (or phone number) isn't clearly better to me (I think it's worse?) in any way, that's all.

Don't you need more than just an account number? Either way yes, it's a lot easier to put someones email address into a box and a $ and hit send. I'd love to know who you bank with such that you can just give an account number, no name etc and have the money move, in my 30 years of banking (Scotland, Canada, USA) I've never heard of that.

Name (only optionally checked), sort code & account number (which are not meaningfully distinct to an end user and I meant both by 'account number'). UK.

Email seems at best no better to me, since why would I assume the address I use to speak to someone is the same one they use for their bank account? Or the particular bank account they want the money sent to?

I think you're misunderstanding how the system works. The email or txt is just to send the link/code. In theory you could open the email and copy/paste the link to someone else and they could deposit it into their own account. You just click the link, it directs you to select your banking portal, you login like you would and accept the funds into your account. Works on web and apps. Canadian banks all use what is called the interac network, it's a real time interbanking network operated by a non-profit intermediary company funded by the banks, also has it's own consumer phone support etc etc.

https://en.wikipedia.org/wiki/Interac

Oh I see, yes I was, ok that's a lot better. Indeed there are plenty of (fee-taking) third-party solutions for that in other countries. Monzo (if not other banks) offer something similar, push vs. pull if you like (you go to my URL and pay by card to 'transfer') in the UK.

So you enter an email address/phone number for them, and they receive a (presumably one time use, pre-set amount) link to retrieve money from you. That seems good. Ceteris paribus though (i.e. if both broadly implemented) I think I'd rather the recipient have the link where you go to pay, seems a bit odd to shift the onus on to the person you owe money to action it.

Curious what you mean where you go to pay? You mean in addition to peer to peer (me sending $50 to my buddy for dinner) I should be able to checkout with the link IRL also? I'm a little confused (although that's an interesting idea). FWIW, 99% of people I know have auto-deposit on, I'm not sure how it works because I don't have it on, but I presume it means if the email matches the email/phn with your bank, it automatically deposits, so most people I Etransfer don't even ask me to put a password on (if you do I guess auto deposit doesn't work or something).

I mean that rather than (my understanding - correct if wrong) the way this works of: A generates link to pay someone $x, A (or A's bank) sends B ('s email address/phone number) the link, B visits link and takes the payment; that I would have it be: A visits B's link, A pays by card or transfer if linked to bank account.

Oh I see, yeah it's bidirectional, either party can initiate. It's a pretty good system tbh, and amazing we've had it for so many years!!

And with 2.0 banks like Monzo, the account holder gets notified of the Direct Debit setup, how much is likely to be debited, and can easily cancel it from the app. That reduces the risk of fraud quite a lot.

In exchange, it saves a lot of time both for the customer and utility provider as the risks of mistakes are reduced considerably. Invoices get paid on time.

With HSBC it’s the same, with the added security of a TUN code that is generated with a physical token for bank transfers.

That said canceling a direct debit on your end even if it’s fraudulent isn’t something you should do as it can wreck your credit score in the UK since you’ll be in debt and depending on the account it can show up as a missed payment immediately even before it going to debt collector/judgement.

If there is a fraudulent transaction you have to contact the bank and file a claim.

Revolut offers free SEPA instant payments.

>> ..In most countries, payments within the same bank have been instant (and free).. <<

Which is quite simple: First, its internaly only an exchange of liabilites in your balanace sheet.

Second, it does not involve any outgoing gateways/interfaces.

Third, if you are using a SaaS-corebanking-solution, those types of transactions are usually excluded in your contract.

From that perspective, it is absolutely useful.

Also, in the case of push, depending on the bank it might take two business days for the target account to be added as a push option.

(So that you have time to notice that someone has breached your account and stop them from emptying your accounts ?)

The fee on instant transactions is really country specific. Netherlands doesn't have fees and banks automatically pick the instant option if available. I've heard similar things from for example the nordics.

In The Netherlands, over 90% of all domestic payments initiated by “regular people” are SEPA Instant Payments, meaning booked on the other persons account no matter their bank within 5 seconds.

They’re free to send and receive.

Source: I worked on implementing Instant Payments at the biggest Dutch bank.

Wait, so direct debit and iDEAL together account for less than 10% of consumer payments? That's shockingly low.

No, SDD is a lot of the total transaction volume. Everyone has a mortgage, phone plan, energy contract etc. and that is all SDD.

iDeal is of course the default for webshops, it’s big too.

But the 90% I referred to are “person to person” payments.

Ah, that makes more sense. I'm still a bit surprised that iDEAL payment requests ('Tikkie') account for less than 10%.

Odd not to touch on Open Banking and PSD2 in Europe; as that is basically the future he is talking about.

In essence; financial institutions are legislated to add customer friendly UX and fraud prevention on top of standard bank to bank transfers. It's effectively a set of APIs that orchestrate it all, with things like dynamic linking to the payment and secure authentication rules for anti fraud.

The idea is for commercial offerings to build on top of the standard APIs (for example, to offer bank transfers in checkouts). In practice it's taking a bit to get off the ground - but providers like Tink (sold to Visa for a lot of money) and Truelayer and starting to get traction.

Australia and MENA region are heading down the same route.

https://www.openbanking.org.uk/

Edit; for clarity, SEPA was the early moves to normalise what the European banks were doing from around 2008 onwards - and ended up with PSD1 rationalising it. As others have said this blog mostly only actually focuses on the direct debit element of SEPA not the credit payment side.

Cynical me reads this article as follows:

Shit! We promised investors that Stripe will be the sh*t, the Global Payment Network. Now banks and regulators have woken up and we are commoditised in India, Japan and EU. Sure hope FedNow won't follow suit. Sorry VCs. Please exit Stripe before it's too late.

I respect Patrick and his content/judgement. So Hanlon's razor (and I don't mean that in a mean way to Patrick) probably applies.

I assume there is a Stripe echo chamber which might explain the focus (I've read several of his money articles and most of them suffer from an incomplete picture).

Also; I'm not sure Stripe and Open Banking are incompatible. Realistically it eases stripes integrations in the EU (Ive not checked if they are a registered payments provider under the legislation but I assume they must be).

In addition; the thing that springs out of this article is how incompatible we are on a global scale. So there is a market there for them.

In the end, SEPA for all it's faults drove European standardisation. Global legislation on that scale is not gonna happen (it's sort of a shame he didn't draw that conclusion)

I expect UPI are like Japan's Suica where it basically dominate low value transition like transport, vending machine and convenient store. While Credit Card Based transaction will continue with those who wants credit and pay later type along with big purchase.

EUR is sort of out side of these because vast majority of transactions has always been Direct Debit. Credit Card spending just isn't as much a thing. And they use Direct Debit for everything. They also have very good consumer protection in place so using a credit card for delayed payment ( in case of dispute ) doesn't happen as often compare to US.

As far as I can tell there isn't a one size fit all solution to every one in the world.

exactly. A2A payments are already here in the UK with Open Banking rails and VRP/Sweeping coming in the next year (or so).

Post Brexit implementation of VRP has been "fun" but I am pleased to see it nearly there!

Follow up; I've looked into UPI a bit more.

It's... Interesting.

I think it's basically solving a very widespread and local use case - which is very low value transactions which are normally done in cash. The AVG value of transactions look to be around $2.

Anything of reasonable value (say $10 still tends to be card-based. This makes sense; fees on cards make anything under $5 cost ineffective, plus you need relatively (to the margin) costly hardware. Margin-based street sellers like those in India can't afford the overhead.

Looking at the implementation; it's interesting there is very little shared about fraud (I couldn't find any specific numbers but based on lots of articles it seems widespread).

Low financial literacy coupled with a system that encourages you to enter your PIN in various interfaces probably makes this something you wouldn't allow high value transactions. Hence the continued dominance of card networks.

If is neat though, although it feels like it's quite a local use case.

The UPI daily transaction limit is INR 100,000 (~USD 1332).

> say $10 still tends to be card-based.

What's your source for this info? People here don't use cards if they don't have to. It's a payment mode of last resort. Credit cards do not provide fraud protection here, so there is no point in using it.

Various news articles was my source. But re-reviewing a lot were from 2020.

I found a source from July that says AVG transactions are now up to around $20 equiv. And the total transaction value is above card transactions now. Although the volume of transactions is 10x which is indicative.

My understanding is India is a very cash-based culture? So the idea of UPI replacing that seemed uncontentious?

Looks like there are 3/4 Billion dollars worth of card transactions each month though, so that's not insignificant. I wonder how much bigger the cash culture is in value, I'd assume quite large.

> India is a very cash-based culture?

This is correct. This leads to a lot of black money floating in the market. I am not sure what's the volume of cash transactions though.

When discussing Europe, you can't leave out the rise of mobile payments that work similar to India's UPI.

For instance, in Sweden, "Swish"[0] has quickly taken over the market for casual payments, with free, instant, irreversible bank transfers between individuals using only the recipients phone number (or a QR code).

They are a bunch of these systems, but currently they are all fractured into national systems, although work has started on adding interoperability[1]

[0] https://en.wikipedia.org/wiki/Swish_(payment)

[1] https://en.wikipedia.org/wiki/European_Mobile_Payment_System...

