Hacker News Reader

Comment by toomuchtodo | Hacker News Reader

FedNow instant payments in the US. Already live, just taking time to ramp (already plugged into 108 banks and financial services providers, including JPMC and the US Treasury). What it could look like is India’s UPI. UPI is so detrimental to Mastercard’s India business it complains about it publicly.

In Europe, more aggressive adoption of SEPA instant payments.

TLDR utility priced payment rails provided by a central bank or other neutral clearinghouse, instead of a for profit corporation trying to maximize its skim off of nation state or some fraction of global commerce volume.

https://news.ycombinator.com/item?id=36801491

https://techcrunch.com/2023/10/11/mastercard-india-upi-econo...

https://www.ecb.europa.eu/paym/intro/news/html/ecb.mipnews23...

https://www.ecb.europa.eu/pub/pdf/other/ecb.eurosystemretail...

View on HN

FedNow is a great step but most of the people I've asked tell me it isn't going to do anything to stop people from being debanked for "morality" reasons like sex work.

You’re only solutions for that are physical cash, crypto, gift cards, etc. The legal framework and value transfer systems are tightly coupled. Your bank isn’t going to break the law for you (maybe HSBC).

The OP us not trying to do anything illegal, he is not sending money to ISIS.

We are discussing OnlyFans and WikiLeaks, the only reason you can't pay them is because credit card bosses said so.

HSBC is a premium service, cant afford it untill you are a boss of a drug cartel

It would have to the banks themselves banning their customers, right?

The only thing that can stop people from being debunked for various bullshit reasons is a legal mandate, explicitly establishing a right to a basic bank account such as e.g. EU payment services legislation does. Even convicted fraudsters should have a right to participate in society by being able to receive and make electronic payments.

Don't FedNow payments come directly from your bank account, like a debit card? Credit charges have the advantage of protecting you from fraud - the money is still in your hands; you don't have to fight to get it back.

If you want to pay the 3% credit card surcharge for that benefit, you still can (as merchants can both continue to offer credit card rails and surcharge those transactions). If you as a consumer want to avoid that extra cost, instant payments are available. Disputes is not a valid argument for an entire economy to pay a 3% tax to the credit card rails ecosystem imho.

But it is a valid argument for encouraging distance sales, including most online sales. When customers know they have fraud protection, that helps bring down the anxiety of a purchase a whole lot.

For your local purchases with trusted entities, you can still use cash.

It also goes the other way. Go and try to purchase something from any business on credit when you don't have the money right now. They will always say no, even if you've been shopping there for decades. Visa and MasterCard always say yes.

People love to rail against the CC companies, but if you actually clear your mind and think about it, their payment systems are incredible.

Credit card payment systems were incredible. They are no longer novel, nor compelling, with inexpensive competing systems available. You can extend credit instantly to someone with a deposit account like you would with a credit card (with the "overdraft" being the issued credit, lots of ways to skin the UX around this). You can also offer purchase insurance on a per purchase basis, while still enabling immediate settlement. Buy Now Pay Later (BNPL) is an example of extending credit immediately without needing value to ride CC rails. I am in no way saying that there is no use case for credit card rails whatsoever, but that the economy, businesses, and consumers need not rely on them exclusively. There are cheaper options available now, speaking from a speed perspective.

https://www.axios.com/2023/07/22/fednow-instant-payments-cre...

> Interchange fees — the swipe fees paid by merchants when customers pay by credit card — reached $100 billion in 2022, per Matt Schulz of Lending Tree. That's more than $800 per household.

> In a world where goods cost the same regardless of how they're paid for, it's entirely rational for consumers to pay with credit cards and then collect their kickbacks.

> There's no particular reason why this kind of financial intermediation should be a $100 billion industry, rife with inefficiencies.

> "The shift to instant payments is inevitable," writes TD Cowen analyst Jaret Seiberg in a research note, "though it will take time."

(work at a fintech payments-adjacent, thoughts and opinions are my own)

Great comment! However, I don't see any competing systems that offer built in fraud protection being widely used anywhere. Bank transfer are instant now, yes. For daily purchases they can easily replace CCs, like paying for your groceries.

You mention BNPL, but those systems AFAIK are much worse for the merchants, with very high fees. I'm not sure I understood the insurance per purchase part, but if the vendor is going to scam you, he for sure is going to scam you on the insurance as well. Who sells this insurance and how?

> There's no particular reason why this kind of financial intermediation should be a $100 billion industry, rife with inefficiencies.

What are the inefficiencies really? As a customer, paying by card deducts the money from my bank account instantly. As a merchant, card sales are paid into my bank account the next day.

> You can extend credit instantly to someone with a deposit account like you would with a credit card (with the "overdraft" being the issued credit, lots of ways to skin the UX around this).

I apologize, but I didn't understand this part. How will the merchant instantly open an account for a customer? How would this be as fast, secure and convenient as swiping a card?

Yes FedNow (and RTP from the Clearinghouse) are captured from bank account, but are push unlike debit which is a pull like credit cards. I looked into it for bill payments and there's a FedNow feature to request payment but it's still in very early stages I don't know if it's even implemented for any of the banks that do support fed now already.

Interesting. Services like my property taxes and electric bill charge me an extra fee for credit card payment (which I prefer since it is push and also rewards) but they only offer direct bank transfer as the other electronic method which I hate since it is pull. I doubt I'll seem them adopt fednow though.

My solution for property taxes has been to just set billpay every year to send them a check at the expected intervals.

> property taxes and electric bill charge me an extra fee for credit card payment (which I prefer since it is push and also rewards)

Precisely why credit cards are a hidden parasite on overall economic activity. They incentivize customers to use to get rewards and then take a ~4% cut of the payment from the merchant. So that's why merchants charge you extra fee they need to make up that 4% cost somewhere and it's either fees or raising prices even though you might not realize it.

People keep claiming this.

I've run a SaaS in the past. About 10% of all US customers were cc fraud, by far the worst rate by country in my data.

I've lost about ~7 dollars on any transaction that went through and then got refunded. I never had any fraud issues with any other payment method.

For me accepting credit card was a pain and costly, but you are telling me for customers this is painless?

Reply on news.ycombinator.com