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Comment by zettabomb | Hacker News Reader

Meanwhile here in the US, we still have payments that take up to 5 days to fully "clear". As far as I can tell, the only reason for this because other payments take a long time to clear, and thus until those have been reconciled you won't know if there's actually enough money in the source account or if some fraud has taken place. Of course, this is kind of a self feeding problem, so it would seem that such a limit on transaction time would make the problem (with transaction time) disappear.

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This is changing with FedNow, where payments settle fast enough for synchronous applications.

https://www.frbservices.org/financial-services/fednow

FedNow is a service for banks, not for bank customers. The original post is about timelines for customers transfers

Individuals too:

> FedNow is an instant payment service developed by the Federal Reserve for depository institutions in the United States, which allows individuals and businesses to send and receive money.[1][2][3][4]

* https://en.wikipedia.org/wiki/FedNow

> The FedNow Service went live on July 20, 2023. It is available to depository institutions in the United States and enables individuals and businesses to send instant payments through their depository institution accounts. […] At the most fundamental level, the service provides interbank clearing and settlement that enables funds to be transferred from the account of a sender to the account of a receiver in near real-time and at any time […]

* https://www.federalreserve.gov/paymentsystems/fednow_about.h...

> The Federal Reserve said on Monday that it would create a real-time payments system, with the goal of making paychecks and money transfers available for use more quickly.

* https://www.nytimes.com/2019/08/05/business/economy/fed-real...

(Your back-end has to be fast before your front-end can be.)

There is no mechanism for a bank customer to initiate a payment via FedNow. It simply does not exist, regardless of what Wikipedia says.

Banks provide the interface, FedNow will provide the rails. Alias support is on the roadmap, and the service is intended to support peer to peer as well as consumer payments per their documentation.

Well, it's a service for banks that will allow them to offer their customers realtime transfers between banks. Just like ACH. I don't use ACH directly, but I do use it through my bank all the time.

FedNow enables banks to offer near instantaneous bank transfers to their customers -- if both the banks involved in the transaction have implemented the relevant FedNow protocols. Since FedNow is relatively new, most banks probably don't support it yet.

Very interesting! It doesn't seem to be the default yet, at least not for anything I use. Glad to hear we're making progress though, if a bit slowly and behind other nations.

Excepting AML (Anti-Money Laundering) laws, which can hold up transactions over $10k, funds are available within 24 hours in the US. This is how fraudulent check scams work. The time allowed for clawing back money on fraudulent payments is, IIUC, measured in months, so you can still end up with the banks owed money by their customers.

"Easy" fix here - don't allow banks to claw back any cash that they've made available for use. Nobody will tolerate "you have to wait 60 days for this check to be available" so the problem will fix itself in short order.

Banks are incentivized to make money available basically immediately because there is very little risk to them if it turns out to be fraudulent. And they're the only ones that can fix the infrastructure to clean this up. You move the liability from the blue collar worker cashing a check for $50 to the multi-national billion dollar corporation and it gets fixed pretty quickly.

IIRC the banks in the US had to be forced (by law) to make the funds available in 24 hours. That doesn't mesh with what you have said at all.

[edit]

Also, the banks really would rather not be loaning their customers money interest-free (which is what happens when they make funds available prior to fraud checks finishing). I think you have the incentives completely wrong.

If both you and your competitor bank can come back 90 days later to withdraw fraudulent funds, you can advertise that your deposits are available immediately while theirs aren't. What is the risk to you? You can just pull the money back.

There is no technological roadblock from verifying within seconds that a) a bank account exists with the given account and routing number; b) it is associated with the name on the check being deposited; c) it has available funds to cover the balance of the check. As it stands the banks give you the money as soon as its deposited (or very shortly thereafter), but that's no risk to them. They can come back and get it whenever should they need to.

If you didn't allow them to do that, we'd have the infrastructure for instantaneous fraud checks/balance verification nearly overnight.

> If both you and your competitor bank can come back 90 days later to withdraw fraudulent funds, you can advertise that your deposits are available immediately while theirs aren't. What is the risk to you? You can just pull the money back.

The risk is insufficient funds in the account to cover the deficit

> There is no technological roadblock from verifying within seconds that a) a bank account exists with the given account and routing number; b) it is associated with the name on the check being deposited; c) it has available funds to cover the balance of the check. As it stands the banks give you the money as soon as its deposited (or very shortly thereafter), but that's no risk to them. They can come back and get it whenever should they need to.

You missed "d) was printed by a forger with otherwise valid information"

The funds are available in a day or three. There is a big difference between cleared and reversing fraudulent transaction.

Are you requiring people to check their statements every week to find fraudulent transfers? Are people who go on vacation screwed? How do you handle instantaneous transfers when the funds are available in seconds?

For example, someone asks to use your phone and you foolishly give it to them. They make a bank transfer when you aren't looking. With instantaneous transfer, you are screwed caused the funds are already available and fraud report isn't allow.

It might be possible to make the banks responsible for fraudulent transactions since they are ones that can do the verification.

The onus is already on individuals to find fraudulent transactions and report them. If my CC gets a fraudulent charge and I don't see it, and it doesn't trigger the bank's anti-fraud logic, it will just get paid.

Your example doesn't really work because for this to happen not only would I need to give this person my phone, I'd need to give it to them with my banking app open and the screen unlocked. At that point it's not a fraudulent transaction.

> The onus is already on individuals to find fraudulent transactions and report them. If my CC gets a fraudulent charge and I don't see it, and it doesn't trigger the bank's anti-fraud logic, it will just get paid.

Right, but if I find it 60 days later when I balance my registry, then the CC company refunds me the money.

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