Tikkies are the Dutch equivalent.

https://dutchreview.com/expat/tikkie-netherlands/

I'd say they have become obsolete ever since all major banks now support similar functionality (payment requests) + the enablement of instant payments across Dutch banks

Hate that neither of them support non-Dutch banks (well, I think maybe Rabo has an extra paid service that does, but I don't bank there). Bunqs service did also accept CC, but I had to quit them over their never ending 'innovation'.

I desperately need something that works at least in the entire Eurozone.

It's pretty great. These transfers sometimes arrive within <1s. The speed and ease of use is something that cryptocurrencies are "trying" to "solve" (Among other things). Most aren't aware of the wide adoption here already, of course there are other aspects crypto's score better on. But if all bank transfers would be a Tikkie, then what would Crypto's, in terms of ease of use and speed have to offer?

Nothing, those were never claimed as cryptocurrency strenghts, the opposite in fact, were accepted as weaknesses that were still worth it considering the other benefits.

From the time I entered the world of Crypto (2012) until now. Both speed and ease of use were major selling points for many, if not most alt-coins. Sure, it's not the core promise of ALL those alts, but I remember a period (Raiblocks/Nano), where no crypto could even dare to under deliver on the promise of speed.

Ah, for me the cryptocurrency story is still mostly about bitcoin and the overall concept of the blockchain.

Promises aren't worth zilch. (We now do have additional features that some altcoins actually deliver on, the most famous one being of course Ethereum with its smart contracts... but trying to beat the ease of use and speed of in-country traditional banking is a lost cause.)

There was a time when Bitcoin was super fast, you send it and it's there. We didn't really care about double-spends, so no-confirmation transactions where good enough. I kind of long back to that time :). But yes, at this point, I don't think Bitcoin does neither have a speed or ease of use issues, we are long passed the stage where it was of importance.

It definitely was in the early days, back when the movement was more idealistic and people were making posters comparing Bitcoin, Western Union & wire transfers to spread the word. I think around the block size debate/BCC fork era most of that rhetoric went away.

MobilePay in Denmark: https://en.wikipedia.org/wiki/MobilePay

Also in Finland.

There's also Siirto to some extent. It doesn't work with all banks, but I think that the banks that are part of it are like 70% of the personal banking market share.

Vipps is the Norwegian equivalent, I guess...? [1]

[1] https://vipps.no/

Vipps in Norway. https://vipps.no/

Yes. In Switzerland it's Twint. It's easy to use, instant and free for the user. It started out as an easy way to move small amounts of money around among family and friends without the hassle of doing a bank transfer. Now large grocery stores and online shops support it too. I don't see it overtaking the whole payment market because of the exclusivity to Switzerland. It'd be great if something like Twint would exist but usable and prevalent all over the world.

> free for the user

Overall it's not free, the receiving party will still pay the fee (so, probably not that different from Debit/Credit Cards for merchants), and shops might increase the price preemptively to account for that.

See this drama for more: https://www.twint.ch/en/press/digitec-galaxus-spreading-fals...

PS: However, it's probably free for user2user payments, using phone no as identifiers. And it's useful to settle lunch debts among friends. I guess they (banks) want users to install twint apps for that, make it then easy to pay at businesses.

PayNow in Singapore: https://www.abs.org.sg/consumer-banking/pay-now

Not just casual payments.

I bought concert tickets last week, for almost 1000DKK (130€). I'd already entered my phone number, so paying by MobilePay was faster and easier. I usually use this if I have the option.

To use it, I pressed the MobilePay button on the website, pressed continue since my phone number is already present and correct. I unlocked my phone, and there was a notification waiting for me, with the amount and recipient stated. Fingerprint and swipe to approve.

I didn't need to type in any card details, or authenticate within the web browser. A 1000kr debit or credit card purchase would require me to enter my 20+ digit bank password, then do a similar process to unlock the phone for 2FA.

There is paym in the UK, which works the same way, using phone numbers, but it is not used that much.

https://en.wikipedia.org/wiki/Paym

In Poland we have "Blik" [1]. It's immensely popular here, especially for online transactions and p2p transfers. Recently it started expansion to physical stores too. Seems to be quite similar to Swish.

[1] https://en.wikipedia.org/wiki/Blik_(payment)

Swish works for person to person transactions, physical store payments, and I've also seen some companies starting to use it for monthly bill payments (ie, send out a paper with qr code, user scan it with app and signs it, and bill is paid).

MBWay in Portugal https://www.multibanco.pt/operacoes/mb-way/

UPI can potentially be scaled to all countries. I think the biggest USP of UPI is the interoperability between payment apps(Google Pay, Paytm, PhonePe, etc), VPAs(alice@icici, bob@axis, dan@upi, 9848123456@paytm) and banks. One could have an account with bank A, create a VPA with bank B and use that VPA to pay a business through virtually any of the payment apps(GPay, Paytm, PhonePe, BHIM, etc). The main pain point UPI addresses is instant transfer, zero cost transfer irrespective of transaction size and removal of friction due to credential exchange. NPCI (the creators of UPI) are already in talks with the UAE and other neighbouring countries to build a cross nation interoperable payment stack. Since no player in the entire stack can charge a service fee, the way that payment apps have monetized UPI is by acquiring customers through payments and selling value added services like insurance, prepaid mobile recharges and mutual funds/ETFs. Interoperability allows for balancing and decentralisation of network load across multiple providers, making transactions less likely to fail. Also cross border exchange is another problem that is still unsolved. Maybe a UPI backed approach to real-time currency transfers is a pipe dream but in a ideal world every transaction, irrespective of point of origin, size or currency would be as seamless as an UPI transaction.

On a side note, I wonder if something like this could be built in the web3 space. A totally decentralised public blockchain implementation of the payment network using UPI-esque interoperability between payment providers and banks.

Actually the India-Singapore link will start in 2022 [1]

[1] https://techcrunch.com/2021/09/13/india-and-singapore-to-lin...

But it's going to be an overlapping mesh of 1-to-1 agreements. Singapore is also negotiating with Malaysia to allow cross-border payments, but it's unlikely a Malaysian user would be able to chain these together to pay someone in India.

Will this suffer from the usual payment restrictions imposed by PayPal/Stripe?

VISA/MasterCard-based services suffer from US regulatory pressure, applying US norms across the planet. Non-US-based payments systems will instead have pressure from their respective countries. For instance they may care less about WikiLeaks pulling the pants down on US intelligence, but may be even more strict on porn.

I took a trip last month(within India) with about ₹600 cash and returned with ₹560, with UPI for everything from chai to flight tickets. It's just so frictionless.

UPI was built around mobile phones, and a significant part of the trust comes from the KYC that was enforced from the beginning for mobile connections. I'm not sure how well that process will scale across countries and across currencies. Still, with the international partnerships coming up, I'm excited for the possibilities that are presenting in the payments space.

You can use UPI as a foreigner without an Indian bank account?

I suppose that various KYC / AML checks are a significant obstacle to frictionless international payments; another is fraud protection.

I bet it's seriously harder to get two countries agree on the lists of undesirables, and streamline e.g. court protection across jurisdictions.

> I expect we’ll see bank transfers as a more prominent part of the payment mix in much of the world.

Interesting read.

I have multiple clients in Europe who use my webshop system with simple bank transfers as the only payment method. It's so easy. No setting up shit like iDeal or Stripe or anything like that, no fees, just paying from one bank to the other. It comes so close to paying with cash. It's not instant so you can't really program against it (as with iDeal here in The Netherlands, your country has probably something similar), so it's not really suitable for big automated webshops. But for small businesses and/or freelancers who want to make money online it's such a game changer.

Let's say you just started a small business selling digital or physical goods, the only thing you need to do is enter your IBAN bank account number and you can get paid within a workday or two. Customers place an order, click a button that says 'I just paid', you as the business owner check your bank account on a daily basis (just from your smartphone) to see if you received their money, if you receive their money you click another button and can fullfill the order.

From experience I know I'll receive money from Germany within one business day, and from the rest of EU within two business days. It depends on the banks I guess, because sometimes even customers from EU with IBAN bank accounts tell me they can't make the payment. Still, it's so easy.

Even for filing your VAT as a business it's stupidly easy in EU, because whatever you sell to Spain or Poland or Ireland, if you stay under a certain threshold (which is pretty high for a one person company) you can just do the taxes in your own country according to the rules you know.

I just really miss the UK, stupid Brexit. I have to quadruple the amount of paperwork if I want to sell to the UK. It's not worth the hassle. Just not worth it.

> It's so easy. No setting up shit like iDeal or Stripe..

While true, the friction with iDeal or Stripe is a lot lower than with bank-transfers.

I've helped set up such payment systems (backends): the rate of non-paying (send reminders, etc) is far higher with bank-transfers than with iDeal. So much, that for many freelancers who send just a few dozens of invoices per year, it pays off (pun intended) to include an iDeal QR code and link in that invoice.

People are so much more likely to click and link and pay than when they have to type over payment details. The latter often ends on the "TODO pile" the former is often payed within minutes after emailing.

(Do note that in Western-Europe it is common business(to-business) practice to send an invoice after the goods or services are delivered. This invoice acts as a payment-request.)

