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The Fed is getting into the Real-Time payments business

cnn.com

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Re: The Fed is getting into the Real-Time payments business

#31

Post by jjeaff »

gst wrote: post #20
ianhawes wrote: post #16

I expect banks to start charging a $65 per transaction premium to interface with this system. FedACH, or "direct deposit", costs pennies wholesale [0]. The value proposition of Venmo/Zelle is not just that they're instant, but that the fees are not insane. Compare that to retail banks which charge upwards of $35 for a "next-day ACH". The Fed should impose fee caps to encourage adoption. [0] https://www.frbservices.or…

> Compare that to retail banks which charge upwards of $35 for a "next-day ACH". Is that still common? None of my banks / credit unions charges for incoming or outgoing ACH transfers.

But they most likely are not same or next day. Mine take 3-5 days to go through.

The banks are making money on the float.

Re: The Fed is getting into the Real-Time payments business

#33

Post by wmf »

incompatible wrote: post #32
HashThis wrote: post #24

The Fed is probably doing this to fend of Facebook Libra. Walls Street is probably wanting to prevent Facebook Libra from money flows.

When will Libra go live? The Fed system will "aim to launch in 2023 or 2024".

It kind of looks like Congress is going to delay Libra until Facebook gives up.

Re: The Fed is getting into the Real-Time payments business

#34

Post by wahern »

ianhawes wrote: post #16

I expect banks to start charging a $65 per transaction premium to interface with this system. FedACH, or "direct deposit", costs pennies wholesale [0]. The value proposition of Venmo/Zelle is not just that they're instant, but that the fees are not insane. Compare that to retail banks which charge upwards of $35 for a "next-day ACH". The Fed should impose fee caps to encourage adoption. [0] https://www.frbservices.or…

The real cost to ACH is fraud, not the electronic processing, per se. The faster a payment settles the easier and more profitable fraud becomes as it makes it easier to cash out and run.

Low fees, fast transfers, high volume/high value--you only get to pick two of the three. (Okay, maybe that doesn't quite work, but you get the idea.)

Re: The Fed is getting into the Real-Time payments business

#36

Post by astrange »

gst wrote: post #20
ianhawes wrote: post #16

I expect banks to start charging a $65 per transaction premium to interface with this system. FedACH, or "direct deposit", costs pennies wholesale [0]. The value proposition of Venmo/Zelle is not just that they're instant, but that the fees are not insane. Compare that to retail banks which charge upwards of $35 for a "next-day ACH". The Fed should impose fee caps to encourage adoption. [0] https://www.frbservices.or…

> Compare that to retail banks which charge upwards of $35 for a "next-day ACH". Is that still common? None of my banks / credit unions charges for incoming or outgoing ACH transfers.

I think they’re talking about wire transfers. Those are $35 at one bank I use (which automates them) and free at another (which makes you call someone and fill out PDFs in triplicate).

Re: The Fed is getting into the Real-Time payments business

#37

Post by woodruffw »

wahern wrote: post #34
ianhawes wrote: post #16

I expect banks to start charging a $65 per transaction premium to interface with this system. FedACH, or "direct deposit", costs pennies wholesale [0]. The value proposition of Venmo/Zelle is not just that they're instant, but that the fees are not insane. Compare that to retail banks which charge upwards of $35 for a "next-day ACH". The Fed should impose fee caps to encourage adoption. [0] https://www.frbservices.or…

The real cost to ACH is fraud, not the electronic processing, per se. The faster a payment settles the easier and more profitable fraud becomes as it makes it easier to cash out and run. Low fees, fast transfers, high volume/high value--you only get to pick two of the three. (Okay, maybe that doesn't quite work, but you get the idea.)

I'm not exactly an expert on clearing, but isn't the reverse also true? FedACH's 24+ hour turnaround makes a whole slew of scams (e.g. fraudulent cash-in, legit cash-out[1]) possible that wouldn't be with an instantaneous system.

[1]: I send you, good samaritan, $500 "by accident" and ask you to return it. You return it, my original transaction never clears, and I'm $500 richer.

