FedNow FAQ
federalreserve.gov
federalreserve.gov
1. Are the transfers irreversible?
Why? Because one big problem with our current system is the fraud (and mistrust) that results from ACH/checks being sent under the impression they are guaranteed funds, but being reversed by the sender or because they didn't actually clear, days (up to weeks) later. This is a big source of scams. People are out lots of money because of this, and continuing every day that this doesn't get resolved. Not saying that we can protect everyone from everything, but this is a no-brainer. Are the transactions final (unless there is legal action and both parties are identified)?
2. Is it a "push" only system?
Push, obviously meaning that only the account owner can initiate a transaction to transfer funds out of the account. I figure it must be, if things are instantaneous and irreversible (but that is to be confirmed). I don't want any more of our current system where someone knowing my bank account numbers can accidentally or purposefully withdraw money from my account and it's up to me to detect and ask for that to be fixed. This is ridiculous that we still have a system that allows that.
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Of course, this new system means that people will need to be educated/trained on some of the dangers that may not be apparent when a system changes. Like, if someone gets duped into sending money, it is now irreversible. Or if fraud is committed somehow, there is no recovering from it. It probably (hopefully) will have to come with new types of account protection given these facts. Some problems will now be prevented, but new problems may be caused. An updated diligence on the part of users (and the system) will also be needed.
I think it's a welcome and overdue development though.
It didn't seem entirely clear, but it seems like request-for-payment is a supported feature, and that they will charge 1 cent per RfP transaction. The wording as a "request" makes it sound like the one paying will still have to approve the transaction on their side for it to go through
Without trust, it just won't work and that's where the credit card companies did it right by guaranteeing against fraud. Of course, they did this off the backs of the merchants instead of putting their own money at risk but that's a different discussion.
Banks participate on the NPCI payment network.
I can assign a Virtual Payment Address (VPA) such as payxyz@mybank and give that VPA to anyone that needs to transfer funds to me. At the moment, there are no transaction fees with a transaction limit of INR 200,000 (approx. $2500). This makes it unnecessary to share any sensitive bank routing numbers / account numbers etc., One can create different VPAs for different purposes/payers.
UPI has had impressive growth in transaction volume (both # and monetary value) since its inception in 2016. https://www.npci.org.in/what-we-do/upi/product-statistics
The transfers are instantaneous (i.e., completed within seconds) and accounts debited/credited. The system works transparently across banks due to the network being managed by NPCI.
Like, could I use a credit card with UPI?
Thirdparty apps can also implement the API to provide services on top of UPI eg: bill pay, ticket booking for buses, trains, movies etc.,
Payment processors provide UPI as a payment method (in addition to debit cards/credit cards/netbanking/digital wallets etc.,).
To answer your question on credit cards usage with UPI: No, you only need a bank account. UPI is a p2p payment overlay over the banking network.
As it stands, it's common infra for a lot of instant settlements in the country, including payments for toll-booths at highways.
> Neighborhoods are leading segments with no specific meaning, whose purpose is to help route to the right area. At this time, there is no official list of neighborhoods, but the following list of examples should illustrate what might constitute a neighborhood:
> `crypto.` for ledgers related to decentralized crypto-currencies such as Bitcoin, Ethereum, or XRP.
> `sepa.` for ledgers in the Single Euro Payments Area.*
> `dev.` for Interledger Protocol development and early adopters
From "ILP Addresses - v2.0.0" [2]:
> Example Global Allocation Scheme Addresses
> `g.acme.bob` - a destination address to the account "bob" held with the connector "acme".
> `g.us-fed.ach.0.acmebank.swx0a0.acmecorp.sales.199.~ipr.cdfa5e16-e759-4ba3-88f6-8b9dc83c1868.2` - destination address for a particular invoice, which can break down as follows:
> - Neighborhoods: us-fed., ach., 0.
> - Account identifiers: acmebank., swx0a0., acmecorp., sales, 199 (An ACME Corp sales account at ACME Bank)
> - Interactions: ~ipr, cdfa5e16-e759-4ba3-88f6-8b9dc83c1868, 2
And from [3] "Payment Pointers and Payment Setup Protocols":
> The following payment pointers resolve to the specified endpoint URLS:
$example.com -> https://example.com/.well-known/pay
$example.com/invoices/12345 -> https://example.com/invoices/12345
$bob.example.com -> https://bob.example.com/.well-known/pay
$example.com/bob -> https://example.com/bob
<meta
name="monetization"
content="$wallet.example.com/alice">
[2] https://github.com/interledger/rfcs/blob/master/0015-ilp-add...