Most banking apps support SEPA QR codes as well, specifying a receiver, amount, and subject line. Which makes payment super easy.

If I’m sharing a bill with friends, I’ll just generate the QR codes, the friends scan them, click pay, verify with biometrics, and are done.

https://en.wikipedia.org/wiki/EPC_QR_code

Oh definitely, it's not for every use case. If one just shuffles boxes through (roughly speaking) and competes on price, an automated system with all the well-known payment providers is better.

If you want to go bare bones, spend as little money as possible (on fees, setup costs and setup time, brain cycles) then I just want everybody to know that - at least in Europe - that's possible. Even with only a personal bank account (and some good bookkeeping, that is)!

> that for many freelancers who send just a few dozens of invoices per year

Let me be clear I'm not talking about invoices from freelancers who already did the work, I'm talking real webshop stuff (you buy and pay for goods and/or digital services on the spot).

The only 'problem' is that you have to wait one or two days (and three when there's a weekend) before you can start fullfilling an order. That's not for every use case, but definitely can work for a lot of use cases I think.

Thanks for detailing. As always in IT, the actual, practical use-case is what makes the difference :).

And yes! I've set-up webshops that work exactly this way: both B2C, and B2B. I even encounter them regularly in NL, where iDeal is the norm and dead-easy to implement: e.g. yesterday when ordering special seeds for coming years vegetable-garden:

"Please email us the product-numbers and quantities, the bank-account from where you send the money and your postal address"

Having no PSP is always easier than the easiest PSP. Having no webshop is always easier than the simplest webshop. Apparently such businesses can get away with it. Or, more in y-combinator-speak: by far the leanest webshop is a simple email-inbox.

> I just really miss the UK, stupid Brexit. I have to quadruple the amount of paperwork if I want to sell to the UK. It's not worth the hassle. Just not worth it.

Had the same conclusion for a while for my webshop. It bothered me to say no to people from the UK, so ended up setting up a reseller account and chose to use that for the UK.

Which - while not free - has now changed to my main payment system as it reduced my overhead drastically. Plus now all my sales is compliant with all tax laws everywhere. Not just VAT within the EU, but also sales tax in the US etc.. without the additional overhead as the reseller is the one who handles all the taxes.

> It bothered me to say no to people from the UK

Agree. I'm in a very lean situation now and can use my time better, otherwise it's worth looking into. There's a lot of good customers there, who also didn't ask for this Brexit thing.

Bank-to-bank money transfers in South Africa is a mostly solved problem. (Electronic funds transfer/known as EFT locally)

- payments above coffee-shop prices often happen by EFT. - it arrives within 2 days, bank sends proof of payment instantly and sellers accept that as sufficient proof. - can opt to send instantaneously which reflects within seconds to minutes (for a small fee, like ~$1). - non reversible - need bank account number and bank name

That’s for push, for pull, debit orders exist, but they are luckily easily reversible. Unfortunately fraud on this is super high.

Always strange when in the US and the landlord asks me to pay by cheque. Something we havent seen in SA in ~15 years.

Guy from Romania here: we can even pay to phone numbers if you’re on ING (Dutch bank) or Revolut (from UK). They will get their client’s IBAN for you. At least in Bucharest almost every person around me has an account on both of these.

In South Africa you can send money to anyone's phone number from several of the big banks. They can even be 'unbanked'. Regulation allows them to receive up to a certain amount before having to KYC and go through AML checks etc.

To access their money they go to an ATM and a challenge response is sent to their phone number.

For a "third-world" country, South Africa has a quite developed financial infrastructure. This might be due to its historical links to the UK or by having a wealthy and connected elites.

South Africa was the first "second world" country in the economic sense, from before apartheid.

Rich elites living roughly Western lifestyles and everyone else super poor.

"Second World" was the Soviet Union and its allies. SA most likely was a part of the First World.

I think having a dualistic economy plays a big role in this.

About UPI: The standardisation of payment interface is done by a corporation called NPCI. It’s an initiative from India's central bank (RBI) and it is non-profit. [1]

This means that a private player's implementation does not become defacto standard.

Multiple factors are aligning to make UPI successful:

1. Massive Mobile (smart phones) & Internet penetration

2. Cheap mobile data from telcos

3. Low cost of payment infrastructure to the banks and shops.

4. Fast clearing of payments (< 5-8 seconds)

5. Neutral standardisation body with blessings from the central bank

[1] https://www.npci.org.in/who-we-are/about-us

I could do without #5 to be honest. Should be working towards a more decentralized approach.

Why this obsession with doing away with a central authority? What is so evil about a central bank? Decentralization is not cheap. I buy a pack of bread from a door-to-door bread and eggs salesman (Yes that's a thing in India). It costs INR 40 ($0.53). I pay him via UPI, he gets money instantly in his bank account with zero fees. He gets full INR 40 like I had paid him in cash. I don't think any decentralized system will be able to do that with zero fees.

It obviously costs money to banks to maintain the infra that makes UPI possible. It still costs nothing for end users to use UPI. You know why is that? Because the Reserve Bank of India has mandated that. A central authority that grants banking licenses and oversees all banks in the country. Banks have to factor in the cost of supporting UPI as a regular cost of business. Banks actually may be saving money by supporting UPI because they don't have to deal with cash. They need less branches and ATMs, less people to handle all the cash.

You remove the central authority, and it becomes anarchy.

The GP's point isn't about RBI being a central authority, but about NPCI being granted a quasi-monopoly on retail payments despite being a non-government body. One of the important recommendations from the Watal Committee report[x] was to restructure the NPCI-relationship:

1. Change ownership structure. It was 75% owned by 10 banks in India, with no seats for other players in the industry.

2. Allow competition to NPCI. This got envisioned in the recent push for a NUE[0], but with a lot of caveats. RBI ended up deferring the plan[1]

3. NPCI also is pushing heavily to move from a non-profit to a for-profit model: https://www.livemint.com/news/india/npci-turning-for-profit-.... This will significantly change the current incentives it holds.

As an example of this conflict, RBI runs NEFT and RTGS for free as near-realtime transaction platforms for free, and now 24x7 (The 24x7 was a recommendation in the report). RBI does not charge banks for interchange on NEFT, but NPCI does charge for IMPS.

[0]: https://www.bloombergquint.com/business/npci-its-nue-competi...

[1]: https://inc42.com/buzz/rbi-defers-its-plans-to-distribute-li...

[x]: https://dea.gov.in/sites/default/files/watal_report271216.pd...

> NPCI also is pushing heavily to move from a non-profit to a for-profit model

This is unlikely to end well.

It obviously costs money to banks to maintain the infra that makes UPI possible.

Cash printing, distribution, and handling is super expensive. Replacing a big chunk of that with some servers and data costs would be a huge win.

Plus they get all that valuable data about what everyone is doing...

> What is so evil about a central bank?

Don't know about India's central bank but US Fed plays with interest rates, bails out risk taking companies or their close friends creating moral hazard, prints money recklessly destroying your savings.

//US Fed plays with interest rates// That's what central banks are for. That's how they control inflation or make the wheels of economy moving by printing more money. That's literally the reason for their existence, controlling money supply in an economy.

and by playing recklessly with interest rates, they inflate assets like stocks and real estate while destroy savings. While making these decisions they decide winners and losers and then privately trade stocks to get rich using insider information.

But aren't most Americans' biggest asset their house, aka real estate? And their savings is their 401(k), aka the stock market?

Does the US Fed have a some kind of official charter saying that they will keep on inflating assets by keeping interest very very low?

Indeed, UPI is a culmination of several years of ground work laid before it (IMPS, Adhaar etc.,)

Let me add one thing here though.

> Low cost of payment infrastructure to the banks

The cost is low primarily because it's is borne by tax payers [1] and the issuing banks. Issuing banks aren't too happy with forgoing a good chunk of their profits that they earn through issuing charges and also having to maintain the infrastructure free of cost.

A new for-profit payment consortium [2] has been proposed to compete with NPCI. Will be interesting to see how this plays out.

[1] https://www.business-standard.com/article/economy-policy/mdr...

[2] https://m.rbi.org.in/scripts/bs_viewcontent.aspx?Id=3832

Worth mentioning Brazil has new transfer method called Pix that takes mostly 10 seconds to exchange money to another bank account and you only need the other person/company ID or email or phone number or a random key (the account owner choose which ones they want to allow). It came just a few years ago but basically everyone has it now since it's a payment method directly coming from the Central Bank and all banks implemented it by now. It's pretty easy to generate a QR code and bill someone but you can also set it up on your website in a way that you can check when it's paid programatically. Worth mentioning: it's free of costs except if you're a company that want to use the REST API. By the way, they even use GitHub to discuss things and document their API, really nice

Dropping in https://github.com/bacen

I believe UPI of India and Pix of Brazil actually cross absorb features from each other which is nice to see.

UPI is getting from 1st December a way to send payments by phone number or random number(key) which I believe are partly inspired from Pix. Earlier phone number lookup was a layer on top of the UPI built by the fintech companies and now it will be part of the base system.

Now that UPI's operator NPCI is focusing on cross border transactions, some day Pix and UPI can interoperate. UPI is already integrated with Singapore's payment system and similarly in discussions with few other countries.

