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

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

#81

Post by WrongAssumption »

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.

Bank of America and Citigroup are in all states, small banks still exist in large numbers.

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

#82

Post by [deleted] »

nemothekid wrote: post #42
lxgr wrote: post #30

Earlier quoted context omitted.

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…

> Why should efficient lending decisions somehow be uniquely hard to make in a large corporation with many local branch offices? Once a bank gets big enough, I think the main issue is risk. The long tail of tiny banks represents a certain customer type that is harder to model in an Excel model and is vetted through personal relationships. Consider one the "big" banks in that long talk - SVB. For a lot of startups get…

[deleted]

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

#83

Post by gonzo41 »

nirvdrum wrote: post #46
gonzo41 wrote: post #36

Earlier quoted context omitted.

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 contr…

This is a pretty aggressive stance. The US is rather large and not particularly uniform. In my experience, small banks are better adapted for the needs of these different communities. I used to bank with large national banks. Their fees were higher, account balance minimums were higher, loans were harder to get (often with higher rates), and their response to customer service issues were to raise their hands and say…

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.

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

#84

Post by nirvdrum »

gonzo41 wrote: post #83
nirvdrum wrote: post #46

Earlier quoted context omitted.

This is a pretty aggressive stance. The US is rather large and not particularly uniform. In my experience, small banks are better adapted for the needs of these different communities. I used to bank with large national banks. Their fees were higher, account balance minimums were higher, loans were harder to get (often with higher rates), and their response to customer service issues were to raise their hands and say…

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 utopia you envision is almost certainly never going to happen.

Why should I want to bank with a large bank? I’ve done it, several times, and it offers no advantages over my current bank. The goals of a credit union are far more aligned with my own interests.

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

#85

Post by ZeroSolstice »

lxgr wrote: post #41
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…

> Being able to make money off the refund is a probable reason why they are even offered. I think you vastly overestimate the amount of interest a retailer can make on that money vs. the cost of processing the refund, potentially not being able to resell already unpacked goods etc. Purchases and refunds are also cleared and settled exactly as quickly, i.e. usually on the next business day.

I don't know many businesses that would perform processes that don't make them money. Even if we use your example of next business day what happens on a Friday where the refund isn't processed until Monday or Tuesday? Is customer satisfaction really increased if you get their refund back to them in 3, 7 or 10 days?

In instances where you have to ship the defective product back. They don't send you an over-night, next day label to get the product back to them as soon as possible. They send it ground. So you paid for a product, you then wait for the product, you then call to get a refund, you ship it back, they receive and process and then you get refunded your original amount. That could be two weeks, even though your refund was settled next business day.

I'd be surprised if any retailer takes a loss with a refund that they can't send back to the manufacturer or write off.

It also seems that there isn't any set refund time limit and varies per state in the US.[1]

[1] https://www.freeprivacypolicy.com/blog/return-refund-us-laws...

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

#86

Post by phs318u »

FireBeyond wrote: post #6
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…

> 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. Australia in the late 90s had instant intra bank ACH transfers. Even inter bank was within 15 minutes. And not exactly a regulation free market.

And almost all Aussie banks now have near instant consumer bank transfers via NPP (New Payments Platform).

https://www.rba.gov.au/payments-and-infrastructure/new-payme...

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

#87

Post by phs318u »

dalyons wrote: post #19
FireBeyond wrote: post #6

Earlier quoted context omitted.

> 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. Australia in the late 90s had instant intra bank ACH transfers. Even inter bank was within 15 minutes. And not exactly a regulation free market.

Australia has 4ish banks. The US has 4000. It’s just not the same problem

As at Q2 2023, Australia had 96 "authorised deposit-taking institutions" which is our definition of a bank.

https://www.statista.com/statistics/1211692/australia-number...

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

#88

Post by yardstick »

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…

Do most of them issue Visa or MasterCard debit/credit cards? That seems like an easy in: everyone using 1-2 card processors under the hood.

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

#89

Post by nirvdrum »

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…

It turns out many others prefer banking locally with smaller banks or credit unions. The market is meeting the demand.

I’m not even sure why you’re intent on blaming small banks for the slow rollout. The article notes that the large banks introduced a competing system in 2017 and it took years to deploy. That’s with all of the advantages of large bank efficiencies and none of the pesky government bureaucracy. We always hear stories about the legacy COBOL systems these big banks have and how it hinders innovation.

It seems to me this more a case of no incentive. If this were such a highly sought after feature, customers would flock to the banks providing it, but they’re not. It’s worth considering why so many choose smaller banks. They can certainly choose large banks but aren’t, despite whatever efficiencies large banks can supply.

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

#90

Post by bob1029 »

toenail wrote: post #48
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.

> and a long tail of too-small-to-upgrade-their-tech-and-processes ones Sounds like a business opportunity. Heh, I wonder why the market is so broken that this wasn't fixed yet, there's obviously money in dealing with money.

This is our business. Believe me we are trying.

It's more of a people problem than anything else. Wrapping the future in a palatable package for risk adverse bankers is truly a cursed problem. Everyone needs their medicine coated in some exquisite form of custom sugar or they won't even look at it.

Traction has been acquired though. We've got word of mouth doing the rounds and customers are coming to us out of the cold.

Paperless onboarding is our bread and butter, but we are eventually going to become the single pane of glass for any branch manager or frontline employee.

Back office is our next dragon. We are saving it for last because doing front office well (I.e. paperless signed docs straight to imaging system via api) means back office workload naturally reduces.

The opportunity is bananas. More than we can deal with and you basically have a mini market per core platform. I feel like you need a really special kind of team to do what we do. Our company president is a former banker with a strong vision of what an ideal in-branch customer experience looks like. I can't imagine it working out any other way.

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