[3] "Payment Pointers and Payment Setup Protocols" https://interledger.org/rfcs/0026-payment-pointers/
"The service will include a $25 monthly participation fee for every routing transit number enrolling in the service. Then there will be a $0.045 per credit transfer and one cent for a RFP message to be paid by the requestor."
And a routing transit number is a 9 digit number that identifies the bank, not the variable number that identifies each individual account [1]
"A routing transit number is a nine-digit number used to identify a bank or financial institution when clearing funds for electronic transfers or processing checks in the United States. A routing transit number is also used in online banking and clearinghouses for financial transactions. Only federally chartered and state-chartered banks that are eligible to maintain an account at a Federal Reserve Bank are issued routing transit numbers. "
[0] https://www.pymnts.com/news/faster-payments/2022/fed-release...
[1] https://www.investopedia.com/terms/r/routing_transit_number....
According to https://bank.codes/us-routing-number/bank/ there are around 18,000 current routing transit codes active, which would amount to about $5.4M annually if all 18,000 were enrolled in FedNow.
According to https://www.statista.com/statistics/871706/zelle-payments-nu..., Zelle processed 436 Milion payment transactions in Q2 2021 alone. If FedNow were to do the same volume, they would net $19.62M per quarter, around $78.5M a year.
Around 2018 most banks started including free Interac transfers for all chequing accounts and now I only see the fee charged for savings accounts.
For comparison, Square, which usually charges 2.65% of each transaction only charges a flat 10 cents for contactless Interac payments. Not technically e-transfers, but one imagines that the pricing model is roughly the same per transaction.
I should point out that Interac as a method of direct payment to online merchants by clicking a button on your vendor’s website/invoice has not had as much success. Only two banks and a handful of credit unions supported Interac Online Payment when I last checked, while basically all banks and credit unions in Canada now support Interac E-transfer. Going to a website and clicking Pay and signing in with your bank account to initiate the payment isn’t supported by most banks. Instead, the Interac E-transfer has to be initiated or responded to via the bank’s website. It also has nothing to do with the bill payments system, which often uses “EFT” (the Canadian version of “ACH”) to pay utility bills, etc.
Otherwise, yes, it sure seems like this would pretty much obsolete a lot of payment platforms.
Seriously though, what kind of vendors are you finding crypto useful for that no other payment method can match or beat? I haven't found a single need for crypto in my life, aside from pure financial speculation. Maybe I just don't run in the right circles.
Most bullion dealers charge absurd markups for cards because people will steal credit cards or paypal account and drain it buying metals, which means the fraud premium for credit is sky high. Crypto is irreversible so you don't get stuck paying insurance premiums for fraud you're not engaging in.
Very pleasant to see the US catch up to the developed world in this regard [1].
[1] https://www.moderntreasury.com/journal/real-time-payments-ar...
We have the wonderful Faster Payments System[0], that allows near instant payments to any account. Banks have nice phone apps, with push notifications and emoji.
Paypal is a thing usually just a way to avoid putting in card details directly.
Denmark's equivalent, MobilePay, is very widely used. I even use it for some online purchases, as the flow is so smooth:
- Select pay by MobilePay
- (They probably already have my phone number (e.g. for delivery notifications), if not I must enter it. It's 8 digits.)
- A notification appears on my phone, with the amount and recipient
- Fingerprint and swipe to confirm
- That's all.
The website doesn't keep any card data, but I still get a very quick checkout process.
To send money to friends or family (or small businesses) is also fast:
- Open app, unlock with fingerprint
- Type in amount, e.g. 100, press Next
- Choose a recent recipient, or scroll through my contacts, or type a phone number
- See confirmation -- the amount and the person's name as on their bank account, not their name in my address book
- Send.
Want to pay someone new? Better have your smartphone with the app, and your bank card and your card reader. Be ready to provide your fingerprint and your card PIN number. And they'll send you a text message telling you a new payment recipient has been added. That's a fine level of security if you're paying thousands of pounds - but if you're paying £5 for lunch the process is just as strict.
And despite all that security, it's still limited to payments <£10,000 for some reason.
