Comment by aidenn0
3 years ago
Is the eventual end-game that I can send money from my account at Bank A, to a friend's account at Bank B to split a check at dinner without using a third party like Venmo?
3 years ago
Is the eventual end-game that I can send money from my account at Bank A, to a friend's account at Bank B to split a check at dinner without using a third party like Venmo?
Yes, that is absolutely a use case. Similar to Venmo, there is also a Request for Payment (RFP) mechanism. I'm on the Request for Payment (RFP) Work Group that is composed of a number of financial institutions, service providers, and billers.
Netflix is part of the RFP Work Group. So presumably they are interested in offering consumers the ability to pay for Netflix using FedNow instead of a credit card. Instead of Netflix paying ~$0.50 in credit card processing fees per U.S. subscription they'll probably be able to find a bank willing to charge them < $0.25. It also gives consumers more control as they have to authorize each charge.
> So presumably they are interested in offering consumers the ability to pay for Netflix using FedNow instead of a credit card.
I do wonder how stuff like this will shake out. I will use a credit card, always, with any vendor that doesn't pass along credit card fees to the customer in some way. (Why would I choose otherwise? The credit card gives me rewards, and better fraud protection.)
But more and more, I see companies charging "convenience fees" for credit card usage or offering "discounts" for cash/debit. Hell, T-Mobile just started requiring you not use a credit card to get their $5/mo autopay discount.
So this is all cool (and perhaps would make it easier for people who don't have a credit card to pay for Netflix), but I don't see why I'd use anything but a credit card to pay for my Netflix subscription, unless they offer discounts for using FedNow. Which... they probably won't?
RFP i.e. Request for Payment is not part of this release. Furthermore there is no ETA from the Fed as to the release date for RFP.
Currently FedNow is simply a push payment system i.e. bank account holder may be able to use FedNow to push money out from their bank account to someone else's bank account.
The limitation here is the bank account holder must know the account number of the recipient. This is a huge limiter in adoption since most people don't want to share their bank account numbers and maintaining a directory of people's bank account numbers is cumbersome to say the least
Yes, the Fed is working on a directory but they have not yet announced the launch date for such a directory, not have they mentioned the index i.e. will it be phone number ? email ? something else ?
Bottom line: FedNow launch: Step in the right direction but still a long way to go
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I’m going to lose $30 a month in discounts with T-mobile if I don’t switch to debit card or checking account. T-mobile has a horrible history when it comes to security. I definitely don’t want to give them access to my checking account
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"Hell, T-Mobile just started requiring you not use a credit card to get their $5/mo autopay discount."
Yes. Visited a T-Mobile store to set that up. Brought in a voided check. Said "Set up an ACH transfer, please." "What's an ACH transfer?" Took about half an hour, two rejects from the T-Mobile payment system with both me and the clerk checking the numbers, and a conversation with Bank of America customer support ("We didn't reject that, we won't see it until the daily batch.") Too many people are going to be paying T-Mobile a $60/year "convenience fee".
(Worse, BofA is apparently still charging for outgoing ACH transfers. And they're not on FedNow.)
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"any vendor that doesn't pass along credit card fees to the customer in some way"
I think every vendor passes along the fees, either in aggregate through pricing, or to the individual as a charge. At least in the latter case it is more transparant and fair to non cc users.
I moved to Europe in 2018. The banking system is decades more advanced than the US. At least where I am, no restaurant will “split a check” and one person is expected to pay. We settle the bill between each other in a matter of seconds.
Most bills are paid using this exact system. Credit cards are very rarely used except in-person. Since you have to accept (or tell your bank to always accept certain vendors) debits using this system, there’s never any surprises. You usually have nearly a week to accept a debit.
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Credit card fees that aren’t passed through to you are a bit tragedy of the commons. Probably good for them to go away. It’s fine if you choose to pay them, and it’s still worth it to you, but otherwise you’re forcing everyone around you to subsidize your credit card rewards. That’s not fair.
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Have you looked at other systems across the world for inspiration / design choices, and if so, could you elaborate on how this system compares? For example, the use case mentioned is probably the prime use case for UPI in India, which has now been extended to become a full fledged payment network alongside CC networks etc.
> they'll probably be able to find a bank willing to charge them < $0.25
I guess that includes some very small values, but the upper bound seems ridiculously high.
