What does a development environment look like, both architecturally and simply visually?
Like: Do developers spin up entire fake economies with two banks and the fed on their latop, or is it all incremental changes to individual microservices in a big permanent test setup? Do other banks / service providers / the fed run test instances of their systems with fake money for other companies to do interop with, like a "global test financial network", or do you generally test with "real" money?
What do you see on your screen in day to day developer live? Are there like dummy online banking web interfaces? Or is it all text logs?
Is it just normal software development like anywhere else, or is there anything that really sets it apart in terms of developer workflow?
Once the service provider is connected to the Fed (a somewhat complex process), it's normal software development. The client uses either MQI or JMS to send and receive messages; the messages are essentially ISO20022 XML. The development environment could be anything (any OS, any IDE). You interface those messages with your system of accounts. The Fed also provides a simple web UI and a testing network where you can test with other participants and run regression tests.
From a software development perspective, it's really quite normal.
That's really interesting. I worked in PCI (payment cards industry) and we had terminals we could relay the ISO8583 messages through, eventually opting to emulate via software for obvious reasons.
generally having to rely on a piece of hardware for high-iteration software development is very unpleasant, so my guess is they chose to abstract what the hardware would do in software for testing/development.
One of the huge pain points I was responsible for was certification of certain payment terminals. Meaning, hardcoded PANs (personal account numbers) written to magnetic stripe cards (or, worse, EMV chips) that have to make physical contact with a reader to transmit data.
Up until a point, we were able to (easily) reproduce these messages via the ISO8583 message format via software. Makes certification much more automation-friendly.
Once we got into hardware encryption/decryption via HSM devices, it wasn't as easily done.
What is normal though? From the perspective of a hardware engineer, from the perspective of a contractor or small company developer, from the perspective of a developer at a medium-sized firm, and from the perspective of an engineer at a FAANG, what is normal is different. Twitter famously doesn't have a dev environment and that's not a bad thing. That's because coordinating umpteen teams to have an actually useful dev-dev and qa-dev env costs more than it's worth, in their eyes. And then, what does normal look like depends on when, too. Local dev envs looked a lot different before Docker came on the scene.
So back to the question, what's the dev env look like? :)
In front of your eyes: TSO-ISPF for everything. IDz for the 5 seconds per month that code is actually written
Test env: Separate permanent envs. From playground where nothing matters, env with some fake data in similar databases and variants of all systems, to mirror of prod with anonymised data, then prod
There are dummy online banking web interfaces
What sets it apart is that the operating system is painful to use and never stops being painful to use. And your employer is paranoid and keeps you in a digital prison for security so very few permissions so there is no creativity or off-road improvisational innovation just assemblyline style development
>> the operating system is painful to use and never stops being painful to use.
But this is regretful, and slows down everything by orders of magnitude. One of the big problems is lack of EFFICIENT documentation/Quick Starts. The guides are labrynthine in layout, looping and colliding spiders' webs of wtfness.
Access to production and its data should be highly regulated. Ideally no dev machine has any kind of write access to prod - instead it's commit access to a (non-master) branch which needs multiple approvals to be merged into a release branch.
Access to dev environments and their local code? Who cares, let them explore. As long as all code is reviewed prior to deploying, they could even be developing on a compromised machine and the live system will still be secure.
Practically, if your dev machine was compromised by a targeted attacker, they could create commits using your identity and if they compromised another dev machine could approve those commits using their identity. Then the attack would only be visible in commit logs with low odds of discovery before release to prod.
I'd rather not have "off-road improvisational innovation" with the nation's banking infrastructure, thanks. If that's what you want to do go write another JS framework or static site generator, don't work at a bank.
Your gut reaction is disgust and I don't blame you. You could do without the insults, however. The "nation's banking infrastructure" is outdated and messy. There is no chance in the entire world to upgrade it or clean it up if we the workers are not equipped with the power to do so. A first step could be informational transparency, I would for example really like read access on other systems in the bank and not just my own. Truthfully, separation of duties in this case is more of a controlling function and less of a security function. Of course I care about security, we all do. But let's not stifle the workers that can change the system from within in such low risk work that it's bordering on fear of change. Don't insult me again on something you know nothing about and haven't seen with your own eyes.
I think anything that could be appropriately described as infrastructure could also be described as outdated and messy, so that's not necessarily a reason in and of itself to let people experiment on banking infrastructure. Are software engineers (again, the type who end up working for the federal government and banks and government contractors) any more qualified to experiment on this stuff than people who have working in banking and finance?
