Looks like he just reinvented the wire transfer. In Europe, a lot of money is transferred like this; I can even make transfers from my phone.
Sounds like ACH. I don't think it's possible for individuals to use on their own, though.
I can just log into my bank in Germany and transfer money to any account in Europe (even in the UK) with zero fees. As mentioned, it's a very common method of payment because it costs nothing to set up or use. Only downside is that transfers usually take a couple days to clear.
It's still nothing close to $25 - I pay 34 cents.
Regulatory capture. There's a ton of financial incentive for the banks and processing networks to push credit. Instead of a simple processing fee that gets pushed to near-zero, they can get a percentage transaction fee from their monopoly network, possibly participation fees from the merchants, lock-in/network effect, they get to push credit debt to increase revenue from the purchaser, they can run 'promotions' and 'rewards' programs to stimulate use, etc.
Even before the overdraft racket had a light shined on it, banks and networks were pressuring merchants (through 'incentives') to shift transactions back to credit. They were raising debit processing and card fees in direct response to the revenue effects of consumers switching to debit. Lowering potential debit revenue by cleaning up overdraft nonsense just put the final nail in establishment incentives to support debit.
There are a ton of alternatives out there for transferring money. Wires are just one Fed product that happen to have a specific speed/security/limit/regulatory system.
Off the top of my head, if you want to move money, there's at least: ach, wire, image clearing, paper check clearing, image exchange, the atm network(s), the debit card network(s), the credit card network(s). That's leaving out paypal, western union, dwolla, and whoever else has started a money transfer business.
Almost every single one of those has different guarantees about timing, reversability, regulations, and transaction limits.
Wires happen to be a ca. 2 hour difficult to reverse (but possible) from /to banks connected to the FED. They're more expensive, probably on the order of $1 + staff overhead.
ACH is a roughly overnight to/from any bank connected to the fed, pretty easily reversible for 3-90 days. They're ~$.01/transaction at scale, and you can batch huge numbers of them into one file, so they scale. That's where most bill pay and direct deposits go, as well as a ton of other stuff.
I'm also not clear how the recipient supplies their info to the sender's bank. If I don't have an ING account, how can they verify that I'm me, and not someone else who's pretending to be me in order to intercept the transfer? As I recall, when I've done wire transfers, I've always been given the account info of the recipient for me to provide to my bank (but I haven't done this very frequently).
Edit: I just saw your other reply where you describe the ING app. I guess that works, but it's rather unfriendly. I'm always a little wary of high-security stuff (such as money transfers) that depend on email, too, but that's also an issue for Dwolla and probably a lot of the other payment startups.
But how is that any different from a credit card number? I have all my bank info in my pocket, right on my Maestro card. No expiration date, no CVV code. Just an account number and a publicly-known bank number. If I'm authorizing a direct debit, that's all I have to enter.
The 6 digit sort code is unique for the bank branch across all UK banks, generally the branch on record for the account (most UK banks use the sort-code for the branch the account was opened at). Unless you happen to mistakenly enter an account number and sort-code that matches, and you manage to mistakenly enter the name of the account holder for that bank account, they'll usually catch it.
The situation is similar across Europe, so if this is a problem in the US, it's a problem of the banks own making, and one easily solved the same way it was in the UK: By adding a sort-code, and matching on the name as well.
Knuth stopped sending checks for rewards specifically because it turns out that giving random people your account info is a bad idea.
I fail to see what negative consequences that have.
I have a hunch that the penalties for check fraud are disproportionately severe compared with crimes of a similar social impact. I wonder if the same would be true with ACH transfers. My point is that governments take bank crimes seriously as prosecute them aggressively.
I'm sure that the penalties for check fraud are quite high. Nonetheless, I don't want to be a victim of check fraud. It's a massive amount of hassle when you have to fight financial fraud, and sending the criminal to jail doesn't change that.
The banks didn't do this willingly, they were forced to by the EU.
This was true sometime ago. Now, the recipient only needs to supply the sender with the last 4 digits. They then verify their own information to complete the transaction.