Hacker News Reader

Comment by kshacker | Hacker News Reader

> The Fed’s new payments system will compete with privately-held The Clearing House, which was launched by a consortium of large banks in 2017. It processed 41.2 million transactions valued at about US$18 billion in the second quarter.

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?

View on HN

Transfers within Venmo fake immediacy. If it depends on an ACH transfer (ie the money is coming from a bank account and not an existing Venmo balance) then the money will be taken back if the ACH fails.

It's transfers between Venmo and a bank that would get faster.

Normal bank transfers can also be reversed, if something goes wrong, can't they? (Eg if there's fraud or whatever?)

That's correct. ACH bank transfers can typically be reversed within 60 days, and even beyond that in some exceptional circumstances.

Does Zelle use ACH? My understanding is that Zelle transfers are permanent. (But then I thought that about Venmo.)

There are stories of Venmo transfers that do not include ACH (ie the source of funds is a venmo balance) being difficult or impossible to reverse. That's purely a product choice by Paypal.

There‘s nothing fake about a bank or payment service provider giving you access to unsettled funds if they can be reasonably sure that they will ultimately be made whole.

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.

The problem with Zelle is that you can only link it with one bank account. So if I need someone to Zelle my Last Coastal Credit Union account, I have to unassociate Zelle from Landfill Bank. Not ideal.

I’m hoping the Fed solution fixes this.

I have three bank accounts and it's difficult using Zelle. I use a different email with two, and a phone number with the other one. But sometimes I forget which account belongs to which email. It's idiotic.

use email+bank_name@gmail.com.

There's enough horror stories about Google and gmail to not trust them with something so important.

You could do the same thing with a different email provider.

zelle uses email or phone as identity. So you can create as many zelle accounts as bank accounts with email aliases.

That's one problem with Zelle.

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.

It will make Venmo/Zelle obsolete as banks will offer fast transfers natively. So no need for another app just for transferring money.

However Venmo does have a nicer UX so customers will likely stick around since its “fun”.

My credit union is integrated with Zelle. I had to go through a special process to do straight ACH transfers, they kept wanting to direct me to Zelle but I need to regularly do transfers beyond the Zelle limit (business payments).

If this all works it will be an interesting culture shift.

Yes, because "transferring money" is a CORE BUSINESS FUNCTION of banks!

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.

The biggest annoyance with Venmo is taking your money out takes a couple of days.

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.

Zelle and Venmo are difficult to reverse and filled with scammers. This is one of the reasons why paying large sums of money or digitally isn't easy. Will this be any better?

Yeah, I don't really know why the US needs a government-run payment system (that will enjoy numerous implicit subsidies and regulatory advantages), when the private sector can handle this.

What's next, government grocery stores or shoe factories?

Given the slow pace of the government, I would be okay with government run grocery stores. We would still be a good half a century away from them considering self checkout, so they would still staff human cashiers, which you don't find in private grocers, these days.

Government run grocery stores exist in the US military. There's one on just about every US military base. It's called a commissary and they do have self-checkout. They operate like any other grocery store except there's no sales tax.

Isn't it a scary precedent that the government wants to compete with private enterprise, while publically funded?

Eru has a decent HN reputation, so I'll engage.

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.

I'm actually from (East) Germany, but I moved to Singapore exactly because of the advantages you mentioned. Putting my tax-money where my mouth is, so to speak. And I have to say I am happy with the value-for-tax-money I am getting here.

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.)

To expand on the toll road example, I will take the radical position that it is exactly the implicit subsidy of roads and automobiles by the government that has resulted in the nightmarish car-culture of the US -- one which has had myriad externalities, including the destruction of town centers, the concentration of commerce in big-box stores in sprawling suburbs, and an annual number of road deaths that is a full 25% of what COVID has wraught, except for every single year forever. If you are an American, you are forced to pay for this atrocity with your tax dollars.

This is honestly a really good point.

You might enjoy 'The High Cost of Free Parking'.

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 )

Reply on news.ycombinator.com