Comment by no_wizard
3 years ago
Is there going to be a universal SDK / API we can use with this? This would cut alot of middle companies out of the payments industry (or at least put pressure on lowering fees). That would be a huge win.
Wish we could do the same for the credit card companies. Would be great if the Federal Government could intervene in some way to have Visa / Mastercard / American Express / Discover use the same API interface for payments. Would dramatically increase competition for providers.
> This would cut alot of middle companies out of the payments industry
Not really. All it will do is let the same companies change the way they handle average citizens' payments.
It's the same as Open Banking in Europe. It is supposed allow small businesses to leverage this to enable innovation and all that stuff, but when you want to use these APIs you find there are limitations on who can actually use it. For example, you can only put your service to production by being on a "directory" of approved providers, and to be on that directory you need something 25k or 50k in an account. So, not really that useful for a small startup wanting to make a product out of it.
Banking systems are the backbone of world power dominance, big players won't let small people share it.
> So, not really that useful for a small startup wanting to make a product out of it.
I mean, 50k puts it out of “a couple people starting something in their garage”, but it doesn’t really lock out much beyond that. That’s pretty close to the franchise fee for opening a McDonald’s.
Yes, it could be more equitable, but if that’s the only barrier to access, it’s… pretty open for even quite small businesses.
50k is nothing. That’s not even the salary for one person in a year.
If you can’t scrounge together $50k to start a banking business, you probably should not be starting a banking business.
Bruh, I could get $50k right now if I go through a line of credit for small businesses as a regular person.
It's not particularly difficult for a small start-up to come up with $25,000 in the US.
That's modest angel investor money in a small city.
Aside from playing devil’s advocate, do you have a sensible reason why it should be this way versus another way?
6 replies →
50k is small peanuts, even for a friends and family round. I’d expect any startup dealing with banking transactions on my or my businesses’s behalf to have at least that much in a bond or escrowed away for counterparty risk.
A lot of people complain that 50k isn't much of a hurdle. Yes, I also agree that I as an individual can actually get that loan tomorrow if I want, but the point is "open" banking is meant to open up opportunities and should have as little hurdles as possible and the 50k is just one example.
Look into going into the business and you will realise other hurdles like having some insurance that will cost you tens of thousands, and more costs. When you compare that to, say, creating an app and putting it up on an app store, we can agree that there is a huge difference.
Of course I understand that banking means playing with people's money and therefore measures need to be put in place. But instead of requiring financial assets maybe the 'measure' should all be around technology and your service will need to have gone through extensive testing to ensure it won't be exploited. Otherwise 50k is peanuts like someone said when it comes to covering any financial loss incurred if your service is messed up. So that 50k is just to filter out a huge majority of individuals wanting to create something for themselves.
Currently this works between banks only. Banks have reserves at the Fed, and those reserves are what gets adjusted when a FedNow transaction happens. The banks then adjust their own records on their customers' behalf.
The fed lists a number of service providers on their page. I assume they will now roll out some interfaces. Glad to see the US banking system start to catch up with the rest of the world ca mid 90s.
I believe the service providers are offering services to banks.
1 reply →
I think most if not all the participating banks are "receive only" so there's no one pushing any money yet.
So it's like a Bitcoin exchange, but with dollars!
It's like a centralized exchange in which funds can be seized, censored, and the participating brokers are licensed. Nothing like bitcoin.
5 replies →
I don't see how this is anything like a crypto exchange, is there something I'm missing here?
2 replies →
No, completely opposite. It is like a regular, centralized, and controlled by the government ledger[1] but faster, no more batch files at the end of the day like ACH and that is all.
Now is a matter of banks to pay the providers[2] to integrate with their systems and ledgers.
[1] https://www.youtube.com/watch?v=le8Me8AfK8k
[2] https://www.frbservices.org/news/press-releases/072023-fedno...
Some would say suspiciously so. Which is why some commentators think this is being implemented as a prerequisite of a CBDC.
4 replies →
It won't take long before all banks are using it. Once the banks are using it, employers will begin making payments using it. Once employees are receiving digital currency payments from employers, cash will end soon after.
I've been receiving my payments digitally from employers in the US for almost 20 years now.
I've never in my life received a wage in cash, as in, hard dollars.
10 replies →
Huh? Employers pay employees via direct deposit in many (most?) cases. This isn’t any different… Either way it’s money moving from one bank account to another digitally.
Cash likely won't end unless legislatively forced to do so. The anonymity is too valuable.
Why are so many people gleeful at the idea of “cash ending”? What problems does cash cause that have people hating on it so much?
If it does end, Amazon gift vouchers? What would be a better substitute?
> Is there going to be a universal SDK / API we can use with this?
There is probably a neobank opportunity in providing this. FedNow is, reasonably, administered by banks. (The Fed doesn't want to provide end-user customer service nor incur liability for fraud.)