I hope they extend that to actual invoicing standard, i.e. pass the invoice details in that RFP message, like something similar to https://www.finanssiala.fi/en/topics/finvoice-standard/
> I'm on the Request for Payment (RFP) Work Group that is composed of a number of financial institutions, service providers, and billers.
I'm just randomly curious: do you know which Federal Reserve Bank FedNow was developed at?
Why should they not be able to find a bank that charges <$0.05?
Other than with credit cards, there are no costs for customer kickbacks and chargebacks.
That sounds odd.
I can't imagine netflix giving up the stickiness of automatic recurring billing to say <2% of the transaction cost.
You realise you can do this over bank account?
At least in the EU, a recurring billing over bank transfer is totally a thing...
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That sounds great!
I had to read this twice - is it really not like in the UK? Is this the first US implementation of "Faster Payments"? Sure people in the UK sometimes use PayPal, Revolut, but most of the time its always just a friend gives (and you save on your banking app) their bank account number and sort code, and you instantly send it across. edit: with no fee
No, Wire Transfers have been the official fast settlement method in US for a while. They have a fixed fee associated but given the larger transaction amounts that people generally use it for, it's not a bad thing. Everyday consumers have their silly apps for money transfer (PayPal, Cash app, iMessage Cash). Other than that, people are just used to transactions taking 2-3 days and over drafting because they made another payment and forgot about it. Yay, ACH!
Ah. Faster Payments in the UK are free.
ACH has been next day for like 2 years now at least with every bank and employer I’ve used. I’m sure there’s some banks that didn’t join the next day system, but I haven’t experienced it. Then again being part of a credit union has lost a lot of its allure these last few years, so maybe that’s where you’d see that sort of thing more.
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I can think of 0 occasions where I’ve given anyone my bank account info who isn’t a commercial organization (employer, electric company, etc).
I had no idea it was the opposite in the UK.
Edit: with the exception of writing physical checks, of course. I use those when the receiver doesn’t accept Venmo or Apple Pay.
When you give someone a physical check, you are giving them your bank account info. It is written on the bottom of every check.
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I remember my father had a checkbook in the 1970's. I never had one, not sure they even exist here anymore (Belgium).
For payments to friends we use bank apps. Usually the receiver generates a QR code for the payment on their phone, which you scan from your bank app, sign with a pincode, and the payment is executed immediately. If you are not near you can also use their account number to transfer money instantly.
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I am currently disputing an international payment and wire transfer (or walking/driving my happy ass to their office and paying cash) is the only method allowed by the lawyer representing me. That's at least one occasion you are not accounting for (a foreign entity that needs the equivalent of cash to proceed)
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> Is this the first US implementation of "Faster Payments"?
No, there's already Zelle, which is fairly popular now, though not as ubiquitous as instant bank transfers in other countries: https://en.wikipedia.org/wiki/Zelle_(payment_service)
Zelle is crap. It was created by banks to skirt regulations which make them responsible for fraud. It exists to make things worse for their customers which is why they pushed people to use it so hard.
The UK and Ireland have identical banking codes (six-digit sort code & eight-digit account number) and constructed IBANs the same way (BIC, sort code, account number), but Ireland switched to using IBANs domestically, while the UK didn't. That means that you in the UK need one interface for domestic payments and a different interface for SEPA payments, while we use the same for both.
Wire transfers exist, but have a high fixed-transfer cost ($20 is not unusual).
The larger banks have their own systems that only work within the bank; some smaller banks offer systems that work with any bank that offers the same system.
ACH exists, and I've used it to move money between accounts I own, but there is some friction to set up. I don't know anyone who uses it for C2C payments.
Damn. We only have to pay fees to the EU after brexit (and I assume internationally too. edit: I've never transferred internationally).
This got me surprised too. In Mexico we are also used to giving our bank account CLABE number (https://en.wikipedia.org/wiki/CLABE) that is used to transfer without fees and instantly. Even small shops use it to get paid, friends to split dinner, etc.
Poland has BLIK, which links your bank account number to your phone number. Then, just send a transfer to the phone number instead of punching in the 26 digits of the account number. And if you don't want to share your phone number, you can use a temporary six digit code instead.
Mostly the worst system you can imagine from power user perspective: * banks won't let you use it without a bank app (there is one exception that will let you use only some only outgoing transfers through the web page) although it is technically not required * giving out your IBAN is not a problem but I don't want to give everyone my phone number, and the temporary code is temporary * don't ask what happens if you have multiple accounts and multiple phone numbers.
