Fed expects to launch long-awaited Faster Payments System by 2023
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If this goes well instant payments will be available with no ACH 2 day withdrawal delay.
The IRS is exploring a system for people to file taxes online.
The State Department is building a system to renew your passport totally online.
I think the last two items are a result of the Inflation Reduction Act. I hope this momentum continues and we can continue making as many government services available digitally. While some will complain how bad these systems will be - I'd rather at least have them than not and allow them to improve.
The sooner the better.
> In addition, the IRS would receive $15 million under this bill to fund a task force that would study the cost and feasibility of creating a free direct e-file program.
"The agency previously committed not to create its own tax filing software as part of an alliance called the Free File Program. In exchange, private tax filing software companies agreed to provide free services to low- and moderate-income taxpayers."
And then continues:
"Roughly 4% of eligible taxpayers used the Free File Program’s private providers to file their taxes in 2020. Intuit and H&R Block, who previously represented two-thirds of the program’s usage, both left the agreement in the past three years."
How should I say it, “come on man”?
To put that number into perspective, TurboTax spent about that much money on lobbying alone from 2018-2012.
Which is why they should pay real experts to do it. For less.
- Bitcoin has an MIT License, for example
- XRPL and Stellar can do the payments volume; the TPS report; whereas otherwise you're building another Layer 2 system without Interledger.
- Flare does EVM (Ethereum Virtual Machine) Smart Contracts with XRPL; $<0.01/tx, network tx fees are just burned, 5 second transaction/ledger close time.
Notes re: Interledger addresses, SPSP, WebMonetization: https://westurner.github.io/hnlog/#comment-32515531 ,
> From "NIST Special Publication 800-181 Revision 1: Workforce Framework for Cybersecurity (NICE Framework)" (2020) https://doi.org/10.6028/NIST.SP.800-181r1 :
>> 3.1 Using Existing Task, Knowledge, and Skill (TKS) Statements
> (Edit) FedNOW should - like mCBDC - really consider implementing Interledger Protocol (ILP) for RTGS "Real-Time Gross Settlement" https://interledger.org/developer-tools/get-started/overview...
> From https://interledger.org/rfcs/0032-peering-clearing-settlemen... :
> Peering, Clearing and Settling; The Interledger network is a graph of nodes (connectors) that have peered with one another by establishing a means of exchanging ILP packets and a means of paying one another for the successful forwarding and delivery of the packets.
> […] Accounts and Balances: The edge between any two nodes (peers) is a communication link (for exchanging ILP packets and other data), and an account held between the peers (the Interledger account). The Interledger account has a balance denominated in a mutually agreed upon asset (e.g. USD) at an agreed upon scale (e.g. 2). The balance on the account is the net total of the amounts on any packets “successfully” routed between the peers.
> The balance on the Interledger account can only change as a result of two events:
> 1. The “successful” routing of an ILP packet between the two peers
> 2. A payment made between the peers on the underlying payment network they have agreed to use to settle the Interledger account
And then you realize you're sharing payment address information over a different but comparably-unsecured channel in a non-stanfardized way; From https://github.com/interledger/rfcs/blob/master/0009-simple-... :
> Relation to Other Protocols: SPSP is used for exchanging connection information before an ILP payment or data transfer is initiated
To do a complete business process, there's – e.g. TradeLens, GSBN, and – signaling around transactions, which then necessarily depends upon another - hopefully also cryptographically-secured and HA Highly Available - information system with API version(s) and database schema(s) unless there's something like Interledger SPSP Simple Payment Setup Protocol and Payment Pointers, which also solve for micropayments to accountably support creators; https://WebMonetization.org/ .
Are you kidding me? Hundreds of billions. a16z's last fund alone as $4.6B.
That money goes directly to developers.
Are there other metrics for Software Quality & Infosec Assurances?
The entirety of the investment made by VCs is given directly to developers. That's got nothing to do with daily volume, market cap, etc - that's cash in hand. Human dollars. What developers choose to spend that money on is up to them but they sure do seem to have found a way. Arbitrarily constraining the analysis to the 'free' part is disingenuous.