I agree. Patrick should take a look in how Pix works (and how it was deployed and had immediate traction and explosive growth, a rare good innovation from the state). Pix is incredible and revolutionary.

https://www.bloomberg.com/news/articles/2021-10-06/pix-mobil...

Just yesterday, I deposited money from my bank account to Coinbase via SEPA. Refreshed the Coinbase page, and it was there, ready to buy digital currency with - so, the transaction was instant, or almost so. The transfer didn’t cost me anything, and neither did it Coinbase (it seems). Coinbase seems to be positive the transaction will settle, or else it wouldn’t let me use the money immediately, right? Reversibility seems to be limited for consumers, I tried that once with a fraudulent seller, and the bank basically said I can’t do that.

What’s exactly the catch with SEPA?

For the customer? Basically this:

> the bank basically said I can’t do that.

For the shop? I think it's mostly that software solutions are incredibly US centric (or more accurately, not EU centric enough) meaning SEPA always stays an afterthought.

I also want to mention SEPA direct debits. They're great from a the customer's perspective, especially for subscriptions and the like.

According to article there is a huge amount of SEPA fraud going around because seller receives you banking details. Unauthorized direct debit maybe?

I don't doubt there is some SEPA fraud but 'huge amount' is something that requires some proof. Personally I haven't seen a single instance and that's with all of my banking details public and many thousands of transactions per year across 10 different bank accounts (three companies, and a bunch of private accounts).

Yeah that confused me about the article. I've never heard of SEPA direct debit fraud, as my understanding is that SDD requires a notification to be sent before any debit is initiated to give time to the user to block it.

It surely can be an issue but I'm not familiar with people refusing to share their IBAN number because they're afraid of random charges, which is a thing for ACH numbers.

The article misrepresents how direct debit works. Just having your bank details is absolutely not enough to initiate a transfer: the user must confirm it by issuing so called direct debit mandate. This mandate usually has a limit on the amount, and can be revoked at any time. Also, the business faces penalties for repeated failed transfers.

The point is that SEPA direct debits are revokable. And by revokable, I mean they are revokable up to 13 months after a transaction. How easily it is depends on your bank : on some banks you need to send a paper letter, on one of my banks, you need to contact the customer service, on the other, reversing a SEPA debit can be done with a simple button on my web interface.

SEPA push, whose are, by definition, manual actions from yourself via the web interface of your bank are not reversible. But that’s probably not the most frictionless method so it’s rarely used other than people to people transactions, between your own bank accounts, or for really big purchases like buying a car.

I pay all my bills with push method. Thankfully most of them appear as digital bills in my bank so I just get list and accept them if they look about right. I would never set up direct debit. I don't trust anyone enough for that.

SEPA goes both ways, as opposed to what the article says

It goes in the "direct debt" way as described, so your electricity or broadband supplier can charge you every month automatically

But you can also "push" a payment to someone else (or yourself, of course)

Not sure about fraud, from what I know, everyone that does a direct debt has an identifier that can be revoked in case of fraud. So it can happen, but there are ways to block fraudulent chargers.

Leading Payment Engineer of one the most aggressive challenger banks in EU here:

- first, SEPA has several message types

- SEPA SCT: A standard transfer, usually settled the next day - SEPA SCT Inst: a realtime transfer, to be settled within 10 seconds max (check rulebook on ECB website) - SEPA SDD Core: Direct debit, this can be used to pay your utility bills e.g.; though you can revert this one up to a couple of month - SEPA SDD B2B: Direct debit for businesses, this one can't be reverted as you gave an explicitly signed permission to execute those (this one is used between businesses)

So, my idea here would be that COINBASE is supporting/using a partnerbank/PSP which allows SEPA SCT Instant.

Regarding fraud: - if one gets aware of your IBAN, the other party can try to pull an SDD, thats right. But: you can claim this one at your bank and you will be refunded immediately. (with SEPA SDD B2B, this wouldn't be possible as you would have a signed a permission) Though, unless a fraudster is counterfeiting your signature, no one will pull a SEPA SDD B2B. But, sure: Check your accounts regulary.

- regarding SEPA SCT Instant: To execute such transaction, you need to verify it by 2FA. If you give permission on your 2FA device, the money is send out.

- what if you do a typo with SEPA SCT Instant or if someone get somehow around your 2FA? In this case, you could reach out to the other bank with a so called R-Transaction, though if a fraudster is aware of all this, i'm pretty sure the person is capable of managing the rest of the track to pull the money out by doing additional subsequent transfers to other banks

P.S.: As far as i can see, Coinbase is not running through us, you may check your bank statement to see which way the money went ;-)

Thanks for this comprehensive answer!

SEPA SCT Inst is really great but banks seem to be dragging their feet on implementing it or charge a premium for using it. Probably the prospect of losing their juicy payments card issuer transaction fees isn't super appealing.

One of the most surprising things about moving to Eastern Europe (being born and raised in Canada and worked in the US) was how much better the payment systems are, from a consumer's perspective. Instant P2P bank-to-bank transfers, confirmed with a 2FA notification on my smartphone, are the default way to pay for everything from my monthly rent to clothing stores (which don't have a credit card terminal) to random ecommerce websites. ACH/Wires and Canada's Interac e-Transfer system seem archaic in comparison, and rampant with fraud (I still get fake texts about e-Transfers to my Canadian voip number weekly, and I still find the US system of wiring money ridiculously slow).

These things are even more glaring for us, in Eastern Europe.

A lot of people go: they're so much richer than us, why don't they have space lasers and flying cars and instant bank transfers now???

I guess at the end of the day we remember we're all only human, after all :-)

Counterpoint. I use Interac e-Transfer all the time. Zero problems. No spam. No fraud. Works fast. There is auto-deposit now so it's even more frictionless than before and it's sped up to essentially instant on regular purchases. And yes, I pay my rent with e-Transfer.

Agreed and it's free across all banks, and some have even raised daily transfer limits to $7000 or more. It's also one of the easiest and fastest no-fee methods to transfer money into crypto exchanges/platforms in Canada.

It is not free with all participating institutions in the Interac system. At the credit union I use they charge a transaction fee for e-transfers.

Fun Fact: UPI also allows certain other interesting kinds of transactions based on "special VPAs". These include:

- IFSC code and account number combination, resolved directly by NPCI, is represented as account-no@ifsc-code.ifsc.npci (e.g. 12345@HDFC0000001.ifsc.npci)

- RuPay card number, resolved directly by NPCI, is represented as card-no@rupay.npci (e.g. 1234123412341234@rupay.npci)

The following were proposed, but didn't take off

- Aadhaar number, resolved directly by NPCI using existing Aadhaar to bank mapper, is represented as aadhaar-no@aadhaar.npci (e.g. 234567890123@aadhaar.npci)

- Mobile number, resolved directly by NPCI using proposed mobile to account mapper, is represented as mobile-no@mobile.npci (e.g. 9800011111@mobile.npci). Instead of this, many PSPs (PhonePe/BHIM most notably) ended up using mobilenumber@psp by default because of the usability benefit, and this "centralized mobile mapper" was never built afaik.

The following are implemented at some banks:

- When bank itself is the PSP, any account identifier, resolved directly by bank as the PSP, is represented as account-id@bank-psp-code (e.g. 12345678@icici)

- A one time or time/amount limited tokens issued by a PSP, resolved directly by that PSP, is represented as token@psp-code (e.g. ot123456@mypsp)

PPIs (Prepaid Payment Instrument - wallets in India) were added to the UPI system quite late, but there's very few who've actually started working. This was also in the original plan:

- A PPI provider issued card number, resolved directly by PPI provider, is represented as ppi-card-no@ppi-psp-code (e.g. 000012346789@myppi)

There's also some credit card providers that let you pay off your card by using a special VPA (cardnumber@card-issuer). See https://www.wishfin.com/credit-card-payment/how-to-pay-credi... for a list of supported issuers. Unfortunately, this makes compliance a huge hassle because every one must treat VPAs as hazardous (because they can now contain complete card numbers).

Scroll to page 20 for the complete list: https://www.mygov.in/digidhan/pages/pdf/sbi/NPCI%20Unified%2...

This is a very useful list.

I recently found out that every FASTAG (highway toll payments) has its own VPA handle for convenient top-us.

https://www.npci.org.in/PDF/npci/netc/Bank-UPI-Handels.pdf

Oh yeah, forgot about this! NETC is also linked closly with UPI now. netc.vehiclenumber@bankupihandle

> Mobile number, resolved directly by NPCI using proposed mobile to account mapper, is represented as mobile-no@mobile.npci (e.g. 9800011111@mobile.npci). Instead of this, many PSPs (PhonePe/BHIM most notably) ended up using mobilenumber@psp by default because of the usability benefit, and this "centralized mobile mapper" was never built afaik.

There’s been a recent development on this front: interoperable mobile number payments are coming to UPI in the next few months. The special VPA format for it is mobile-no@mapper.npci.

Ref: https://www.npci.org.in/PDF/npci/upi/circular/2021/NPCI-UPI-...

Australia's New Payment Platform performs bank transfers instantly, and can use email address, phone number, or business ID as a destination (the recipient must first have registered this with their bank). No fees. It's pretty decent. https://www.rba.gov.au/payments-and-infrastructure/new-payme...

