Why it's taking so long for Americans to get payments instantly • Hacker News Board

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

#101

Post by thecodedmessage » Sun, Dec 17, 2023, 4:49 PM UTC

grecy wrote: post #16

akosoghaaafjdr wrote: post #7

Earlier quoted context omitted.

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…

> 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…

“Because profit” is a bad explanation. It’s super incomplete.

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

#102

Post by DonsDiscountGas » Sun, Dec 17, 2023, 5:01 PM UTC

akosoghaaafjdr wrote: post #4

This article doesn't really go into much detail, but this shouldn't be surprising. IT in financial services is the most insanely complicated, heavily regulated, mishmash of every technology under the sun going back about 60 years that it's a miracle it works as well as it does. This is also why fintech/insuretech/etc startups tend to fail so spectacularly...because in almost every case they severely underestimate the…

>The CEOs of Citi and Bank of America both told lawmakers at a Dec. 6 Senate hearing that they were preparing to join the network in the coming months.

Assuming this is actually correct, I agree with you that this would be pretty successful. Although it still seems like FedNow should've existed years ago. I can deposit a check using the supercomputer/high-res-camera I carry around in my pocket, using a global information network. But it still takes 3 days for ACH to do its things. Companies can do hard things with the right incentives.

>Big banks, which spent more than $1 billion on their own real-time payments system, lobbied to stop the Fed from developing FedNow, which would compete with their network.

Seems like the incentives were in the wrong direction.

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

#103

Post by amanaplanacanal » Sun, Dec 17, 2023, 5:22 PM UTC

nirvdrum wrote: post #84

gonzo41 wrote: post #83

Earlier quoted context omitted.

Consider the fact that the small banks offer an perceived or real 'better' service. What that tells you about the market is the big banks are lazy and not competitive. So naturally the next step is to get big, beat them on service and eat their lunch.

That’s not the natural next step. And even if it were, shareholders would push that new big entity to increase profits and then it just becomes the thing it disrupted. A core topic of what I wrote is that I enjoy banking with an entity that doesn’t have aspirations to grow beyond its local environment. I enjoy being a member of a credit union. I decidedly do not want to bank with a large bank. History has shown this…

That’s one of many nice things about credit unions. There are no share holders, they are owned by the members.

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

#104

Post by bdavbdav » Sun, Dec 17, 2023, 6:22 PM UTC

akosoghaaafjdr wrote: post #4

This article doesn't really go into much detail, but this shouldn't be surprising. IT in financial services is the most insanely complicated, heavily regulated, mishmash of every technology under the sun going back about 60 years that it's a miracle it works as well as it does. This is also why fintech/insuretech/etc startups tend to fail so spectacularly...because in almost every case they severely underestimate the…

In the US at least - in Europe and other regions, the tech is fairly progressive. In the UK we’ve had “faster payments” for eons.

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

#105

Post by GauntletWizard » Sun, Dec 17, 2023, 6:25 PM UTC

missedthecue wrote: post #99

otterley wrote: post #98

Earlier quoted context omitted.

Banks are probably a bit hesitant to unlock instant payments because they can’t be reversed and so they will be a juicy target for perpetrating fraud. I’m confident they’ll be rolled out eventually but I think it’s going to take a little time for banks to figure out what the right controls for the feature should be.

This is one of the main headwinds with Zelle. It's digital cash. It's advertised as digital cash. But still even with a lot of consumer education, so many people treat it as a reversible payment. Congress grilled bank executives about it last year and even most of the representatives failed to grasp that it was digital cash. If someone gets defrauded, it's just as if they handed $20 to a scammer. It's going to be har…

It's not. It's just another database entry row. It's controlled by your bank and the receiving bank. It can be initiated without me being present. It can be initiated remotely.

Comparing it to cash is dumb.

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

#106

Post by o-o- » Sun, Dec 17, 2023, 6:26 PM UTC

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…

> No that isn't surprising because those were new buildouts of brand new systems that didn't exist before

Granted tech leaping explains why many third world countries are ahead, however the US was no where near the first to digitize its banking infrastructure. I've heard stories from former (now-retired) colleagues who went to visit banks in the US to showcase Skandinaviska Bankens digital ledger. This was around 1968, and the US bank executives were allededgly blown away.