As for offsets, the entire model is bogus and I encourage you to look into it. It's generally just a way to prop up bad business models. You can't buy crime offsets from someone who promises not to do a crime they would have otherwise so that you can do it - and yet that's exactly how carbon offsetting works. That's to say nothing of that blockchain carbon offsetting company that set fire to the forest they were planting twice. [1]
[1] https://boingboing.net/2022/07/23/blockchain-based-carbon-of...
Chainslysis sells Blockchain/DLT analysis and investigation software and services to investigative agencies in multiple countries: https://en.wikipedia.org/wiki/Chainalysis
How do they estimate their potential market?
"Crypto Crime Trends for 2022: Illicit Transaction Activity Reaches All-Time High in Value, All-Time Low in Share of All Cryptocurrency Activity" https://blog.chainalysis.com/reports/2022-crypto-crime-repor...
> In fact, with the growth of legitimate cryptocurrency usage far outpacing the growth of criminal usage, illicit activity’s share of cryptocurrency transaction volume has never been lower.
> […] Transactions involving illicit addresses represented just 0.15% of cryptocurrency transaction volume in 2021 despite the raw value of illicit transaction volume reaching its highest level ever. As always, we have to caveat this figure and say that it is likely to rise as Chainalysis identifies more addresses associated with illicit activity and incorporates their transaction activity into our historical volumes. For instance, we found in our last Crypto Crime Report that 0.34% of 2020’s cryptocurrency transaction volume was associated with illicit activity — we’ve now raised that figure to 0.62%. Still, the yearly trends suggest that with the exception of 2019 — an extreme outlier year for cryptocurrency-based crime largely due to the […] scheme — crime is becoming a smaller and smaller part of the cryptocurrency ecosystem. Law enforcement’s ability to combat cryptocurrency-based crime is also evolving. We’ve seen several examples of this throughout 2021, […]
> However, we also have to balance the positives of the growth of legal cryptocurrency usage with the understanding that $14 billion worth of illicit activity represents a significant problem. Criminal abuse of cryptocurrency creates huge impediments for continued adoption, heightens the likelihood of restrictions being imposed by governments, and worst of all victimizes innocent people around the world. In this report, we’ll explain exactly how and where cryptocurrency-based crime increased, dive into the latest trends amongst different types of cybercriminals, and tell you how cryptocurrency businesses and law enforcement agencies around the world are responding. But first, let’s look at a few of the key trends in cryptocurrency-based crime […]
"Mid-year Crypto Crime Update: Illicit Activity Falls With Rest of Market, With Some Notable Exceptions" (August 2022) https://blog.chainalysis.com/reports/crypto-crime-midyear-up...
More concerned about the climate impact; about environmental sustainability: https://cryptoclimate.org/supporters/
And still, 99%+ of the market is incapable of assessing the software quality of the platforms underpinning the assets themselves, so we reach for some sort of market fundamentals technical data other than software quality and information security asurances.
Some of it? Oh most definitely. It just depends on your business model and whether you need to keep your code proprietary. If you don't, good to go.
You seem to be assuming they’ll succeed.
I don’t think the government could do that for $15 Trillion, never the less $15 Million.
For the record, ACH is incredibly cheap ($0.002 to send and $0.001 to receive) - but with the volumes of payments going through the network, that $15M is a small fraction of revenue. There was no special tax measure passed to fund this study. It came out of user fees.
> More than 29 billion ACH Network payments were made in 2021, valued at close to $73 trillion.
Wow!
What's the API look like?
Bad. lol. But let's see what comes out of FedNow.
Imagine a world where Zuckerberg wasn't obviously some kind of early Boston Dynamics prototype assembled before the team responsible for the ethics subroutines got their CI/CD going.
When the FBI shows up and tells him to do something, he's going to do it. He can either enjoy the billionaire lifestyle and do as he's told, or suffer the rather predictable consequences. After all, there are well over five thousand federal crimes in the USC. Zuckerberg, along with everybody reading this, is definitely guilty of something. Just takes a bit of digging to figure out what.