There is a delay of first transactions. PayID is what it it is called for most banks.

I believe it is 24 hours for the first, then instant after that.

What a coincidence, a fraud protection scheme that happens to make NPP unsuitable for retail payments right off the bat. Surely unintentional and nothing to do with banks and credit cards wanting to preserve their racket of skimming every purchase in the country.

FWIW what GP wrote is not true of all banks in AU. I have made several transfers to new payids recently and they have all gone through immediately.

I've never experienced that, and as others have said, it's not true of all banks; most bill it as near-instant.

I think the biggest barrier to adoption for retail payments is a visibility issue - most people I've spoken to have no idea what Osko or PayID are.

That's at the bank's discretion, rather than something enforced by the system.

It still totally undermines the system. I went two hours out of town to pickup a car, expecting to pay on the spot with PayID instantly, just like dozens of times before. It triggered the mysterious 24 hour waiting period of my or their bank (the biggest in Australia), and of course the sellers wouldn't let me take the car. Dozens of calls to the bank, escalations - nothing can be done.

I had to cancel the transaction (by lying and saying it was fraudulent), drove to the bank, withdrew the money in cash, and paid the good-old-fashioned way. headdesk.

PayID is useless as a payment system if you can't actually rely on it to make a payment in a timely manner.

PayID is the service that let's you pay to a mobile / email / ABN, but it's not the only use - smaller value transfers to a standard BSB are also often instant thanks to Osko which is also using the New Payment Platform.

I’ve never experienced that with any of the banks I have accounts with…

Depending on the bank large transfers are delayed to prevent fraud.

Also there’s BPAY for bills and things which must be pretty cheap to vendors because it’s almost always an option for any kind of internet/phone/utility etc. invoice and never has a surcharge unlike credit card payments sometimes do.

I’ve seen it for web payments but it’s not ideal because of the delay (usually like next business day) in processing.

I'm sure BPAY takes a cut somewhere along the way, and this is ultimately passed to consumers. And you can sometimes pay BPAY by credit card, and sometimes there is a surcharge for that.

Interestingly, Osko, the user-facing part of the NPP (as far as I understand it), is owned by BPAY. I'm still getting my head around the definitions of NPP, PayID, and Osko.

Another article describing what sounds like science fiction in the US but is established in a lot of the rest of the world? Perhaps I’m misunderstanding the article but when I purchase stuff online the checkout options are “bank transfer”, “credit card” or “invoice”, with the direct bank transfer often being the default choice these days.

Close,

In Germany for example most German stores have the following payment options:

1 You get an invoice and transfer money before shipping 2 lastschrift - vendor pulls money directly from your bank 3 Invoice ( rechnungskauf) - you order, get the product together with an invoice and you got 14days or 30days to pay. 4 Klarna 5 PayPal 6 Credit Card

Amazon for example send me an invoice once a month for all the products I bought.

The Lastschrift 99 percent of the cases does not check authenticity, since banks are required to get you the money back in case of fraud, and since only German banks support Lastschrift, the vendor using lastschrift will be also using a German banks. This making unrecoverable fraud impossible.

And about option 3, package theft is no problem, since DHL FedEx ups, etc. All require a signature and are not allowed to leave the package on the door step. DHL brings the package to the post office or neighbour if your not home. Of course you can designated drop locations as well but they are not allowed to be in plain sight e.g. put it in the shed or something. Bigger problem is here that people use your name with a fake address for purchases, and after the vendor contacts the police they give them your address based on name. Don't know how often it happens but it is not on scale to be scared off.

Oh and in case your login data for a shop gets stolem by scammers, if they change the delivery address German stores require that you reenter payment info to prevent fraud.

In which country and what are you buying?

In my experience (UK) the only services accepting bank transfers are financial institutions (Coinbase, Revolut). Most stores prefer to pay CC fees and have a smoother checkout experience, probably to grab those extra % points of customer converting. A lot of e-commerces online even offer Paypal (even more ridiculous fees and infinite hassles for sellers) just because it's more user friendly and can help conversions a bit more.

A couple of years ago, I even opened 2 cash isa saving account for 20k each paying by credit card because that was the only option the bank accepted.

Sweden. And anything. The same seems to be the case when buying from other Nordic retailers.

It's a no-brainer. Card processing fees are just too high (2.9% + $0.3).

Account transfers bring more flexibility and convenience and costs almost nothing.

If it could work, it would have worked three decades ago. Bank transfers are just a pain in the ass. I still remember all the fees I paid just to transfer money to another bank/another country.

Cryptocurrency was considered a way to simplify the problem, but probably didn’t work in this aspect

US? Bank transfers are couple clicks with zero fees in most of Europe.

*EU, that's the point. Outside SEPA, people still use SWIFT.

Even Swift wasn't all that bad. A bit more clicks, and a fee IIRC, but fortunately most people don't do international transfers all that often.

Zelle payment transfers are painless, instantaneous, and free. I can do it from my bank's app or online banking page. Punch in the person's phone number or email, enter the amount, done. They don't even have to accept the payment. And nobody has to describe what the transaction was for; it's highly private, beyond who the money came from / went to and the amount.

The caveat is that the money transfer cannot be undone for almost any reason. There's zero customer/purchase protection. The Consumer Financial Protection Bureau, however, has instructed banks that part of the Electronic Transfer Act requires banks to refund people if the transfer was a result of them being tricked into giving up their account details (it's not clear if this means the money would be yoinked from the recipient.)

I kind of would like the option to enable some sort of confirmation and/or 2FA for a Zelle payment (mainly this means disabling it via the website; my phone provides bio 2FA), and confirmations for receiving a payment. Those are my only complaints with the system.

But that means it can be trusted by people who want to know, for certain, that they've been paid "for real." It's instantly settled, unlike damn near every other form of money transfer system where even if the money seems to be in your account, there's still a days or WEEKS long delay until the transaction can't be yoinked back.

This makes it great for if you're selling a car and about to sign & hand over the title to the other person, for example.

It’s crazy how much Zelle has taken off in my area. Home contractors. My barber. My family.

Also the etiquette that’s emerged around using Zelle is funny too. If I’m paying someone new, they’ll normally have me send $1 as a test to make sure we all have the right contact info before sending the rest.

They should be able to request a payment instead of sending $1. If I go into Bank of America's app, I see "Send" "Request" and "Split" options.

I do not see these options on BoA's website though, which is a dumb inconsistency.

Yeah it’s pretty inconsistent. I can request money through USAA but my barber’s bank doesn’t let him request, so he does the whole “Send $1” dance.

I’ve used Zelle for years to pay my rent and it’s a real pain because you’re limited to 2k a day. So I have to spread payments on multiple days (I live in SF).

I miss Monzo.

The biggest problem with Zelle is the low limits. I cannot send more than $2500/month. One time I paid a contractor about this amount, and then, well, I couldn't use it for a WHOLE month until the limit reset itself...

Very, very annoying. One of the many reasons I prefer crypto currencies. No one restricts me about what I can do with my money

For what it's worth, the limit on MobilePay in Denmark is 15,000DKK/day, $2300.

Through the website, transfers with similar speed are limited to 1,000,000DKK a day ($150k).

In person (showing identification at the bank) I don't think there's a limit.

You will note the restrictions apply also to anyone who has successfully stolen your credentials, or is holding you at gunpoint, etc.

I'm in the lucky situation that locally I can transfer instantaneously or nearly so across all of Europe and internationally I use bitcoin for recipients in places where banking fees are too high or the transfers too slow. It's a good combination.

Why not a stablecoin with lower fees?

Because I'm more than a bit skeptical about all of the groups jumping on the 'lets mint our own coin' bandwagon. The number of stories of scam coins is large enough that I'll take my chances with Bitcoin for the moment and see which ones of the others survive over the longer term. I'm also a bit allergic to being marketed to in the name of the class of product, 'stable' has certain associations that I don't think apply to any of the crypto coins.

Usdt sure, although it’s working so far, but there’s plenty of legit stablecoin projects like usdc, or even paxos (which is what novi is using). Why isn’t stable applying to these coins?

I sent $50 in USDC yesterday and was charged $9 in fees, not counting the coinbase USD<>USDC fee which I think existed since I used a debit card.

Legit crypto users[1] should let you pay with TransferWise.

[1] ie online research chemical stores

Ah interesting, I guess USDC relies on Ethereum and so you're eating ETH's fees? I've never used USDC myself. I'm hearing Celo fees are around 1 cents.

Wise is also a great solution, but its speed is going to be dependent on a lot of factors: does it have a partnership with your bank, how long is the route it'll take, and how long each node will take to process a transfer on the route. It is streamlined though so the user experience is top notch, security wise it's a centralized system so the more people use it the more it becomes a single point of failure.

Oh, and we haven't managed to confirm the transaction yet because I sent slightly too much and Coinbase's UI won't show me the transaction ID, or even the amount sent after fees.

How do stablecoins make money? That is how do they pay for everything they do? It either has to be fees or some sort of investment. And investments can always crash, thus resulting loss of money...

Circle makes money on the yield they get from the treasury bills they hold. If US treasury bills crash, the stability of USDC will be the least of our worries.

Transfer fees.