Re: The Fed is getting into the Real-Time payments business

#38

Post by digsy »

HashThis wrote: post #24

The Fed is probably doing this to fend of Facebook Libra. Walls Street is probably wanting to prevent Facebook Libra from money flows.

The Fed has been using same day ACH (which was really 1/2 day settlement) since 2016.

And they were sending signals pretty soon after the launch that they were wanted real-time payments.

I believe that pre-dates Libra but quite some time.

Re: The Fed is getting into the Real-Time payments business

#39

Post by westurner »

This system will need to interface with other domestic and international settlement and payments networks.

There is thus an opportunity for standards, a need for federation, and a need to make it easy for big players to offer liquidity.

As far as I understand, e.g. Ripple and Stellar solve basically exactly the 24x7x365 RTGS problem that FedNow intends to solve; and, they allow all sorts of assets to be plugged into the network. Could FedNow just use a different UNL (Unique Node List) with participating banks operating trusted validators and/or offering liquidity ("liquidity provisioning")?

Notably, Ripple is specifically positioned to do international interbank real time gross settlement (RTGS) and remittances. Ripple could integrate with FedNow directly. Most efficiently, if it complies with KYC/AML requirements, FedNow could operate an XRP Ledger. Or, each bank could operate XRP Ledgers. https://xrpl.org/become-an-xrp-ledger-gateway.html

Getting thousands of banks to comply with an evolving API / EDI spec is no small task. Blockchain solutions require API compliance, have solutions for governance where there are a number of stakeholders seeking to reach consensus, and lack single points of failure.

Here's to hoping that we've learned something about decentralizing distributed systems for resiliency.

>> In contrast, the XRP Ledger requires 80 percent of validators on the entire network, over a two-week period, to continuously support a change before it is applied. Of the approximately 150 validators today, Ripple runs only 10. Unlike Bitcoin and Ethereum — where one miner could have 51 percent of the hashing power — each Ripple validator only has one vote in support of an exchange or ordering a transaction. https://news.ycombinator.com/item?id=19195050

So, you want to get banks onboard with only one s'coin USD stablecoin; but you don't want to deal with exchanges or FOREX or anything because that's a different thing? And, this is not just yet another ACH with lower clearance time?

> Interledger Architecture

https://interledger.org/rfcs/0001-interledger-architecture/

> Interledger provides for secure payments across multiple assets on different ledgers. The architecture consists of a conceptual model for interledger payments, a mechanism for securing payments, and a suite of protocols that implement this design.

> The Interledger Protocol (ILP) is the core of the Interledger protocol suite. Colloquially, the whole Interledger stack is sometimes referred to as "ILP". Technically, however, the Interledger Protocol is only one layer in the stack.

> Interledger is not a blockchain, a token, nor a central service. Interledger is a standard way of bridging financial systems. The Interledger architecture is heavily inspired by the Internet architecture described in RFC 1122, RFC 1123 and RFC 1009.

[...]

> You can envision the Interledger as a graph where the points are individual nodes and the edges are accounts between two parties. Parties with only one account can send or receive through the party on the other side of that account. Parties with two or more accounts are connectors, who can facilitate payments to or from anyone they're connected to.

> Connectors provide a service of forwarding packets and relaying money, and they take on some risk when they do so. In exchange, connectors can charge fees and derive a profit from these services. In the open network of the Interledger, connectors are expected to compete among one another to offer the best balance of speed, reliability, coverage, and cost.

Why should we prefer an immutable, cryptographically-signed blockchain solution over SQL/BigTable/MQ for FedNow?

Blockchain and payments standards: https://news.ycombinator.com/item?id=19813340

... Here's the notice and request for comment PDF: "Docket No. OP – 1670: Federal Reserve Actions to Support Interbank Settlement of Faster Payments" https://www.federalreserve.gov/newsevents/pressreleases/file...

"Federal Reserve announces plan to develop a new round-the-clock real-time payment and settlement service to support faster payments" https://www.federalreserve.gov/newsevents/pressreleases/othe...

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