I miss the Faster Payments network immensely. The systems in Canada and the United States are a mess in comparison.
Monzo for instance just requires that you are signed into the app and can face-ID on iOS.
which is quite specific
For non-P2P stuff like PayPal is very good because bank transfers are non-reversible. You can do G&S on PayPal and reverse that if you need to.
For P2P, stuff like Revolut, PayPal, whatever is still easier because you don't need to remember your bank account number. There is also no interoperability between banking apps either (the only interaction is through FASTER and your number). So you end up needing someone in the middle, like PayPal, which (in the end) is just doing bank transfers...not ideal but it is, at least, cheap.
Reason would suggest the latter will eventually change, but that day is not today.
Also, cross-currency transfers are significantly easier with apps. I agree that it is all a bit unnecessary but...banks are banks. In the UK, there has been a lot of competition and services are still (imo) dire.
No, participants have nostro/vostro accounts with each other, and payments are immediately settled using those. Participants shuffle money between those, including via accounts at the Bank of England if necessary, to maintain sufficient liquidity; they do that throughout the day, with a big cleanup at the end of the day, but it's not part of the transaction.
Which means that banks need to keep track of their balances with other participants, and not send customers' payments if that would take them overdrawn. Obviously this would be highly undesirable, so they work hard to keep those accounts topped up.
All major banks participate in it, and it's both P2P (send to target phone number, which will behind the scenes resolve to a bank account) and web payments (use a one-time code from your bank app and then confirm in the app, without sharing any permanent data like card numbers).
Also, it's instantaneous and free.
And in fact almost nobody in Poland uses Revolut nor PayPal for P2P, everybody uses BLIK. People do use Revolut for their great exchange rates though.
Either the person gets an email/text with instruction to deposit the money, or they can register their email in a central database which allows for automatic deposit and nearly instant transfer.
There's also ridiculously low limits on daily/weekly/monthly transfers making it useless for say moving a house deposit between banks.
I'd like clarification but from the wording and this release, it seems that it's about $0.05 per transaction and the bank has to pay a $25/mo fee per routing number: https://www.pymnts.com/news/faster-payments/2022/fed-release...
And yet it comes across as a mere clone of Venmo.
For example, the person who cuts my hair only takes cash. I asked if we could try Zelle (I rarely carry cash). She agreed, and we haven't looked back.
The goal of Zelle was to prevent the likes of Square Cash, Venmo, etc from dis-intermediating the banks from their customers.
How do Americans send money from one bank to another for accounts they operate?
TD also wanted me to come into a branch with a bank statement from my other bank. Not ideal since they don't operate west of South Carolina and I'm in California.
It always struck me as an odd product, since I can just plug my ACH info in directly, but it does provide some level of convenience by allowing, say, a roboadviser app to show the embedded balances of my other accounts.
I’m amazed banks put up with it.
Some banks offer external bank transfers through their online portal, and sometimes with a small transaction fee. I've been told by my bank with that transaction fee that you can avoid it by using the "bill pay" feature and just inputting your other bank account's routing and account information. I think that all works over ACH anyways.
I still use it all the time since it's a superior to any other offering for instantaneous high-dollar transfers, but it always feels like a "Venmo got embedded in my banking app" type of interface vs. "my bank is offering a direct payment service to it's other networked banks".
Hard to define, but I do think the marketing/branding/rollout were more to blame than the merits of the service itself (IMHO, Zelle is great).
The banks don't make money on it...so boring to them and therefore neglected from a marketing perspective.
Perhaps Zelle will switch to it for settlement without changing the user experience? Some limits might be removed, but then again I’d guess that the limits are at least partly there for security purposes (to prevent bank accounts from being drained too easily) and the risks don’t go away just because settlement is easier.
(In a similar way, ATM transactions have daily limits and it’s not because there’s any technical reason for daily limits to exist.)
[1]: https://www.bloomberg.com/opinion/articles/2019-03-08/the-fe...
Instant bank transfers.
Because of this you csn just scan the QR code of your taxi, the fruit seller on the street, transfer to your friends.
Everyone gets it instantly.
Now this is not third party services. It’s bank account to bank account. As a result things like PayPal or Cash app make no sense in this part of the world and have no uptake here.
In fact it’s a downgrade to use those kinds of services.
Remembering the bank issues in North America is quite painful. Hope it really happens next year.