Because you should be skeptical about their claims about being backed by real money.

Some projects are actually extremely serious and audited. For example, Paxos/USDP, USDC. Diem/Libra's proposition was exactly that also.

USDC has not been audited, they have only had attestations.

I don't know about three decades ago but this type of payment has been ubiquitous in the UK for at least two in the form of Direct Debit and widespread across Europe for years now via SEPA.

It is not just much cheaper than card payments, it is also dramatically more reliable. If you lived in a parallel universe where all of these payment methods had emerged at once and you described a payment method so unreliable that people would actually give a name to the hack of retrying each failed charge automatically, they would think you were joking.

Ironically, despite in theory having a more generous reversal policy to protect consumers from fraud, these direct payment methods are also much less likely to result in inappropriate reversals that harm legitimate merchants, at least in our experience. Perhaps this is because banks will typically only reverse in cases of real fraud whereas card chargebacks are widely abused to commit fraud themselves or applied inappropriately as a blanket measure after an event like a stolen or lost card, and the incentives favour granting the refunds even if the customer just says for the flimsiest of reasons that they want their money back.

This seems out of touch with modern offerings e.g. wise.com. Easier than PayPal with none of the crazy bank transfer fees.

Wise fees are still too high for international transfers. They are doing currency arbitrage to sweeten the deal they get.

Wise is too slow (especially for transactions involving the US) and still expensive.

India, a third world country has worked it out. Apart from UPI, we have other bank transfer mechanism that doesn't involve writing a check. There's RTGS (Real Time Gross Settlement) for large payments. It's what we use when we buy property or do large business transactions. There's NEFT (National Electronic Fund Transfer) for instant transfers upto INR 500K. There's IMPS (The underlying mechanism of UPI) for instant transfers upto INR 100K.

Intra-bank transfers are always free and instant because bank is just changing numbers on two accounts in the same database.

It has been so easy to move money between banks in India that we don't even think about it.

A decentralized system like crypto which uses pointless proof-of-work to remove trust providing intermediaries are just too slow, expensive and overall inefficient by design. They won't work in real world.

1. India is a single country, cryptocurrencies are global

2. Nobody uses proof of work anymore (besides bitcoin)

> 2. Nobody uses proof of work anymore (besides bitcoin)

And Ethereum and...

True, but Ethereum is moving away from it. If we're talking about modern cryptocurrencies, what's the point of including Bitcoin and Ethereum in discussions?

Well, are they really though? Sales taxes are more than twice that where I live, and anyway I don't have to pay it directly.

You can probably get a volume discount on that 2.9% in the US. In Europe, Stripe starts at 1.4% + $0.3 for charging European cards.

Thats because the EU regulates fees.

You can DEFIANTLY get a volume discount from any credit card processor based on volume. Typical large merchants are paying Interchange Plus at a much lower rate than what's listed on Stripe or Square. Interchange is the rate paid directly to the card issuer and Visa/MC. Plus is paid to the merchant account (Stripe).

The actual itemized fees inside of that Interchange fee are mind boggling.

Indian here. One thing you should remember is that UPI is free (so far) because it is not a 'Credit' product yet. With a credit card, someone is giving you a loan for x days and there are costs associated with it - interest rates, default rates, etc.

Of the 2.9% that Stripe (or any other processor) charges, a majority of the fee goes to the credit card issuer, i.e. bank. You probably chose to use a particular credit card because of the rewards offered by that particular bank. So, practically, a majority of the 2.9% fees goes to the issuing bank and a major portion is returned as rewards to the credit card user, i.e. the payer. Since the merchant, i.e. the seller, probably raised the prices by ~3% in order to afford the processing fees and credit card users get back most of it in rewards, people that use any other mode of payment end-up paying extra for the same product practically.

'Credit' cards are going to cost money for the foreseeable future. Issuing banks charge anywhere from 1.8% to 3% or higher for processing credit their cards. Processors add a markup on top of this fees to their merchants. 'Debit' cards issued by the major banks on the other hand, cost less than 0.5% for the processors. Stripe charges 2.9% for both debit as well as credit cards, YES but their costs to them are not the same.

I am a complete noob when it comes to this stuff, so forgive my ignorance, but doesn't the U.K already have all of these things? Is it a global leader in payments/banking/fintech or is the US just so far behind the rest of the world?

In Germany we have a bank transfer based system called Giropay.

As part of the purchase process after picking Giropay as the payment method you get asked what bank you're at and then get redirected to a special version of the bank site (for my bank it is giropay.normal-bank-domain.de instead of the usual www.normal-bank-domain.de) where you log in using 2FA etc as usual and proceed with the bank transfer. Once you are finished you get redirected back to the merchant. In the background, Giropay confirms your payment with the merchant so that the merchant knows she will receive the money soon.

I think it's a good system. Not all banks participate in it, however.

Let's adopt patio11's criteria to a programmable public blockchain, like ethereum

- Customer UX: crypto wallets built into browsers and phones. Connect your wallet to any webpage to pay. Or, tap your phone to pay via a crypto payment

- Certainty: crypto transactions are, by default, instant and irreversible. Any kind of chargeback scheme, refund policy, or time-delay may be built into the crypto app layer

- Settlement time: per previous remark, crypto transactions settle instantly on a global basis, unless a slower speed is built into the app layer

- Reversibility: again, crypto transactions are irreversible by default, and any kind of reversibility scheme or policy may be built into the app layer

Doubters or critics of ethereum's ability to handle global-scale payments may find the following items to be of interest:

- Scale: ethereum has adopted a rollup scaling architecture where separate physical networks settle on ethereum. These separate networks are known as rollups aka Layer-2s aka L2s aka execution layers,. Some of the most important L2s are Arbitrum, Optimism, StarkNet, zkSync 2.0, and Miden. These L2s will help grow ethereum to billions of daily active users

- Cost: ethereum's rollups may be expected to be cheap enough for everyone in the world, especially using a technology known as "zero-knowledge rollups with off-chain data"

- Environmental impact: ethereum is five and a half years into a six-year upgrade to completely eliminate any negative environmental impact. Ie. Ethereum will stop using proof of work mining

You keep saying “instant”, but in practice ethereum takes a few minutes for finality and can only handle a maximum of 50 tps. I’ll grant that both of those may improve with as zk tech matures, but even with rollups there’s no way of having better finality than ethereum, which is unlikely to ever be better than 60s

In practice, rollups can offer better finality than ethereum's base layer by using a bonding scheme. Basically, a rollup provider can sign a message that says "I promise that this transaction will become finalized, otherwise I forfeit my bond." Depending on the implementation, the receipt of that message can give the payment recipient pretty good confidence that the transaction will be finalized. I believe some rollup providers are either doing this already or currently researching it.

- Customer UX: This really isn't as straightforward as you put it. The main issue for customers is that if they loose their wallet, they loose everything. This has to be accounted as part of UX, even making transactions is simple and straightforward.

- Settlement/Certainty time: Blockchains combine these into one. They depends heavily on the specific chain. For some networks, its basically instant. Eth seems to be around a minute or so. Bitcoin is around 60 minutes.

- Reversibility: Agreed, although whether this is good or bad depends on the user.

I like the way it was said in the article, these are all axes of comparison. Consumers choose products based on a set of criteria. For many, irreversibility or the risk of loosing everything due to a lost wallet is a dealbreaker, even if transfers may be much faster than other methods.

> Customer UX: This really isn't as straightforward as you put it. The main issue for customers is that if they loose their wallet, they loose everything. This has to be accounted as part of UX, even making transactions is simple and straightforward.

At scale people will want to use custodians for large amounts of money. So basically banks will always be a thing. Only the backbone is changing.

If people are using banks at scale, what is the advantage over just using banks currently? I guess international transfers but using blockchain implies all the banks handling most of the digital currencies (or all using the same one) and so I don’t see the appeal above some fast centralised clearing house for transfers.

> - Environmental impact: ethereum is five and a half years into a six-year upgrade to completely eliminate any negative environmental impact. Ie. Ethereum will stop using proof of work mining

Reduce, not eliminate. Maybe, maybe it would stop having additional negative over regular money transfers but "completely eliminate" requires magic (negating effects with credible offsets is viable).

Just to be clear for anyone not familiar with the space, poster is describing the bright future of tomorrow, not the difficult reality of today. So right now an ETH withdrawal on Binance costs ~ $20.

A lot of people have expressed the sentiment that "the GAS price is too damn high". It is so high that interacting with "useful" stuff like swap contracts or liquidity pools costs $50 - $100 per shot and lots of interesting use cases are shut out because network fees render them uneconomic. It is sort of a burning problem that leaves the ETH of today as a network mainly for purists and whales.

I agree with parent that long term the future looks much brighter.

I like how truelayer operates. Takes me to my banking app where I authorise the payment using my bank auth. No middlemen "value-adds" -X%, no keying in card details, no crappy browser autofill and CVV. Admittedly this only seems to work via mobile at the moment and haven't seen it on the web yet.

The Amazon VISA announcement shows that maybe card providers and their payment service providers are next on the disrupt list. They might go the way of the dodo.

I like TrueLayer as well, albeit it's not free for the provider. TrueLayer is the middleman.