Doesn't matter how much money you have or how great your lawyers are. If the government wants to squash you, they are going to squash you.
A fast, free alternative to those would certainly provide some relief.
"$1. Or $4000. Maybe $20. Whatever. Life's a lottery. Be lucky."
People want insurance products, they want rewards, they want chargebacks and they want to borrow up front - and so do merchants. It increases average ticket sizes and it saves them from having to deal with cash. This system didn't get foisted on anyone, it was built to meet the needs of both buyers and sellers.
In Europe where interchange is regulated, credit cards are capped at 0.3% interchange but don't come with those features.
I don't know them, that would be my guess.
It's not even a revolving door anymore, it's just unchecked corruption.
It’s great to have organizations that help people navigate complex bureaucracy, but it’s way better to just simplify the bureaucracy directly.
> Or some people try to politicize their tax dodging when they get caught.
I don't see why that has to be an "or." the statements are not mutually exclusive (i.e. they can both be simultaneously true)
and Historically: https://en.wikipedia.org/wiki/List_of_allegations_of_misuse_...
For those here who are young and haven't had an exposure to this process outside of meme sites: an IRS audit is indeed a big pain in the ass. But as political oppression, it's pretty weak sauce. It's not like we're deploying novichok in the service of tax collection.
Through just relentless bad faith and a bottomless victim complex, the Republican House committees spent years insisting that Obama was targeting them, by literally restricting the IRS audit to only the right leaning lists and then presenting the IG results as comprehensive: https://thehill.com/policy/finance/154584-ig-audit-of-irs-ac...
And yes, they are enforcing laws. If they do not, then some other agency with similar or more expansive police powers will need to do the same thing.
But of course these good intentions last only five minutes. No, we don't have any money for Central government this year, the harvest was poor and besides we needed money for our new great hall. We'll get you next time. And like that old friend who always seems to have forgotten their wallet, the colonists never did seem to have the money they'd said they'd give voluntarily.
So the Constitution establishes a government which can take what it needs, because the wishful thinking doesn't work.
The real American way is to have no government involvement. Arguably no federal reserve.
Banks already created Zelle which works great. Get cash instantly with a phone number. I personally prefer cash but w.e. (Don’t want to be tracked)
Why do I need the government implementing another solution that already exists. Particularly one that has partisan actors at the top of the board. No thanks.
It really depends what you mean about payment clearing. With Zelle you can send someone money in a few seconds. I’ve done transactions up to a couple thousand.
That said it doesn’t “clear” immediately if that’s what you mean. Typically, I can use the funds within 3-5 min, so idk seems pretty darn fast.
Also, not sure if you're aware of the irony of your statement on no government involvement. Zelle originated at Bank of America, JP Morgan Chase, and Wells Fargo in 2011. Three of the largest recipients of bailout funds after the 2008 financial crisis. So, technically, Zelle wouldn't exist without government involvement.
I agree with you Zelle might not exist without government involvement in saving some of the banks involved. That doesn’t mean the government was involved in developing or managing Zelle.
That’d be like saying Tesla is government run because it gets a tax break per vehicle. You could argue Tesla wouldn’t exist without it (probably true), but it doesn’t mean government manages anything
> The FedNow Service is a new instant payment service that the Federal Reserve Banks are developing to enable financial institutions of every size, and in every community across the U.S., to provide safe and efficient instant payment services in real time, around the clock, every day of the year. [1]
for context in case not everyone knows what "Faster Payments Systems" is (or that it's the actual name of the system, apparently).
[0] https://fasterpaymentscouncil.org/
[1] https://www.frbservices.org/financial-services/fednow/about....
[1] https://www.frbservices.org/financial-services/fednow/prepar...
Surprisingly FedNow [2] is barely mentioned on Wikipedia. [3]
This is probably a better article to have linked for the post. [4]
[1] https://www.theclearinghouse.org/payment-systems/rtp
[2] https://www.frbservices.org/financial-services/fednow
[3] https://en.wikipedia.org/wiki/FedACH
[4] https://www.pymnts.com/news/payment-methods/2022/fednow-pilo...