The EU banking landscape is far more heterogeneous – 24 languages and 27 different nationalities, each with their own jurisdiction. All in all against all odds and still Instant SEPA is in place (not to mention the national mobile account-to-account solutions).

Technical debt does not explain the absense of instant payments in the US. I'm convinced that the real reason lies in the imbalance between political and corporate will. Or put differently: an effect of what happens when corporate will dictates (finances) political will.

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

#107

Post by tshirthoodie » Sun, Dec 17, 2023, 7:15 PM UTC

GauntletWizard wrote: post #105

missedthecue wrote: post #99

Earlier quoted context omitted.

This is one of the main headwinds with Zelle. It's digital cash. It's advertised as digital cash. But still even with a lot of consumer education, so many people treat it as a reversible payment. Congress grilled bank executives about it last year and even most of the representatives failed to grasp that it was digital cash. If someone gets defrauded, it's just as if they handed $20 to a scammer. It's going to be har…

It's not. It's just another database entry row. It's controlled by your bank and the receiving bank. It can be initiated without me being present. It can be initiated remotely. Comparing it to cash is dumb.

It's a digital abstraction of cash. Are you happy now?

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

#108

Post by lxgr » Sun, Dec 17, 2023, 7:26 PM UTC

SideburnsOfDoom wrote: post #66

lxgr wrote: post #34

Earlier quoted context omitted.

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.

The many small banks will buy most of the IT backend "as a service". There are a small number of vendors for this, FiServ comes to mind (1). And that industry is very concentrated - the number of competitors to FiServ for actually running a bank will be in single digits. 1) https://en.wikipedia.org/wiki/Fiserv https://www.fiserv.com/

Offering a new payment service with different semantics to all existing ones is not only a tech/backend change, though.

The real-time aspect of FedNow has liquidity implications; the fact that it (optionally?) allows outbound push payments for consumers at a much cheaper rate than wires makes means that automated fraud prevention becomes a priority.

In other words, when you can charge $10-30 for an outgoing (and often incoming!) wire, that pays for the liquidity and manual fraud reviews (during business hours only). At roughly $0, those economics change significantly.

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

#109

Post by someNameIG » Sun, Dec 17, 2023, 7:27 PM UTC

bdavbdav wrote: post #104

akosoghaaafjdr wrote: post #4

This article doesn't really go into much detail, but this shouldn't be surprising. IT in financial services is the most insanely complicated, heavily regulated, mishmash of every technology under the sun going back about 60 years that it's a miracle it works as well as it does. This is also why fintech/insuretech/etc startups tend to fail so spectacularly...because in almost every case they severely underestimate the…

In the US at least - in Europe and other regions, the tech is fairly progressive. In the UK we’ve had “faster payments” for eons.

Same in Australia, we've had virtually instant transfers for years.

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

#110

Post by jjeaff » Sun, Dec 17, 2023, 7:45 PM UTC

o-o- wrote: post #106

akosoghaaafjdr wrote: post #7

Earlier quoted context omitted.

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…

> No that isn't surprising because those were new buildouts of brand new systems that didn't exist before Granted tech leaping explains why many third world countries are ahead, however the US was no where near the first to digitize its banking infrastructure. I've heard stories from former (now-retired) colleagues who went to visit banks in the US to showcase Skandinaviska Bankens digital ledger. This was around 196…

ACH transfers are basically instant in the US. But because they can, the sending bank holds on to the outgoing transfer for as long as they can get away with and the receiving bank waits to make the transfer available to the customer for as long as they can get away with. this allows banks to squeeze a little bit more return out of the money, and more importantly, the longer money is in limbo, the more likely customers are to overdraft thus incurring penalty fees. additionally, slow transfers helps keep customer money in same-bank services. if I can instantly transfer money in from my brokerage service, then I have less incentive to use the brokerage service offered by my bank.