They probably don't get as much money as CC payments though. Revolut topups / Nectar / Chip are now all using TrueLayer.

On the cons side, it doesn't work so well on all devices (I had problems going from app -> browser -> app on older devices, probably because of RAM limits).

Ideally, we could just have a free open-source wallet application that connects to all the different banks via Open Bank API (same as TrueLayer) and then just have a special walletOS://revolut/topup/250/gbp link in the app which opens up your wallet and allow you to send an instant bank transfer.

Zero fees, zero middlemen.

I've been toying with the idea of building it but it's not immediate to monetise, so I'll do it once I'm rich and bored and keep selling simpler services to business for now.

You could potentially upsell a saving / personal analytics premium service once you have enough adoption or resell transaction data (even if the latter won't probably be a very popular model, given modern concerns with muh privacy)

The main problem it would solve for me is that I have something like 8 different banking apps on my phone which I hate with a passion and I hate Credit/Debit Cards: sharing your single secret everytime you're paying for something is just plain retarded plus we're just enriching Visa and Mastercards, which produce zero innovation in FinTech.

I don't think that sounds like a bad idea at all. The payments market is massive and there is plenty of pie to go around.

Smaller transaction size sites and apps that struggle with payment fees might interested in that as TrueLayer seem to focus on major players.

If pay with debit card you are doing a bank transfer. Maybe in the US most people are using credit cards but in EU many are using debit cards.

In the US, there is a difference between debit cards, ACH, and bank transfers. They are three separate things.

care to explain?

Sort of in the sense it comes from your bank account; but the settlement process is different, and can take longer.

Faster Payments (bank transfers in the UK) for example settle 3 times per day and are intended to be instant.

Debit cards usually settle daily and there can be a delay; which is why you will see an Auth on your account (card payments go; Auth to lock the money, Payment to set up the payment, and Settlement to move the actual cash). This is why the EU mandated banks start to show actual funds available (balance less all auths and other pending payments) as it can sometimes take days to settle debit card payments and people can be unsure of their balance.

In general, finance is an example of the "99 standards" error; in that every so often new standards come in to fix things but just add another approach to the mix (don't get me started on Direct Debits!)

Not really. From a purely technical perspective there’s no real difference between a credit card and a debit card. The mechanism for moving money is identical.

The only difference is that one moves money from a credit account, the other moves it from a debit account.

The costs via Visa/MasterCard are broadly the same. The clearing and settlement process is also broadly the same. Neither are as quick or finite as a bank transfer. One big difference for a merchant is that debit/credit cards have a dispute process (called chargebacks), whereas bank transfers generally don’t.

The maestro cards in Germany aren't real maestro cards, but co-branded girocards that only use the maestro network outside the EU.

They end up making an actual, real chip+pin authorized bank transfer.

Here in New Zealand we've ditched checks as a payment method, bank transfers have been the norm for paying bills for years now.

> ACH payments are generally free to end users in the U.S., though a few banks will attempt to monetize them. (Looking at you, Bank of America.)

Stripe also charges for ACH. ACH payments on Stripe cost 0.80%, capped at $5. [1]

https://stripe.com/blog/accept-ach-payments

Re: bank transfers in Japan, TFA states that after-hours bank transfers are still in the making, but, my experience is that the 24/7 instant transfers have pretty good coverage already - recently every transfer I've made or received has arrived instantly (to like 3-4 different banks from my rural institution). Once I didn't have the cash to cover my bar tab at like 1 AM on a Saturday, but the bar took PayPay. I didn't have enough PayPay balance, but I could do a transfer from my main bank to PayPay bank and refill my balance. A lifesaver!

In Thailand most in person transactions are done by bank transfer via QR code:

https://www.bangkokbank.com/en/Personal/Digital-Banking/Prom...

The local sellers pay little to no fee, and the transfer is instant. All of the popular banks here support this form of payment.

It's also very common for people here to do bank to bank transfers, and they are all instant.

The US is behind in many ways.

> result in the recipient learning two things about the sender (name and phone number, both of which are configurable at transaction time)

The recipient of Japanese bank transfers only gets the name. The phone number is only for the sending bank's side to reach out to the sender in case the transfer failed. Particularly of importance when you make transfers without owning an account at the sending bank (not sure how common that feature is outside Japan).

Also of note, the Zengin system actually allows additional metadata in so-called EDI messages. However it's somewhat rare to see this offered by interfaces, and so likely not generally suitable. Here's one example: https://faq-chibabank.dga.jp/faq_detail.html?id=31

> The Single Europe Payment Area (SEPA) offers free, instant transactions between European banks. They’re pull based

There are also push based SEPA transfers. Not that the article claims there aren't, just seems incomplete to present only the push based version for Japan (and not furikae and its challenges) and only the pull based version for Europe.

+1 for UPI.

However, UPI is not "open" in the true sense (you can't have an app running on linux or AOSP for instance). It's locked to certain apps, which apparently need license from GOI. The whole Indian banking system is also too reliant on SMS + TOTP.

That UPI locks people to US proprietary systems, while GOI also has been making noises on tech monopolies, is apparently an irony not apparent the babucracy.

What “US proprietary systems” does UPI lock people into, exactly?

The number of available UPI apps today exceeds 100. Some of the big ones are created by US companies, sure, but many are created by Indian/non-US-owned companies. There is no lock-in though.

Also, UPI is not on Windows/MacOS either, so it’s not correct to infer that it’s “not open” simply because it doesn’t run on Linux. It was designed from the start to be a mobile payment system, and there are good reasons for that (more on this below).

The reason it doesn’t work on AOSP is, I presume, due to security concerns related to rooting (similar to why it doesn’t work on older known-insecure versions of Android/iOS). The security/fraud prevention mechanisms rely on proving that your device has a SIM card with the phone number linked to your bank account - and the same phone number is tied to your identity via Aadhaar. These guarantees are presumably much harder/costlier to ensure on such devices.

EDIT to add: There is also an economic angle here: the above description of reliable, low-cost KYC in UPI also reduces the cost of operating the network (both directly by simplifying KYC, and indirectly by making fraud harder).

Source: I work on a UPI app (although I am by no means a security expert).

>family fraud (child and parent disagree with respect to desirability of purchasing the video game; bank backs parent; video game seller loses out),

'Fraud' is not a name for everything a seller doesn't like. This can happen without any bad intent, and the seller lost nothing. And frankly, if a video game seller didn't allow this type of refunding, they'd have much less of a market.

> If you don’t live in India, it is highly likely that your bank-to-bank transactions involve giving your counterparty a code representing your bank, a number for your bank account, and some metadata about yourself.

No. It involves anyone billing me giving me their bank account (IBAN) number, and usually some reference number too, along with the amount and due date.

> The Single Europe Payment Area (SEPA) offers free, instant transactions between European banks. They’re pull based; a user communicates their banking information to a business, which debits the user’s account, rather than the business communicating their banking information to the user in order to send them money.

Sure, maybe that also exists -- but why would anyone accept doing it that ass-backwards way around?!?

All in all, one wonders whether this guy just doesn't know what he's talking about (when it comes to Europe), or if perhaps he has some reason to outright lie.

> My employer Stripe...

Oh. Well, I guess that answers that, then.

> n the U.S., I expect bank transfers will struggle to see general adoption as a payment method, even after the release of FedNow, but who knows what will be built on top of them. Cards are very popular and entrenched, and the economic model allows them to outcompete free on price alone. New payment methods will need to find something very interesting to offer to capture the user’s interest, and some participant in the transaction to pay for it; Buy Now Pay Later had the interesting insight that some businesses would happily underwrite their customers’ use of credit if someone else took the payment risk. Perhaps we’ll see similar experiments in applications using bank transfers as the underlying payment rail but with more complicated economics split creatively between the parties.

Well, yeah, the other thing is, what interest do I have in letting the merchant get my funds directly without a middleman who promises to step in in the case of fraud? I am quite happy to continue paying with credit.

Nobody mentioned GoCardless, so I do. I think it's a nice option compared to all of these payment methods which are just additional cake frosting ton credit card infrastructure. - https://gocardless.com/direct-debit/introduction/

In Southeast Asia, bank transfers as payment are part of the norm.

On our platform much more than half of all payments use bank transfers.

For Malaysia specifically this is facilitated by a nation-wide provider in which all banks must participate.

Because of that payment gateways can just integrate with that provider and not with individual banks.

The maximum fees are also set by the government. Transfers must be free for GIRO clearing and are very low for instant clearing and have been required to be waived since before covid.

The result of this is exceedingly positive in my opinion.

For instance one bank has a QR code that you can print (which contains basically just the account number) and you can pay in shops by scanning it. But besides that for random other things people will accept bank transfers. For instance, plumbers, AC repair, etc typically only take cash but in my experience will accept a bank transfer.

Southeast Asian resident here as well. We even pay shipping fees by bank transfer to our motorcycle drivers (!). This is like 0.5$ or 1$. Everyone has a bank account and transfers happen instantly thanks to a free, 24/7 platform that all Banks partake in.