> 26 digits of the account number
That seems rather excessive. Why on earth are Polish bank accounts so long?
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It sounds very much like some of the Interac services that we have here in Canada (and have had for ages). We can do what is called "email money transfer" where as long as I know your email address I can go into my bank app, transfer money to you and it will automatically show up in your bank account.
The US already has Zelle which does this. However the roll out was botched, many banks don't seem to use it and most people (including me until a few months ago) thought it was a paypal competitor - but it's actually a government based system system which renders free transfers between bank accounts (your own or others) with a cap of 3 or 5k/month.
The interface is very weird. Many people can't figure out how to use it. I ended up having to set up new email addresses and assign them to different bank accounts in order to distinguish my accounts.
> but it's actually a government based system system which renders free transfers between bank accounts (your own or others) with a cap of 3 or 5k/month.
Zelle is run by Early Warning Services [1], a joint venture between Bank of America, Truist, Capital One, JPMorgan Chase, PNC Bank, U.S. Bank, and Wells Fargo.
It's most definitely not "government-based".
[1] https://en.wikipedia.org/wiki/Zelle_(payment_service)
Zelle has many limitations:
1) The recipient needs to download the app and sign up. How does the Payor know whether the recipient has Zelle app or not
2) Even with the app, there are only about 50-100 banks that allow Zelle transfers. If someone's bank does not offer Zelle they are directed to enter their Debit Card number using "Push to Card" to receive the funds. While the funds land up in the bank account instantly either way, some Debit Cards have limitations and will not be enabled to receive funds
3) Zelle is essentially a "messaging layer" i.e. the actual settlement happens overnight using ACH rails. As a result the sending as well as the receiving bank are taking some risk in terms of allow the recipient to withdraw money when the underlying settlement hasn't happened. If the settlement fails the receiver's bank will need to claw bank the money from the receiver As a result there are some really low limits on daily transfers i.e. between 1-2K/day for most banks
4) Above all Zelle (like most other payment rails ) is a push system i.e. one can push money using Zelle. One may not pull money using Zelle
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Zelle is most certainly not a government service.
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You’re heavily limited in terms of transfers also. I need to split my rent over several payments over several days using zelle. It really sucks compared to something like SEPA
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Fidelity Investments is one of the biggest financial institutions in the country. Zelle does not support it or vice versa (not sure which way).
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Except Interac is controlled by the big banks, for the big banks. To the best of my knowledge.
Interac is a company formed by the big banks in Canada to link all their networks and help insure we have uniformity. I believe it started as a way to standardize ATM machines and has grown to a bunch of other things and is largely why Canada was able to so quickly and completely adopt chip and pin and tap to pay literal decades before the US did.
Not OP, but I thought FedNow will do this on day one for participating banks. Someone correct me if I’m wrong. FedNow will also settle faster than Venmo currently does (unless you pay for Venmo’s instant settlement) because it’s instantaneous. To be fair to Venmo, their bottleneck was precisely the lack of FedNow. I assume Venmo will make instant settlement free. But they will need to add more features now that people might substitute with FedNow. Anyway, this is a big deal for Americans and was a long time coming.
Is this not possible currently in the US? That’s quite surprising!
No, US bank to bank transfers/payments are quite slow, and not commonly used for small transactions. But there are a couple substitutes that are used:
* Zelle is basically better bank transfers and is already supported by many (most?) US banks: https://en.wikipedia.org/wiki/Zelle_(payment_service)
* Random 'third party' money transfer services like Venmo, Cashapp, Paypal, etc.
But similar to messaging in the US, the main issue is fragmentation. There's isn't quite a national consensus like some other countries have.
Debit cards can be used for instant payments and are used to eg pay Uber drivers. Or wire transfers.
And Zelle is a bank to bank transfer network, not a third party service.
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From the perspective of most people from other developed countries, it’s honestly incredible that the US hasn’t already had this for years like we all have…
Can't you already send money from bank A to bank B without Venmo? Isn't that the whole point of bank transfers?
There are three methods to do so:
1) Write a physical check (2-10 days from deposit, usually 2) 2) Use ACH (a virtual check) (2-10 days, usually 2) 3) Fedwire which costs $10-$15 to both the sender and receiver (15 minutes).
There are some banks that give free Fedwire transfers, often just to higher account tiers. Fidelity Investments gives free Fedwire to everyone, though.
Zelle exists and you can scan a check that was written to you (check 21)
wow americans can't do that already????
That's how it works in the EU.