Do your country's favorite banks implement ILP Interledger Protocol; to solve for more than just banks' domestic transactions between themselves? https://github.com/interledger/rfcs/blob/master/0001-interle...
Aren't WeChat Pay and AliPay basically embedded versions of paypal/cash app?
You just get a UPI ID that looks like whatever@yourapporbank. Then for online payments you can just enter that ID and approve/deny the transaction request in your UPI client. You could also just generate a QR code for that transaction and scan it with the UPI client
I see that a lot of people are unaware about UPI on HN, I might summarise my experience in a separate post and comparing it to Zelle
Please do! I would buy you a coffee or similar for doing so. Likewise if someone wants to create and maintain a Wikipedia page listing instant payment systems and their details (because FiServ keeps taking down their marketing enumerating this information while also excluding it back from Wayback Machine[1]), I'd be willing to throw some fiat at that.
[1] https://www.fisglobal.com/en/flavors-of-fast (404s, don't bother clicking, Modern Treasury has some content marketing that refers to it)
In India, Singapore, Hong Kong, this is a solved problem.
And before you tell me they charge for it, I agree they do, but I also get fraud protection that's 1000x better than anything in SEA or on Venmo/Cash app.
Why though? You can print out QRs and send them around digitally. No extra tech is needed to handle QRs. Why is NFC better?
For example all UPI apps have near instant qr recognition at any angle. In fact on my phone, it takes longer for the camera to start than for the QR recognition to finish.
I also think there are a lot of things that QRs can do but NFC cannot. But the opposite is not true
I am not exclusively tied to any of those devices (or their camera, which is a relative weakpoint in a smartphone).
I am also able to trust that the payment medium is so complex that there's a very low chance of phishing (i.e. pretty easy to print out a QR code to a malicious domain, hard to do that over ApplePay).
The US government will never be permitted to enter a business area and displace existing corporations regardless of whether it makes life easier for citizens or not.
While the payments industry (ie Mastercard/Visa) is a big one, they do actually provide a service. The cards allow people to buy things on credit (so stores can let people buy things on credit without needing their own collections departments or taking on default risk) and they provide various consumer protection mechanisms (which consumers want even if they won’t care about buying things on credit and paying back the loan over a long time).
It also isn’t obvious to me that this market won’t see disruption. There are a lot of BNPL firms trying to get in on it, for example.
My brief experience in other European countries is that debit cards are common, but credit cards aren't. I've heard this is because of strict caps on fees, which means few promos and benefits (like the US has). Sweden has a digital p2p service called Swish. Small businesses seemed to prefer it, but was a little annoying because you had to key in the code or use your camera to scan their QR code. This wasn't a huge hassle for sending money to friends. From what another commenter said, the UK requires you to manually key in the sort-code and account number. I can see that preventing adoption for casual purchases.
I was never sure of what protections I had around fraud with other payment options. I imagine consumer trust will be difficult to build.
Then why don't corporations regulate the government, instead of it being the other way around? Why did the minimum corporate tax rate just go up to 15%? Why is there any corporate tax at all? The US government pushes companies around anytime they see fit. They're a superpower with the world's most powerful military, the FBI, CIA, NSA, and dozens of prominent regulatory agencies that control every aspect of the US economy.
When they decided to go after Google, guess what happened? The founders of Google immediately ran away in fear. They promptly resigned simultaneously and shrank from view. They knew what would happen and they got out in front of it.
When they went after Microsoft, guess what happened? Bill Gates resigned from leading the company that he founded and had been in charge of for a quarter century. The most powerful, richest private citizen in the US gave up control over one of the world's most powerful corporations.
The feds are drastically more powerful than any private citizens or corporations. Corporations are run by people, and people are very easy to target and easy to break, especially when you have powers of an epic scale central government.
Even a company the size of Apple is barely a spec to the US Government (a government which is currently engaged with Ukraine in smashing the supposed #2 military, Russia, using just a modest flex of its weapons and capabilities). Only China's government comes close to rivaling the US Government for power, corporations are a joke by comparison.
If the feds want to implement an instant payment system, then that's exactly what they'll do, whether Visa or PayPal likes it or not.
This is true of governments too. Tech lobbyists doesn't sway the people who make up the government that much. But oil, guns, and real estate very much do.