Plus, I think the Buy American Act had the IT waver removed, no?
In large parts of the US, it used to be illegal for banks to have branches.
As you can guess, keeping your banks confined to one office in one city is a recipe for them being vulnerable to the fortunes of a single small area.
In contrast, their neighbour to the north, Canada, had a much more stable banking system, that was run by large national chains (just like in most other parts of the developed world).
If you want to learn more, George Selgin has written a lot on the topic. Other keywords to look for are 'unit banking' vs 'branch banking'.
The migration to ISO 20022 is in full swing, finally. We will get there.
The US also has recently seems to have a hesitance toward introducing new regulations that actually seems to have made it harder to change things like these in cases where the private sector isn't able to take the initiative on its own.
I know some time has passed since and a lot of money and effort has been spent in improving things but I'm still pretty impressed just how quick it all works. My banking app notifies me when money is sent or received from my account and it usually beats the checkout confirmation page load time or POS approved message when I make a purchase.
For someone like me who only uses Zelle and Venmo, haven't needed others - I wonder if this will make a difference and also when exactly will this private vs Fed gateway make a difference. Would there be any fees? I know private exchange came first but if Fed solution is free or cheaper, would they need to maintain the alternative?
It's transfers between Venmo and a bank that would get faster.
Banks are required to make the first $200 or so of a deposited check available immediately, and at that point it‘s not even clear if the check will clear, much less has the money already settled.
What‘s important to have in real time is a payment guarantee, but of course it helps the receiving institution with liquidity management if the settlement itself is also instantaneous.
Perhaps Venmo ends up using this to change that and move the money but I'd prefer to skip the middle man and transfer through the fed's service over pay pal's.
However Venmo does have a nicer UX so customers will likely stick around since its “fun”.
If this all works it will be an interesting culture shift.
Major step backwards for them to outsource this. Your absolutely right that you should not need another app or service to enable your bank to do its job.
I’m hoping the Fed solution fixes this.
Another is that if you live overseas it is really hard to get it to work, even with a pre-existing US bank account.
And you can't make Zelle payments to someone who is not on Zelle. While in theory that's also true for ACH, bank wire transfers have been a thing basically since the invention of wires (telegraph).
Sorry, in my experience Zelle is a major step backwards with severe loss of functionality and greatly increased risk exposure.
What's next, government grocery stores or shoe factories?
First, the private sector is not handling this well.
Second, we are talking about core infrastructure of society. The question of what is best to solve this, business or government, is indeed complex.
Business tends to work well when the value created is short-term and can be easily measured and captured by the entity creating that value. For example, a grocery store.
Government tends to work well when the value created is long-term and diffuse, and doesn't have a single point of capture. For example, the road network which the grocery store relies on to get both its goods and its clients to the store.
A nation-wide payments system seems to me to fall clearly into the second category.
Note that eru is from Singapore, truly a great country where the government has many examples of striking a good balance along the above lines. It isn't perfect, but it is one of the best in the world.
If the private sector in your country can't handle infrastructure, I think the role of government should be to clean up regulatory hurdles and barriers to entry, so that the private sector can handle this task.
Honest and competent civil servants are one of the rarest and most precious resource in any country. Affairs should be set up, so as to economize on their time and effort required.
Singapore ain't perfect. For example, our government has significant ownership in eg an airline and quite a few other businesses. But still, Singapore is one of the best run countries for a neoliberal.
> Business tends to work well when the value created is short-term and can be easily measured and captured by the entity creating that value. For example, a grocery store.
I agree. I agree even more: any organisation works best when feedback is immediate.
> Government tends to work well when the value created is long-term and diffuse, and doesn't have a single point of capture. For example, the road network which the grocery store relies on to get both its goods and its clients to the store.
I disagree. We know that governments work badly at the best of times. Why would anyone think they'll magically start working better when the outcomes are harder to measure?
