I was listening to a podcast a few weeks ago (Planet Money) and was genuinlely shocked at how poor the US payments network is in relation to here in the UK. Most bank transactions here complete within 2 hours (faster payments service) and are completely free.
The US Federal Reserve is currently trying to work towards faster payments - and seems to want to let private industry solve the problem. It really is terrible though and has been for a long time.
Isn't "letting private industry solve the problem" exactly what we've already got?
I was listening to a podcast a few weeks ago (Planet Money) and was genuinlely shocked at how poor the US payments network is in relation to here in the UK. Most bank transactions here complete within 2 hours (faster payments service) and are completely free.
I could not believe my eyes when I saw that a transfer (it's called a "wire transfer") will cost me $35 on the sending side, and the receiver will pay another $25. Then you need the bizarre routing numbers which banks bizarrely obfuscate for even more bizarre reasons and which are easy to get wrong because there is no checksum. And then it takes days. No wonder when anything even slightly better appears, people jump…
Wires don't cost the banks that much. I believe the actual cost is under one dollar, which is what I've seen some brokerages charge for outgoing wires. The reason banks charge so much for outgoing and incoming wires is because customers pay it.
Wires are required at times because they're "good funds" faster - ACH may take up to 6 days to clear in bad cases. Also, wires can't be reversed (generally). If that's a good or a bad thing is dependent on the transaction and transactors.
ACH never really clears, it just hasn't returned yet. Big banks will have the money next business day at the latest, Tiny correspondent banks in alaska might be as far behind as an extra day or two. There's a class of return that's supposed to come within 3 days, (NSF/No Account/Closed Account) that's usually what the banks are waiting for, but fraud related returns can be up to 60 calendars later by the rules.
Ah, perfect - I had forgotten that banks had up to 60 days! Just nuts.
I was listening to a podcast a few weeks ago (Planet Money) and was genuinlely shocked at how poor the US payments network is in relation to here in the UK. Most bank transactions here complete within 2 hours (faster payments service) and are completely free.
I could not believe my eyes when I saw that a transfer (it's called a "wire transfer") will cost me $35 on the sending side, and the receiver will pay another $25. Then you need the bizarre routing numbers which banks bizarrely obfuscate for even more bizarre reasons and which are easy to get wrong because there is no checksum. And then it takes days. No wonder when anything even slightly better appears, people jump…
A common argument in favor of bitcoin and other crypto tokens is the large cost reduction of sending money, commonly paired with the US figures you mentioned.
I find it fascinating that the much saner situations in the EU are never mentioned. Perhaps I need a more diverse source of news on this topic.
About 3 years ago I was raising money in the USA for a Mexican FinTech startup. Said startup uses Mexico's equivalent of ACH to transfer money (it is called SPEI). VCs in the US were amazed when we told them that SPEI transfers costed $.4 USD and the money was moved in 15 minutes or less. Fast forward years later I work in a company that uses ACH, I have came to know some of its internals, and man how bad it is... ta…
Canada is like this as well.
Like Mexico, or like the US? (Your comment is ambiguous; genuinely curious)
SFTP - I can't say what's happening today, but 8 years ago this was the only channel available when I added an ACH payment system to B2B accounting system. 80 column text files SFTP'd overnight to the company's bank. I also had a couple of 200 page dead tree books on my desk describing the process & formats. I joked that it was originally designed for delivery by telegraph. I'm still not convinced I was wrong.
80? The file format is 94 char fixed width, and it's based on the track specs of 9 track mainframe tape.
It was a 3 month project I finished 8 years ago...I guess my memory failed me.
I could not believe my eyes when I saw that a transfer (it's called a "wire transfer") will cost me $35 on the sending side, and the receiver will pay another $25. Then you need the bizarre routing numbers which banks bizarrely obfuscate for even more bizarre reasons and which are easy to get wrong because there is no checksum. And then it takes days. No wonder when anything even slightly better appears, people jump…
A common argument in favor of bitcoin and other crypto tokens is the large cost reduction of sending money, commonly paired with the US figures you mentioned. I find it fascinating that the much saner situations in the EU are never mentioned. Perhaps I need a more diverse source of news on this topic.
International transfers are where crypto or other modern payment systems can shine - currently, low cost startups still charge ~2-3% plus onboarding fees to send funds (in comparison to banks 7-22%), and they have volume limits.
Does ACH cost? I know in the UK we have faster payments, it usually shows up a few seconds later in the target account, and it's free. I've mostly stopped using paypal as a result.
ACH is not a service directly exposed to consumers. Instead it is the backend for a lot of other services. It backs direct deposit, paying with "electronic cheque", and most interbank-bank consumer transfers, broker-to-bank transfers, and even many service-to-consumer transfers. For example, when you withdraw money from paypal in the US, it would normally be via an ACH transfer to your bank account. ACH transfers are…
Thanks for a thorough reply. Would a better equivalent of ACH to the UK be BACS then? And Zelle is similar to UK faster payments?
A common argument in favor of bitcoin and other crypto tokens is the large cost reduction of sending money, commonly paired with the US figures you mentioned. I find it fascinating that the much saner situations in the EU are never mentioned. Perhaps I need a more diverse source of news on this topic.
International transfers are where crypto or other modern payment systems can shine - currently, low cost startups still charge ~2-3% plus onboarding fees to send funds (in comparison to banks 7-22%), and they have volume limits.
Transferwise is much cheaper than that, under half a percent for larger currencies and no onboarding fees.