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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

#61

Post by hakfoo »

csdreamer7 wrote: post #11

> The more than 300 banks it has said are using the platform represent a fraction of the roughly 9,000 U.S. banks and credit unions. The article claims big banks lobbying with their own competitor to FedNow delayed the rollout of real-time payments, according to those industry officials. But another factor I want to point out is that the USA has more small banks (and, I assume, credit unions) than any other country o…

The whole "their own competitor" (Zelle) thing seems sort of weird.

It hit the market well after people were seeing FedNow on the horizon. Why bother building something expensive that's obviously going to be obsolete in a few years?

If it was meant to compete with PayPal/Cashapp/Venmo, it was 10-15 years too late for that. Anyone who wanted it had it already.

I wonder if the value of Zelle is that it's still a private club. The customer safety and confidence stories have been terrible-- rejecting accountability, ignoring fraud and misuse. The banks are incentivized to say "our network, our rules."

FedNow, as a government entity, will eventually respond to controversial political forces like "people expect to be made whole in the event of fraud" or "payment platforms should provide a means of leverage in customer disputes".

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

#62

Post by loxias »

ttymck wrote: post #43
ZeroSolstice wrote: post #33

"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 an…

Retailers make a significant return on interest? Can you help me identify what keywords I would look for in a P&L to see this?

I always heard it as "float management", or "managing your float".

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

#63

Post by unmole »

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?

> Having many participants in a market simply means that nobody were able to consistently outcompete the other players.

Yeah, no. The tiny bank in Arkansas isn't participating in the same market as the tiny bank in Alabama. But the large bank from New York wasn't allowed to compete in Alabama by state regulators.

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

#64

Post by pmontra »

csdreamer7 wrote: post #11

> The more than 300 banks it has said are using the platform represent a fraction of the roughly 9,000 U.S. banks and credit unions. The article claims big banks lobbying with their own competitor to FedNow delayed the rollout of real-time payments, according to those industry officials. But another factor I want to point out is that the USA has more small banks (and, I assume, credit unions) than any other country o…

According to the Bank of Italy there were 439 banks in Italy in 2022 down from 684 in 2013. [1]

GDP of USA and Italy: 26.95 and 2.19 trillion dollars. [2]

GDP/banks (if it makes any sense but bear with me) : 26.95/9000 = 0.0029 and 2.19/439 = 0.0049

So yes, money per bank is less in the USA but only by a factor of 2. It's in the same order of magnitude. It's also a much larger and sparse country (at least in some areas) so I would expect more fragmentation and redundancies in those markets where you need to be physically close to customers. Banking is among them IMHO

[1] https://www.bancaditalia.it/pubblicazioni/banche-istfin/2023...

[2] https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomi...

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

#65

Post by loxias »

creakingstairs wrote: post #5
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…

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

God no, hah! Not surprising at all. They didn't have first mover disadvantage.

There's a cost to being the first to invent infrastructure. Others can stand on your shoulders and build improvements, while you're stuck with "version 1.0".

Other nations might have instant payments for a good while, but the US had viable banking and a postal service for more than 200 years. The cost of being first is sometimes being last to upgrade. :/ see also: China and trains.

edit: come at me!

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

#66

Post by SideburnsOfDoom »

lxgr wrote: post #34
AndrewKemendo wrote: post #24

Earlier quoted context omitted.

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.

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/

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

#68

Post by [deleted] »

unmole wrote: post #63
thomasahle wrote: post #18

Earlier quoted context omitted.

> 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?

> Having many participants in a market simply means that nobody were able to consistently outcompete the other players. Yeah, no. The tiny bank in Arkansas isn't participating in the same market as the tiny bank in Alabama. But the large bank from New York wasn't allowed to compete in Alabama by state regulators.

[deleted]

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

#69

Post by [deleted] »

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…

[deleted]
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