Comment by wtmt
3 years ago
This is a bit off topic for the post, but relevant for some of the comments here.
For those who are commenting about payment systems in India and comparing this to UPI (Unified Payments Interface), this is not like UPI in a few ways.
Firstly, this is more closer to a faster version of RTGS (Real Time Gross Settlement) in India, which is operated by the RBI (Reserve Bank of India). Speaking from experience, RTGS in India can take several minutes or even 20 minutes or longer, belying the “real time” in its name (this is true even now). The FedNow system is supposed to be real time (we’ll soon know how well it performs in comparison).
Secondly, UPI is a payments system by a consortium called NPCI that’s owned by private, public and foreign banks in India. It is not owned by RBI. FedNow is owned by the Federal Reserve, and not by a bunch of banks.
With both RTGS (and the slower batched transfer system called NEFT) in India and FedNow in the US, the interbank settlement is done via the central bank (RBI or Federal Reserve).
FedNow is probably more similar to TIPS, which has been running in the euro area banks since 2018, building on SEPA instant credit transfer. https://www.ecb.europa.eu/paym/target/tips/html/index.en.htm...
Anyone with an euro bank account is probably using TIPS in some fashion. In most cases, you can send a bank transfer anywhere in the euro area within 10 seconds for zero fees. Some banks may charge an extra fee on the sending side, and the receiving side might be a bit slower (in which case the payment might take a few hours to show up or act like a normal bank transfer). It's also used by merchants like Amazon or payment systems like PayPal to reduce fees on their payments.
Another difference is the use of phone numbers and simple email like identifiers in UPI. That doesn’t seem to be part of FedNow itself. What makes UPI very usable is that entering the phone number or a simple UPI id brings up some metadata about the person to confirm that the transfer target is accurate. In FedNow such a layer has to be added by Zelle or similar layer above, it appears.
Well, given that FedNow has nothing to do with UPI, per the parent's comment, and it's about inter-bank settlement, it makes sense for an application layer like Zelle to provide that.
FedNow intends to support aliases such as phone number and email identifiers in the near future.
To clarify, the Federal Reserve is owned by the 12 Federal Reserve Regional Banks which are in turn “owned” (as in stock that pays a dividend but can’t be traded) by the commercial banks in that region.
it's not a clarification.
the ownership and stocks are entirely legacy symbolic gargoyles on a standard central bank. independent government agency. it's a loosely coupled top-down public institution, the monetary policy is set by a public committee,
> it's a loosely coupled top-down public institution
Indeed. Here I was thinking we'd shed the last of this "independent Fed" legal fiction during the "Great Recession."
Any idea how much the dividend pays to these private individuals?
I don't think you are drawing the right parallels here. RTGS is only meant for transactions where sums to be transferred are very large. It only accounts for 0.24% of all transactions. While UPI and IMPS guarantee instant payments and account for 57.27% of all transactions.
> FedNow is owned by the Federal Reserve, and not by a bunch of banks.
Sorry I have to ask. What do you think the Federal Reserve is?