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Why it's taking so long for Americans to get payments instantly

wsj.com

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Re: Why it's taking so long for Americans to get payments instantly

#31

Post by manuelmoreale »

ex3ndr wrote: post #21
grecy wrote: post #16

Earlier quoted context omitted.

> most other countries got started decades later due to a lot of factors but mostly either poverty, being behind the iron curtain, or lack of access to reliable computers You are completely ignoring many countries here that have had instant, free transfers since the 90s. It never ceases to amaze the lengths Americans will go to explaining why they are behind the rest of the world in some way or other while trying as…

Like what? Most countries in europe still don't have transfers by phone number?

What would be the benefit of that if you don’t mind me asking?

Re: Why it's taking so long for Americans to get payments instantly

#32

Post by lxgr »

devoutsalsa wrote: post #22
cuteboy19 wrote: post #13

Earlier quoted context omitted.

What possible use is there of having so many small banks? This is one of the only non-tech industries that scales reliably

So we don't have to pay a monthly fee of 2.95 euros just to have a bank account! Competition brings lower fees.

Competition should work just fine with a handful of large banks and a vigilant regulator.

In fact, I suspect that there are actually huge inefficiencies in these very small regional banks people are paying for one way or another.

It might still be worth it for society, in the end, but I highly doubt that it’s cheaper/more efficient than in other countries.

One example is the fact addressed in the article: It takes way too long to roll out technical innovations that have been commonplace in other countries for decades or even centuries.

Re: Why it's taking so long for Americans to get payments instantly

#33

Post by ZeroSolstice »

"Fed delays have cost consumers hundreds of billions in overdraft fees, check-cashing fees and late fees, said Aaron Klein, a senior fellow at the Brookings Institution."

Why would banks be incentivized to speed up this process? They make money off the delay and get to blame the Federal government. Its the same reason a purchase can be done instantly but then it takes up-to (10) business days to be refunded. Banks and retailers make interest off the money they hold onto. Being able to make money off the refund is a probable reason why they are even offered. Otherwise it would be all-sales-final.

Re: Why it's taking so long for Americans to get payments instantly

#34

Post by lxgr »

AndrewKemendo wrote: post #24
cuteboy19 wrote: post #13

Earlier quoted context omitted.

What possible use is there of having so many small banks? This is one of the only non-tech industries that scales reliably

I’d say it’s one of the more important things to not have as a single point of failure

Sure, yet there are still a small handful of too-big-to-fail banks at the top, and a long tail of too-small-to-upgrade-their-tech-and-processes ones at the bottom.

I’d rather have 50 large banks than 5 humongous and 5000 tiny ones from a resilience and efficiency point of view.

Re: Why it's taking so long for Americans to get payments instantly

#35

Post by lxgr »

salawat wrote: post #29
cuteboy19 wrote: post #13

Earlier quoted context omitted.

What possible use is there of having so many small banks? This is one of the only non-tech industries that scales reliably

Decorrelatiom of risk. Many small redundant banks decreases odds of system threatening contagion. Large correlated businesses have catastrophic outcomes when things do eventually happen.

Unless many small regional banks are all driven into the same corner by the same macro forces that have already capsized a few of them.

And we still do have too-big-to-fail ones too – and they’re gaining market share.

Re: Why it's taking so long for Americans to get payments instantly

#36

Post by gonzo41 »

thomasahle wrote: post #18
cuteboy19 wrote: post #13

Earlier quoted context omitted.

What possible use is there of having so many small banks? This is one of the only non-tech industries that scales reliably

> What possible use is there of having so many small banks? This is such a strange question. Having many participants in a market simply means that nobody were able to consistently outcompete the other players. I's like saying, why have 2 million farms in the U.S., when you could just have a few mega cooperations owning all farm land?

Well, you do have a few mega-corporations owning a lot of the land, or at least making big attempts to. The Saudis growing alfalfa in the US desert are a good example of that.

It would make more sense for many of those smaller banks to merge locally and compete with much bigger banks in their geography. But the US is odd. Take, for example, the justice system, where very little town has its own police force. In contrast to other countries where the State police do all forms of policing and everyone gets a better and more uniform quality of service.

I would question the notion that promoting numerous small banks without the advanced features of larger counterparts, and deeming it beneficial for competition, is simply a manifestation of U.S. exceptionalism.

Re: Why it's taking so long for Americans to get payments instantly

#37

Post by lxgr »

akosoghaaafjdr wrote: post #7
creakingstairs wrote: post #5

Earlier quoted context omitted.

> but this shouldn't be surprising Then is it surprising that other nations have had near instant payments for a good while?

No that isn't surprising because those were new buildouts of brand new systems that didn't exist before. In a lot of cases, those countries skipped over a whole bunch of in between phases, like how China skipped over a bunch of telecom infrastructure buildout and so managed to avoid a lot of similar issues there. The US digitalized it's financial industries the earliest and so it has the most pre-existing infrastruct…

All European countries have been doing banking for a while now, with some institutions predating computers by a couple of centuries, yet they still somehow managed to roll out SEPA Instant.

And to give another counterexample: The US has had cell phone networks much longer than many other countries, yet the 5G deployment here is pretty competitive internationally.

The second mover advantage is real, but I don’t think it can explain the holdup here.

Re: Why it's taking so long for Americans to get payments instantly

#38

Post by hirako2000 »

lxgr wrote: post #30
chadash wrote: post #25

Earlier quoted context omitted.

Except the parts that don’t scale. For example, some banks specialize in servicing specific communities (e.g., Chinese immigrants). Other banks understand local geographic areas well. For example, they might be able to give you a better rate on financing a gut remodel because they know your contractor does good work and your plans for the remodel will be desirable in a specific neighborhood. It’s hard to do that when…

I hear that argument often, but I’m not convinced. Why should efficient lending decisions somehow be uniquely hard to make in a large corporation with many local branch offices? We’ve seen massive consolidation in mobile phone networks (where local knowledge should arguably matter just as much for where to build the next tower), supermarkets (I’d assume preferences and spending habits to also vary widely), media, and…

Lending decisions might simply, often but not always, be much more complex than how to build nationwide networks.

Re: Why it's taking so long for Americans to get payments instantly

#39

Post by lxgr »

ex3ndr wrote: post #21
grecy wrote: post #16

Earlier quoted context omitted.

> most other countries got started decades later due to a lot of factors but mostly either poverty, being behind the iron curtain, or lack of access to reliable computers You are completely ignoring many countries here that have had instant, free transfers since the 90s. It never ceases to amaze the lengths Americans will go to explaining why they are behind the rest of the world in some way or other while trying as…

Like what? Most countries in europe still don't have transfers by phone number?

Yes, because they have the real thing: Instant and free cross-country transfers by bank account number. Why use something strictly less powerful?

A phone number based transfer service can be implemented as a directory service on top of that much more easily.

Re: Why it's taking so long for Americans to get payments instantly

#40

Post by andrewjl »

lxgr wrote: post #32
devoutsalsa wrote: post #22

Earlier quoted context omitted.

So we don't have to pay a monthly fee of 2.95 euros just to have a bank account! Competition brings lower fees.

Competition should work just fine with a handful of large banks and a vigilant regulator. In fact, I suspect that there are actually huge inefficiencies in these very small regional banks people are paying for one way or another. It might still be worth it for society, in the end, but I highly doubt that it’s cheaper/more efficient than in other countries. One example is the fact addressed in the article: It takes wa…

The US hasn't ever had a vigilant financial services regulator.
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