Should the U.S. have an official tax preparation system? That would sure save a lot of people a lot of money, but I'm personally grateful for the fact that a bunch of private companies have been spending a lot of dough trying to develop good online tax prep utilities. Self-service tax prep is in a much better place than it was 15 years ago because of the efforts of those private companies. And an official option for tax prep would undercut those efforts. (At this point, of course, it's high time for the IRS to create an official option, and they are moving towards that.)
Congress is aware of the above concern. The lawmaking "meta" since the Reagan years is to not undercut the normal operations of a competitive market unless there's a clear reason to. But sometimes there are clear reasons to. That's why we have things like FDA rules that tell companies what can or cannot be labeled as "peanut butter" or "milk chocolate." It's why we strictly regulate the radio spectrum. It's why we have healthy anti-trust, anti-cartel, and anti-foreign-bribery laws. Congress understands traditional examples of market failures and is very interested in fixing them. But the tax prep industry, for example, is not an example of a market failure, so Congress is not excited about getting involved.
Getting back to FedNow, creating a standardized payment system to be used throughout the financial industry is a prime example of fixing a market failure: the difficulty of coordination, and the obvious benefit of getting every bank onto the same payment system. So I am not especially pessimistic about the prospects of this system.
Would it? Seems like a conflict of interest to me. Down the road the government might be tempted to abuse its control of both tax laws and ubiquitous tax preparation software.
I think it would be better if:
- Tax laws and tax law updates are required to be released in machine-readable format (i.e. JSON) using a machine-parsable protocol (i.e. converted from "English" to "Tax Grammar")
- IRS was required to maintain a public API for submitting returns
This would lower barrier-to-entry of tax filing software and weaken incumbents' (i.e. Intuit's) lobbying power. Furthermore, IRS is free to build a tool if they want, so long as it is both open source and dogfoods the public API and public tax law data that everyone else has access to.
Could you describe a scenario where this could be the case? What kind of things would abusive tax prep software do? Would it lie to get people to overpay? Why would the government take that approach instead of just levying directly from people's accounts and/or reducing their refunds?
That said, Trumps tax law greatly increased the standard deduction so it's not as big of an issue any more.
As of 2019, only ~11% of filers itemized. It would be a good idea to have a public website where 90% of filers could do their taxes for free.
Personally I hate the fact we have so many deductions. I'd love a simplified tax code but I think that would be a tough sell.
This is a fundamental misunderstanding of the situation. The tax law is what it Congress decides it is. The law depends on taxpayers to report their incomes as well as deductions and other facets of their financial lives (e.g. household size, addresses, etc.).
A government-run tax prep site couldn't necessarily pull in all of your deductions, that's correct. But it also couldn't necessarily pull in all your income (especially business income, offshore income, etc.). It's mostly neutral in that respect.
In this case, it is mostly one sided
Roughly 90% of Americans file using the standard deduction ($13k for a single person, $26k for a married couple filing jointly). Median household income is ~$67k, so the median household is not itemizing.
The remaining 10% of people would not be bound to use the free public system.
Intuit et al fought tooth and nail against this, because they knew it would cost them big time.
These companies aren't benefiting from "the free market", they are rent-seeking regulatory capture organizations.
Sure, that sounds good on paper. But here's a list of people who would be hurt by this system unless they were sophisticated enough to realize that they should revise their return:
- Most people with a kid
- Most people supporting a relative
- Most people supporting someone who has no income and lives with them
- Most people who made charitable contributions in 2021
- Many people with a home energy deduction
- Most people who participated in post-secondary education
- Anyone in the gig economy
I disagree, if you want clarity, look at other countries (e.g. UK) that already do this kind of thing. There is no "how can we know?" argument to be made. And IMHO, It's so much better for consumers overall.
For example, in the UK, I believe where a child is living is tracked through some centralized benefits system throughout the year. That hugely changes the calculus as to whether an automated tax return makes sense. If the U.S. had a similar sort of centralized system for tracking dependents or at least children, then an automated return would make a lot more sense, since claiming children/dependents is a huge part of getting the credits you deserve, and it would be great if it were possible to do that automatically. But it isn't.
I've already explained why I think automated returns are bad in the United States. If you disagree, make counterarguments based on how taxes work here, not in some other country with an entirely different system.