Right. I suppose that makes sense. I’m thinking about ease of startup costs for institutions that want to use it financially. The Fed would need to support that anyway. Perhaps by not limiting a qualifying institution to just banks but also opening up access to financial service firms would be enough. They could just have some sort of fair priced qualifying program that a company has to maintain to access it or something
The Fed is not allowed to compete with member banks. That's part of the reason why something like FedNow took so long to emerge.
Isn't this column's whole shtick?
> Wish we could do the same for the credit card companies. Would be great if the Federal Government could intervene in some way to have Visa / Mastercard / American Express / Discover use the same API interface for payments. Would dramatically increase competition for providers.
If FedNow can fit in with ApplePay, then it can displace credit cards in the first place! The corollary I’m drawing, is from India where “UPI” payments (something similar to FedNow) was launched about 7 years ago and today is the more dominant payment mode than credit cards.
Shameless plug, but Moov offers a single API for payments. The clearing house's RTP system will be supported shortly, and FedNow is coming soon after. Check out out here: https://moov.io/
Pricing page is all but worthless... no indication what so ever about what even basic tier pricing is, or could be.
Agreed. This is really strange from their pricing page: >> Get started for free to test our APIs & unblock your development team. Talk to us about your transaction volume to get the best pricing with flexibility to grow.
You would think there would _at least_ be a ceiling price. Makes me wonder why they can't show _any_ pricing.
2 replies →
Column is building API's for our direct integration with FedNow: https://column.com/fednow/
The network of banks supporting FedNow is still small, so we may not see meaningful payment volume for a while compared to ACH, Wires, Checks, etc.
That you for staying true to your word!
https://news.ycombinator.com/item?id=31114620
No. This is an interface for banks to settle between themselves.
A bank does not want to interact with you in the same channel as it interacts with another bank.
What there will be are services provided by banks which utilize this for instant transfers.
The middle companies between transfers you want. Most of the actual work is fraud prevention and dispute resolution... unless you want the only means of settling a dispute is through the courts.
> Wish we could do the same for the credit card companies.
FedNow can replace credit cards for cases where chargeback or actual credit isn't necessary. So for many ordinary cashless payments.
Arguably even for many cases (small to medium amounts of money) where the possibility of chargeback seems useful FedNow could be better in expectation, because the fees are lower. The credit card companies are making money after all. Using them for chargeback is like buying insurance for things you can replace out of pocket: On average, you make a loss.
that seems like the right answer...
however, the payment itself is almost besides the point. the tricky part is the scheme / governance surrounding payments. who is liable for what, preventing fraud, etc. these large payment actors + the middlemen are more about fostering trust networks than moving the actual dollars and cents.
fraud in P2P payment networks (e.g. Zelle) is already a huge issue because a lack of a governing actor like a card network.[0] a different question is would the government ever provide this mediating role / lay out guidelines? would we want it to?
https://www.nytimes.com/2022/03/06/business/payments-fraud-z...
Even when offered a more competitive option, consumers love credit cards - the merchant gets soaked, while they get cash back. Given how the networks are, you'd have to have an unprecedented collusion of merchants to break the credit networks open.
> consumers love credit cards - the merchant gets soaked, while they get cash back
It's never the merchant that gets hosed. It's the people not using credit cards.
Because, of course, the merchant just takes his banking expenses and forwards them right back to all customers by increasing prices across the board.
And it's not only the people not using credit cards that get hosed. Even the people with credit cards lose out - because the cash back is practically always smaller than the fee the merchant payed and forwarded to the customer.
As always, the real winner is only the bank. There's a reason for the market cap of MasterCard and Visa...
Credit cards also have really good consumer protection laws around them. I have 30 days to report any fraudulent transactions and on my card and the bank MUST give me my money back.
Every single study shows that people spend more when using credit cards than when using cash.
I think you know the answer to your question, more than likely this won’t see the light of day outside of federal usage.
Far too much lobbying for any REAL competition to shake up the industry.
This will be exclusive to the federal government and state governments I imagine.
> Wish we could do the same for the credit card companies.
For e-commerce, isn’t that SRC?
https://www.emvco.com/emv-technologies/secure-remote-commerc...
> cut alot of middle companies out of the payments industry
Those middle companies have lobbyist representation and the govt has no intention of cutting any companies out of the payments industry.
This is usually never the way it happens. The government does not make market ending decisions on a whim. It would have already met with the biggest stakeholders and fedNow is likely the result of many considerations and compromises. Visa will likely not be threatened any time soon.
Yeah. Unlike UPI in India, FedNow is not mandatory for anyone. But companies could still offer "discounts" to customers when they use FedNow, as they save on credit card fees.
UPI is not mandatory in India, don't know where and why such a message circulates. If I am benefitting with Credit Cards at petrol pumps, I deliberately use it and there's no concern from anybody. Merchants prefer UPI (for now) because money goes to their bank account without any cost. And cash still works at most places where UPI does.
2 replies →
> This would cut alot of middle companies out of the payments industry (or at least put pressure on lowering fees). That would be a huge win. > Wish we could do the same for the credit card companies.
I have no idea about fednow but you can directly transfer an unlimited amount of USDC to someone in about a second for $0.0025 right now on Solana.
$0.000025, ahem.