You could try to make an argument that both governments and businesses work badly under these circumstances, but that for some reason governments are slightly less impacted?
I mean, it's theoretically possible. But seems unlikely?
In your specific scenario: toll roads work just fine. Alternatively, the shop can also choose to subsidise road tolls for their customers. Just like shops often offer free parking already, or other freebies.
(And yes, I also think that governments should not be in the business of issuing currency either. At least they shouldn't have a legal monopoly. See eg https://oll.libertyfund.org/title/white-the-theory-of-free-b...
This is a minority position these days, but one with a long intellectual heritage.)
See eg https://www.econtalk.org/extra/free-parking/
(Also https://www.econlib.org/archives/2006/02/economics_of_fr.htm... and https://www.econlib.org/archives/2010/08/why_is_there_fr.htm... and https://en.wikipedia.org/wiki/The_High_Cost_of_Free_Parking )
How is India's system any less secure?
I think the thing is, because the system in the US was developed much earlier, it might have become more difficult to switch over to newer technology. Leapfrogging [1].
This is why you need to depend on nasty solutions like chargeback
A payment system that is so cheap (free), fast and intuitive that people use it as a messaging system (via transaction description field).
In the US I imagine it's going to have to be done by each individual bank which might be kind of messy.
Suppose your grandmother died, and it has been pretty complicated sorting everything out. There's a lot of money that needs to be moved around, a lawyer is involved, Smith, Smith and Thompson. It's not difficult to find people who are involved in such things, after all they might Tweet about it, mention it on Facebook, that sort of thing, "Sorry, grandma Josie died, we're sorting everything out so I won't be at FishCon".
One day you get an email, or it could even be a physical letter, and it seems to be from Smith, Smith and Thompson. It explains that they've just switched banks, and so please ensure that any future payments go to their new account, sort code 12-34-56, account 87654321.
Well that's lucky, you have £18 500 of grandma's money to send over because her shares in a Singapore company were sold this morning when their market opened and that money now needs to be sent to Smith, Smith and Thompson. So you type in the numbers from the letter, the bank asks you who this payment is for, you say "Smith, Smith and Thompson", and you send £18 500.
Unfortunately, account 12-34-56 87654321 is not the new account for "Smith, Smith and Thompson" it was opened in the name of a recent immigrant, Jan and it was empty before your £18500 was transferred, whereupon it was all withdrawn. In a few days when you realise you were scammed, the money isn't there. Your bank might take pity on you, or they might not. If police are called, Jan doesn't have the money, he was given £20 by some guy at a friend's party to do bit of paperwork, easiest £20 he ever made. The cops probably eye him up, then give him a caution and send him on his way, he's just a dupe.
So the name check is because while scammers could easily find someone like Jan, they're going to struggle to find people with names like "Smith, Smith and Thompson" which match a suitable business. This was deemed to be a sensible change because people who don't understand IT assumed the reason they were asked for the name was because it was needed, whereas actually it was for their reference. I used to have ones labelled "Mum" and "King Chris" (it's short for "Fucking Chris") but now it's checked.
https://www.wearepay.uk/what-we-do/overlay-services/confirma...
These payments settle instantly with finality. Just like sending USDC but without the high fees and huge delays of using a blonkchain.
Or as Europe calls it, 2008, but hey a win is a win.
Waiting a minute is also completely unacceptable. Imagine if you had to wait a minute every time you wanted to sue your credit card, grocery stores would grind to a halt.
And it actually goes directly into your bank account.
Further, Algorand isn't "from MIT" it was started by an MIT professor, and their actual transaction fee is a sum total of the direct fees (roughly zero right now) plus the block reward divided by total transactions in a block.
Most people are hard coding in the 0.001 fee.
When you say it confirms instantly that remains to be proven.
There’s no reason to think it wouldn’t be instant. SEPA payments are in Europe, Faster Payments are in the UK and Australia has one too. That’s not an exhaustive list.
I wouldn’t call it a “google AI” just because it was created by an ex employee who thinks it’s sentient. I wouldn’t call Nest an Apple camera just because it was founded by a group of Apple employees. If I did I’d surely be on the receiving end of a lawsuit seeking to clarify that point.