IDK, this is a variation on the good old "The USA can't do this proven common sense thing that delivers benefit to citizens in many other developed countries, because ... uh ... USA special!" (1)
There's a chance that it's correct, but institutions that cannot learn from examples right in front of them are "special" in a different way, not a good one. Being able to learn would set a better trajectory towards greatness.
1) e.g. see The "FedNow" thread, yesterday https://news.ycombinator.com/item?id=32510581 Also, any healthcare or gun control thread.
Most of your other examples aren't really valid because the vast majority of people take the standard deduction anyway, so things like charitable contributions, home energy deductions etc. don't matter.
But most importantly, the whole proposal always leaves the "You're welcome to do your own taxes if you have anything we haven't addressed." It's just that Intuit didn't want to even allow this option because they know the vast majority of people don't have complicating factors, and they hadn't gotten really good at scamming "free filing!" users into buying upgrades they didn't need.
This isn't hard, and tons of other countries do this.
"This isn't hard" -- as illustrated by both my and your mistake, this is as far from the truth as could be. Everything related to taxes is absurdly hard, whether it's setting up the right tax prep system, the right level of complexity in the tax law, or simply the right return to file as a taxpayer. My overarching point here is that Congress made a certain value judgment as to one of these very hard problems—that a healthy industry dedicated to getting people's tax returns correct might be in the best interests of both the government and taxpayers—and this might not actually be the product of corruption.
The fact is the vast majority of taxpayers do not have special situations, and it's straightforward to say "if you think you have any custom situation that may apply to you, file yourself".
And Intuit's behavior, as well documented in the ProPublica report, absolutely point to corruption and scammy behavior.
Conversely if you buy and sell the same stock with two different brokers and cause wash sales, or do anything with HSA investments in California, TurboTax and any other consumer tax product will not get your taxes right, and it may not even be possible to do them properly by hand, so everyone is doing them wrong and the IRS just isn't noticing.
Good thing ignorance is a defense for taxes.
I guess, if you're only looking at the US. My understanding of the history is very different. In 2001-2002, the US was already behind other countries since it had no e-file option. The IRS was considering an official tax prep service. Because Bush was in office and there was huge pushback from the tax prep industry, it was pitched that a public/private partnership would be the fastest way to "catch up."
In 2019, ProPublica runs a story about TurboTax's shady behaviors hiding and up charging for what was agreed to be a free service. It should cover 70% of tax payers, but in practice is only used by 2-3%.
To me, this looks like an example where the government explicitly tried not to replace a large, private industry and the result could only possibly benefit 30% of people (likely significantly fewer since much of that 30% will still require personal tax prep). Even after 20 years of fallout and very explicit bad-faith behavior, the threshold for change hasn't been crossed.
See the section "The U.S. Approach to Central Banking" of https://www.federalreserve.gov/aboutthefed/structure-federal... .
Because of its autonomy it doesn't seem to fall well within any of the three classical branches of government, but it sure seems to me like a part of the government nonetheless.
Credit cards these days are pretty much usable as digital only; all of mine are addable to Apple or Google Pay, and usable at pretty much any contactless pay terminal.
If they go away it's because their credit product will be replaced by BNPLs, and transactions with trustworthy stores will move to FedNow to avoid that 3%ish interchange fee.
Or worse than just lobbying?
I have to believe that there is constant, baseline fraud that everyone in these areas puts up with.
In the US, if someone steals my phone or credit card, or intercepts my payments in any way, I pretty much expect to get all my money back. When payments are instant, what's there to stop scammers and fraudsters disappearing with my money?
I think a lot of fraud prevention tech can reasonably be done in a matter of seconds. FedNow also proposes to be domestic only for the time being, which means the recipient accounts are in US jurisdiction and easier to shut down and prosecute. Finally, there's no reason a wait-period/cooldown can't be implemented in another layer.
The problem is when someone spins up a scam account, gets a fraudulent payment, and then cashes it and shuts down the account. If they already have the money in cash, it may be impossible to prosecute.
Any fraud prevention is going to have to be privacy intrusive by it's nature.
So even after all those multiple warnings, if somebody gets frauded (which happens, because people get greedy, they pay a small amount to get a bigger prize, or a work from home job etc scams), police in some places now have IT Crime cell, which follows up with banks and try to recover the money. No guarantee. But there is no constant stream of fraud anymore thatln what happens here in US with people who fall for scams.