Interesting idea, but banks block this. My German bank until recently offered SEPA "instant" bank transfers, which make the cash appear on the receiver's end if both the sending and receiving bank support instant payments, for free. Recently they set the cost of instant payments to 1€ per transaction, without guarantees that it will complete as an instant transaction (depending on the receiver's side). Nobody will pay that money without the guarantee that the service bought is also rendered as such. On the web, waiting until the next clearing window completes, or the next bank business day, is not a payment option and has impact on the supply chain (when the merchant is confident enough to start the shipping process depends on if he has payment guarantee or not).

UPI has been truly revolutionary for me here (in a mid sized city in India). I almost do not remember using Cash from the time the Pandemic started. 5 Years ago if someone had told me I could live Cash free for 18 months I would have thought that future is decades away in here. One point I would like to add is the recent changes with UPI Autopay have significantly reduced the friction of recurring payments. It is not made completely friction less as the India financial regulators believe that some friction in recurring payments flow is better for consumers even if it is worse for business.

Not sure what rubbish he is talking about.

No doubt some money transfer need a caution media like property sale and Bitcoin etc. Most just a matter of efficiency. We can use cheque in one stage. But move to credit card. Then for quit awhile nos many places use debt card. And many places has its location specific stored value card Oyster card, octopus card, ..

Credit card elimination is a possibility in fact. Hence these days even credit card for low value transaction so to involved.

Elimination of middle man and use it in an appropriate manner by finding suitable way is always. From shell to …

Bizum in Spain is awesome: associate your bank account to a mobile phone number, send and receive money with just the phone number. Both for individuals (free) and businesses (very low fees). Since every bank in Spain supports Bizum, it has been a turning point for everybody. Of course VISA and MasterCard are not happy since they are losing more and more transactions.

https://bizum.es/en/

In Switzerland, most (e-commerce) businesses allow to buy on invoice, e.g. you just pay by providing your name and address. Is this prevalent in other countries?

The shop usually provides 2-4 weeks of credit until that invoice gets paid eventually.

There's a whole industry behind that, where businesses can sell the risk to a third party and receive the money instantly by paying a commission based on the risk assessment of the buying party.

Is there a name for that?

How is fraud handled in this case? Name and address is relatively easily accessible public info. Do they notify the person that there is an invoice against them before they ship the product?

Paying by bank transfer is pretty much universally accepted in Thailand now after the pandemic severely reduced reliance on cash. even tiny vendors will do bank transfer with a QR code now.

Better yet there are no fees so it's great for merchants too.

Unfortunately online is a different story. For now even bank transfers are usually mediated by a 3rd party that charges fees and is generally a nuisance. hopefully that is fixed soon too.

While I am by no means an expert, the implication of the article is "worldwide all bank transactions do not include enough metadata not enough auth security to make them machine processable, and while you can usually guess, that's either a liability or manual process(or both).

Basically across the globe, finance will benefit from the sort of basic metadata an undergraduate would put in their first draft.

In terms of credit cards being "cheaper than free" in the US, I've noticed more places offering cash discounts in the past year or so

Does anybody know of a way to make recurring SEPA (push) payments?

My bank requires manual interaction, so I have been looking for a card-to-SEPA gateway - without succes.

Reason: Binance offers recurring DCA but with hefty fee for Visa/Mastercard. Binance partnership with AdvCash makes SEPA "zero"-fee possible. AdvCash accepts SEPA, but my bank cannot make recurring SEPA payments.

It depends if your bank supports such. For me it does. I for example have setup my rent to go on same day each month for up to year or more to my landlord. Each of these is separate repeating push payment with same details(message/reference number). And all of them are pre-approved.

That must be down to your bank's specific system. I've been paying my rent that way for... Closer to two decades than one, I think. If theirs is really that stupid, maybe you should switch to another bank. Ask around if anyone you know has a better one.

We have such a platform but they screen scrape your bank website in order to do direct payments to a merchant - it is a pain to do this yourself because you need to fill in so much detail i.r.o account nr and reference id.

I have 2FA enabled so I still need to authorize the payment via my cell.

Wish our banks would expose functionality securely without me giving them my bank web login details.

Does any European bank actually have a public API?

My bank (Danske Bank) does not. Even the first step of logging-in with our digital sign-on (NemID) is a bit tricky to automate. (MitID's rsa key fob might make it easier)

https://truelayer.com/

https://developers.monzo.com/

https://developers.danskebank.com/ though "Requires a QWAC+QSEAL issued by a QTSP".

(Does any bank anywhere have a truly public API?)

the article completely missed the talking about the online payment system in China which is at least 10 years advance than the counterpart in US or india or any other countries in the world.

Any details?

Someone please tell Patrick about bitcoin... Jk, he works for stripe/banks so he has to turn a blind eye. Feels like I'm watching Kodak resisting the digital camera all over again

Bitcoin lacks reversibility, which turns out to be a necessary property for a payments network to cover all use cases.

This (as well as expensive fees, until lightning, and wild price fluctuations) is why it never really caught on as a SWIFT/Western Union replacement.

This is all great if the currency between the buying and business is the same (ie, USD to USD), but still does not fix transactions between entities of different currency types.

In my opinion, this is where cryptocurrency as a payment method for B2B, B2C will shine. No more dealing with foreign transaction fees and conversion fees. Plus the added benefit of not converting your money into an unstable currency (ie, Turkish Lira)

Crypto currencies are great for paying people whose names and banking details you don't necessarily know. I've used them to pretty good effect to date and the fact that they have all the drawbacks of cash and are used by criminals too doesn't diminish any of that.

.. wait until you find out what cash is used for.

Or precious metals

Banh mi?

Spreading cocaine dust?

I use it for buying groceries.

You could also just have a bank account with money denominated in USD or Euros or something.

You can have a cryptocurrency wallet with money denominated in USD or Euros, too (asset-backed stablecoins).

…which is the same thing as a bank account but not FDIC insured and now you have to pay cryptocurrency transaction fees.

But you don't have to pay bank fees, and you have access to global payment and smart contract networks. It's all trade offs.

Doesn't using cryptocurrencies just mean you have even more conversion fees?

In the current reality where nobody else uses cryptocurrencies, you're going to be converting at both ends to national currencies (if anything at least to pay tax)

Even in a hypothetic crypto utopia, there's no chance that we'll get one single currency to rule them all, so you're going to have to convert every time you pay for something (every market is going to have it's own currency)

>This is all great if the currency between the buying and business is the same (ie, USD to USD), but still does not fix transactions between entities of different currency types.

When trying to send about $2000 from the US to Canada earlier this year, I found that the cheapest and fastest method was to do it via BTC (and within Coinbase, so free).

> transactions between entities of different currency types.

Because crypto->USD doesn't have any conversion fee. Right.

>Plus the added benefit of not converting your money into an unstable currency (ie, Turkish Lira)

You mean, 'unstable' like Bitcoin, right?

This is already very common in Australia and Canada. I'm sure a ton of other countries too.

Bill payments sure, but not many businesses accept Interac e-transfers.

I bought something here in Australia last week with a bank transfer, and I've paid plenty of business using e-transfer in Canada - especially when covid kicked in.

I was forced to pay Qantas using BPAY (as in, I did not want to spend $70+ on card fees). I ended up cancelling the flight for a full refund and was told I need to wait up to 12 weeks to get it paid back into the account.

Definitely not as flexible as a credit card payment which would have been reimbursed within days.

Stores don't and it's not used for making recurring payments, but small businesses use it. Half the payments made to my small Canadian business are eTransfers.

Does nobody here have a target red card? That’s what they do and they give you 5% back

Scanning a QR code to make a payment in China is also very interesting.

Surprised Canada's Interac system was omitted from this post.

I would love to see direct transfers replace payments via credit cards, which provide very little utility to customers in the end. I would also like to see this serve as an alternative to PayPal or Stripe or other such intermediaries. All these companies simply create unnecessary centralization points. And that also means they come with a central authority. And what do these authorities like to do? They like to build up market power, shelter themselves from competition, seek rent, and impose their political/moral will on their customers and on businesses. We saw it with porn. We saw it with Wikileaks. We seek it regularly now in the age of deplatforming. It’s time to move past them, and crypto does not have to be the only answer.

The only exception is Amazon who will do a SEPA pull instead.

Wait, didn't Patrick ask for his stuff not to be posted to HN anymore?

https://news.ycombinator.com/item?id=29122338

https://news.ycombinator.com/item?id=29041030

Not exactly, and if he happens to write something every week that the community finds interesting, it seems to me we're all better off. If anyone can do that it's probably patio11 :)

Neither of those comments ask for the articles not to be posted to HN. They both ask for people to be "selective in submitting these", which I understand to mean: don't submit every single one indiscriminately, just the ones that would be of particular interest to the HN community.

Ah, so it's marketing then. Got it.

Yep. In particular I’d like to only be front paged when I’m writing well relative to my beat and my ability, not just because I have high name recognition or am better than the least interesting thing on the front page, which is a bar I think I’d clear too often to be healthy for the community.

Allowing site owners to declare zero-karma could nullify the market pressure. The site owner would be saying “let people post my stuff, but don’t give them any karma for it”:

    $ curl https://example.com/.well-known/hn.txt
    Nokarma: /

That could have a side effect of promoting commentary blogspam about the original post instead but dang et al are pretty quick to swap out those links for links to the original material, which would then pick up zero karma.

That's a good one!

Reply on news.ycombinator.com