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Comment by bearjaws | Hacker News Reader

I am a betting man, and I bet all the major banks, Venmo, PayPal, Zelle will all go to court, probably all the way to the supreme court (or does it go to Senate now?) to rule that this is beyond the powers of the Fed.

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.

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I would bet money on the opposite happening: The Fed is not going to release a social app that interrupts the network effects of all of those systems. Zelle may be the one that has the most to worry about, because it is partnered with big banks and powers a lot of their transfer systems.

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.

Zelle isn't partnered with the big banks. It is literally owned by them as a joint venture created for the sole purpose of facilitating the bank-to-bank transfer system.

So... it's America's Interac?

It's owned by a few of them and then partnered with the rest of them.

The Indian Reserve Bank (RBI) and NPCI introduced UPI (Unified Payment Interface) back in 2016, similar to FedNow. This potentially disrupted the business and product that Paytm (similar to Venmo) offered.

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.

There is always a negative externality to such things. Everyday people are now spending more than they ever did because it's easier.

Easier then what? Giving someone a $5 bill?

NPCI itself is a consortium of banks, similar to Zelle, but better at just about everything

Venmo, PayPal, and Zelle are all consumer-facing products. FedNow is a service for interbank settlement only, not a consumer product. FedNow does create an opportunity for banks to provide instant payments for their customers, but that just means banks (even small banks) will be able to compete well with Venmo and others. That seems like a win for everyone to me.

Adding onto this, the Fed has proposed opening up Fed Master Accounts to non-bank fintechs (e.g., PayPal/Venmo). That would allow them to improve their own services by moving off of ACH.

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...

I think many are forgetting that Paypal has owned Venmo since 2012 [1].

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

FedNow has been in the works since 2019 (at least). If someone were taking them to court, shouldn't it have happened by now?

To me this is the first formal announcement that the Fed is going to solely operate this system, which makes many of these companies redundant.

This is specifically about interbank clearinghouses. Not sure why payment companies would care?

The Federal Reserve is independent, in the sense that monetary policy and related decisions are made autonomously and are not subject to approval by the federal government.

None of that matters if the supreme court sees the issue. "congress didnt explicitly delegate this to the fed, therefore its unconstitutional"

Why would a Federal Reserve member bank fight the Fed on this?

All? No. A lucky few? Absolutely.

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