Not necessary - My UK bank (Monzo) allows FASTER payments without a OTP (the UK version of this that has been around for about 15 years) via their app.
You just sign into the app, put in the bank account number you are sending it to, sort code and recipients name, it verifies you with Face-ID then sends the cash.
But all banks, of course, have a level of fraud protection in place (just not the legal obligation to replace funds from a scam and compensate/reimburse victims).
It's also worth noting that this is a legal decision, and not a technology issue.
I've had one credit card compromised in my life, and my bank alerted me before a dollar left my account.
I'm calling BS. Virtually everyone I know has either had zero, or at most one or two experiences with fraudulent charges, and they're cleared up immediately with a phone call.
The only convenience added by their way is qrcode scanning as opposed to typing up a recipient name. Which I admit is verh nice so long as they mandate accepting cash payments as a condition of a business participating in commerce. Every transaction you make is tracked and being banned from that app means you can't even buy basic survival items and services like food, shelter and even public toilet access lol. You can't even beg people for money because you are banned and your account is tied to your government ID. You effectively accept wepay or whatever monopoly app as your master. Freaky stuff.
No thanks, cash is still nicer and convenient (to consumer not merchant).
I remember reading Matt Ridley's book "The Rational Optimist" and he said that society only progresses when we trade, and we only trade productively when we have trust.
So basically I think there must be trust otherwise it will hamper the growth of society.
Now, imagine all that data is sitting on Federal servers by default. No subpoena required, and fraud systems would be integrated directly with investigative services at the Federal level. This integration should strike fear in the heart of anyone who currently scams via 3rd-party payment providers.
I am bothered that fraud isn't directly addressed in this page, but it's only an FAQ and it'd be silly to think the Fed wouldn't build industry standard (or better) fraud protections into a system they're building from scratch.
Is the federal government going to take on that risk? What makes you think they can afford to hire programmers who are skilled enough to build out a sophisticated fraud detection system? The highest GS pay scale is lower than what a new grad makes at Stripe/PayPal.
It's better if you compare benefits and cost of living. Or if Stripe fires you because your manager didn't like that you tweeted a joke about Elon Musk once (apparently this happens).
Health insurance is definitely better at the tech company. Cost of living varies - Washington DC/Northern VA is not cheap, and Washington state (where Stripe is based) has no state income tax.
I think very few people would take the government job, particularly the type of people okay with taking big risks that you need to build out a greenfield fraud detection and payment system.
Imagine so confidently posting something so wrong. No, that’s not how it works in the US. Every credit card company (and PayPal-like company) has a massive anti-fraud department that both automatically detects fraud and responds to consumer complaints. If I see a charge I don’t recognize, or a seller fleeced me, I call my credit card company and they give me my money back and fine the shit out of the seller’s account unless the seller can prove to them that the charge is legitimate. Yes, ultimate recourse is to court, but very rarely is that necessary.
Really? One of the BEST things? That sets a pretty darned low bar.. I mean, I've never once been even remotely inconvenienced by the US way of handling money and payments.
It's normal to people in Asia. But weird to people in the USA and Canada.
UK also has near-instant bank transfers. It usually just takes me about 30s to receive one. But you do have to specify the sort-code and account number by hand.
I do wonder why the 12-year lag in the US implementation of essentially the same standards (and the same ones they had implemented on SWIFT much earlier) was there to begin with. You'd think that with the states in the US not being nation-states it would be much easier/faster to implement something like this nation-wide.
And you're 100% correct that uptake in the long tail of smaller banks and credit unions is probably one of the biggest "issues" with the service. If your bank isn't signed up, there's nothing you can do as an individual except move to a bank that is. Systems like CashApp and Venmo don't have that issue.
It's really ubiquitous right now, as you can pay pretty much anything using it.
[edit] for those who like numbers, here are the stats from the federal bank (ps: it's in Portuguese): https://www.bcb.gov.br/estabilidadefinanceira/estatisticaspi...
They're working on an offline version now, we'll see... that'd be amazing.
All in all, I'll keep using credit cards for security (Pix transactions can't be disputed) and miles.
Transfers instantly from my account to another person or business, all it takes is a phone number or QR code. And I can also send request for payment.
Only drawback is there is no protection like with debit/credit cards, so no chargeback.
I see that as an upside though. Fraud (and other protection) is essentially an insurance service you pay for, often in several percent premium. This service would lose its utility to me if I had to pay a premium to cover fraud. We already have debit/credit for those who want fraud protection.