I'm sure if you looked at the actual on the ground implementations they are not all effectively instant for the consumer.
> I'm sure if you looked at the actual on the ground implementations they are not all effectively instant for the consumer.
They actually are. Not sure why its so hard to believe you can update a SQL database in a few milliseconds.
How do you reverse that charge in case of accident or fraud?
ACH isn't great and RTP/FedNow are significant improvements, but there are reasons why reconciliation exists.
Hard fork :-D
Which is what happens when someone in charge loses money big time. Etherium Classic -> Etherium, LUNA->LUNC, etc.
For quite a lot of transactions, you can pay extra to make them near-instant. The capability is and has been there for a long time, it’s just moated by a profit model that penalizes the people with the greatest need for quick access to use resources which rightly belong to them.
Cryptocurrency technologies such as Ripple, Stellar and Algorand are already faster, available worldwide and are significantly cheaper in fees per transaction and are aiming for ISO 20020 compliance, meaning that they will be compatible with the same financial payments messaging standard used by the current system.
It doesn't mean it those three will 'take over the current system' like what many crypto maximalists keep screaming about, but those three technologies have the highest likelihood to work with the current system when crypto becomes more regulated in the future.
Roughly equal to common overdraft fees, which similarly burden those most in need of fast transactions. And often these burdens compound not just on themselves but on top of each other too, eg if I help a family member cover an expense plus overdraft we have to pay double the overdraft to pay the overdraft; when I was tight on money between jobs but had available credit I’d have to pay another increment of the same, plus interest. All told, it could cost around 150USD pay a 5USD bill. Which only affects people who are unable to pay such a small bill. Now that I’m not between jobs and the burden of fees is less of a concern, but I don’t have to worry about the fees at all because they’re processed out of my bank account. But the transfer still has a fee for the recipient if they need it sooner than “in 3 business days” which can often be effectively a week. That’s long enough to incur much greater costs, ranging from further monetary penalties to eviction depending on what payment is due.
We’d all be better off, as a family, opening a joint bank account but I’d be surprised if that wouldn’t flag a fraud alert if not actually violating some law I’m unaware of.
The US has been historically so flush with capital and regionally isolated that there was no burning need nor desire for much centralized governance let alone bank coordination so it still hasn’t developed the muscles to do much of that. Historically, other countries have needed to tightly control and coordinate capital in order to survive against geopolitical challenges and so have everything in place in order to, for instance, make the end user banking experience efficient between banks. Understand this and suddenly America makes a whole lot more sense.
Until fairly recently in large parts of the US, it used to be illegal for banks to have more than one branch. (The last restrictions on branch banking in the US only came down at the end of the 20th century or so. It was a long and slow process.)
For comparison, Canada is just as wide-spread, but they had national banking chains since forever (because they were legal), and with that came national coordination.
If your bank is locking up the funds for 3-5 days, that's their decision and has nothing to do with the US banking infrastructure.
My bank processes all transfers same day.
You should take advantage of the many alternatives and switch.
https://www.europeanpaymentscouncil.eu/what-we-do/sepa-insta...
https://payhawk.com/blog/what-is-instant-sepa-a-look-behind-...
A good payments system has protection for fraud. Unlike zelle.
It will replace the use case of using credit cards to pay immediately, but not the carrying of high interest debt case.
I expect the roll out to banks would be slow and the roll out to consumers to be even slower.
The closest thing would be a debit payment network (eg the card swiper has funds to pay immediately and is not relying on a 3rd party extending credit to them to complete the transaction).
I'm fairly certain interac is its own network, though transactions CAN be routed over the visa network.
Canada is truely and increasingly falling backwards into the stone ages in areas were fed regulation comes before technology.
There's no other way BUT bring politics into this since if we want to move forward on federal regulated payment infrustruction, change must come from the government.
the current Liberal government want to keep chasing feel good leftwing policies than enable more business of all sizes to compete in a global stage.
Sad times.