I'd love to be able to hand folks a simple string or image, and have them able to send funds to me instantly, irrevocably, with no fees, and in a way that they can't pull funds back from my account (cough checks / ach).
https://rb.wd5.myworkdayjobs.com/en-US/FRS/details/FedNow-In...
Plus -- how many other large tech employers have a real police department to guard their giant pile of gold? https://www.federalreserve.gov/faqs/does-the-federal-reserve...
I wish this would be more available to directly connect with versus having to go through an existing bank. It also leads me to believe that adoption won't be widespread for a few years after release.
With Real time payments (RTP, the clearing house instant payment rail) it still has banks onboarding to the network each month. RTP was launched in late 2017
Bitcoin has been doing 24/7 payments since 2009 and instant payments since at least 2018. Not to mention Bitcoin is decentralized and not reliant on government and bank bureaucracy to function.
The Fed is a little late on this one.
Whether or not the funds are made available mostly depends on how much the receiver trusts the transmitting account; even if it shows up the same day it still might turn out to be fraud a few days later.
So the underlying technology that is going to basically power and be compatible this standard will most certainly be in collaboration of the creators of XRP, (RippleNet), Stellar Network, Algorand and XDC chains as they are notable cryptocurrency technologies and ledgers that are gaining general compliance with the ISO 20020 standard. [0]
So like it or not, there is a compliant few cryptocurrency DLT technologies that are already being evaluated and are being considered for this use-case.
[0] https://investorplace.com/2021/10/iso-20022-crypto-list-5-co...
This is to settle between banks. The thing banks do at the end of the day.
And yet they did, but it was not big news. There is currently an instant payment system integrated with all major American banks for person-to-person transactions, and yet they somehow fumbled it so Venmo takes all the publicity.
Zelle also is a product of TCH, hence why "major banks" carries a lot of water. You can't leave behind rural and low income Americans.
This can be a major problem, because some landlords only take their rent by Zelle and if you accidently zelle someone at the wrong time and your whole household runs out of Zelle limits you're fucked for paying the rent.
... Really? You couldn't figure that out any sooner? ACH or a paper check would have been faster.
Maybe they've ironed out the kinks these days, but I'm sure Zelle would have been bigger news if it worked well from the start.
The FAQ had a link to a community site, but that link is already broken.
I'd like to see a critical service like this fully open source so that it can be inspected and referenced.
2) Repeat scams happen
3) Give government more power to fight scams.
4) Hire 87.000 IRS Agents ?
We will either implement nothing or we will implement a system that lets all these companies profit.
Meanwhile every major country in the world solved this issue 8+ years ago.
PayPal, Venmo, etc. will all start to use FedNow in the backend to provide for a better product experience and charge the same fee, but spend less on settlement.
These are better payment rails, not the wholesale replacement of how people send money to each other in the USA.
Interestingly, NPCI also allowed third-party apps to integrate UPI payments directly into their app. Users could use both the Paytm wallet and UPI for transactions. These apps that integrated UPI saw a huge rise in daily usage and volume of transactions, which was ultimately beneficial for them (they could channel promotional coupons/offers through the apps). UPI was generally preferred over online wallets as the medium of payment because of direct bank-to-bank transactions.
So if the Fed does something similar, might just be a win-win.
For those interested in the Fed Master Accounts topic, I recommend this Macro Musings podcast episode with George Selgin.[1]
[1]: https://macromusings.libsyn.com/george-selgin-on-inflation-f...
Nobody should have this much oversight into individual finances, not even the fed. FedNow can go back to hell
>In fact, among the many countries that have either developed or are in the process of developing instant payment capabilities, the vast majority have done so with the direct operational involvement of their central banks. This progress means that the U.S. retail payment system lags behind systems in other countries.
Furthermore, they don't have confidence in the private sector to achieve this sort of thing:
>Based on its assessment, the Board concluded that private-sector real-time gross settlement services for instant payments alone were unlikely to provide an infrastructure for instant payments with reasonable effectiveness, scope, and equity. In particular, private-sector services are likely to face significant challenges in extending equitable access to the more than 10,000 diverse depository institutions across the country.
The furthest and the most compliant crypto project compatible with the ISO 20020 standard which fits this use-case so far is XRP.