Are they qualified? Sometimes a fresh perspective and courage is what is actually required rather than the home blindness that comes with following the careful bureacratic method for decennia. I would want there to be at least one mechanism in the universe that willpower from the bottom to actually improve the health of the core of these old institutions and companies. There is no mechanism at all currently for the person doing the actual work to take ownership, out of passion or duty, without first climbing the corporate ladder and becoming the grey suit decisionmaker not actually doing the tinkering any more.
I want to be able to own my own risk. If I identify a team need or personal need or business need I want to prototype it autonomously and have the control over my own computer and systems to do so while following all tests and procedures. I can pass it upward for a green light while following all test and development practices. Not only put someone elses decisions into practice while being bottlenecked by guardrails. These old institutions and old companies would pay anything to have something resembling startup agility, but they won't give up any power to self-selected intrapreneurs. I say let me own my own calculated risk . It can even be calculated risk, agreed ahead of time, this happens, that consequence. Off with my head, sure, tell me the cost that comes if I fail with some freedom and if it's losing my job then I'll accept it. If it's paying out of my pocket then I'll accept it. I'm not saying be reckless or not know what sort of risk one is taking. Open the door for calculated personal risk and let me remove the appropriate part of the guardrail. What's the point of being here if I can't use my own life force to change for the better that which crosses my path. Certainly not going to waste time, just fire me or fine me, I agreed to it to do more and better work because I care, hypothetically.
I'll admit the risks that comes with more access, if the risk is uncalculated and can't be owned in scale. Don't take risks, any at all, where the worst outcome is unethical or illegal, for everything that is production and customer data, or where the worst outcome is not even understood or out of scale. So some mindfulness, yes.
If someones personal tool becomes actually useful and the person leaves, then it becomes a weak link in an already unhealthy codebase. Or if they take decisions that don't come from above and somehow have enough access to also leak customer data or cause production issues, then compliance fines could happen. Or getting hacked, or breaking laws with unlicensed software or piracy or anything else, or disrupting other teams, or causing irreversible damage or data loss. Scary, I admit it! I see the paranoia from the top and I empathise!
Let's use bottom-up freedom for replacing the infrastructure with new technology, or lifecycle treatment or archiving, not for entrenching it with new development, or just not knowing what one is doing. But let's not get paralysed with fear. The scale is too heavily tipped in one direction. Shift it in the right direction.
> I'm happy to share anything that is not under NDA.
Meta-questions that you quite possibly can't answer: broadly speaking, what parts of this system are under NDA? Why would any part of this system be under NDA? Did any government agencies impose the NDA, or was it private companies? Is the NDA intended to protect those running the system, or is it intended to protect those using the system (IOW, is it security by obscurity)?
In my line of US government coding (no relationship with this project), NDA is orthogonal to security. NDA is used to protect confidential vendor information. For example: that they have a contract with the government at all (in the case of a stealth startup), specific technical capabilities they don’t want broadcast to their competitors, the size of the contract vs. committed resources, etc
Basically everything that is not publicly documented on the Federal Reserve's website. Unfortunately, it is really common in the financial services space to overuse a NDA. Things like specific fraud safeguards, hardware information, network diagrams, etc. are all under NDA.
Is the eventual end-game that I can send money from my account at Bank A, to a friend's account at Bank B to split a check at dinner without using a third party like Venmo?
Yes, that is absolutely a use case. Similar to Venmo, there is also a Request for Payment (RFP) mechanism. I'm on the Request for Payment (RFP) Work Group that is composed of a number of financial institutions, service providers, and billers.
Netflix is part of the RFP Work Group. So presumably they are interested in offering consumers the ability to pay for Netflix using FedNow instead of a credit card. Instead of Netflix paying ~$0.50 in credit card processing fees per U.S. subscription they'll probably be able to find a bank willing to charge them < $0.25. It also gives consumers more control as they have to authorize each charge.
> So presumably they are interested in offering consumers the ability to pay for Netflix using FedNow instead of a credit card.
I do wonder how stuff like this will shake out. I will use a credit card, always, with any vendor that doesn't pass along credit card fees to the customer in some way. (Why would I choose otherwise? The credit card gives me rewards, and better fraud protection.)
But more and more, I see companies charging "convenience fees" for credit card usage or offering "discounts" for cash/debit. Hell, T-Mobile just started requiring you not use a credit card to get their $5/mo autopay discount.
So this is all cool (and perhaps would make it easier for people who don't have a credit card to pay for Netflix), but I don't see why I'd use anything but a credit card to pay for my Netflix subscription, unless they offer discounts for using FedNow. Which... they probably won't?
RFP i.e. Request for Payment is not part of this release. Furthermore there is no ETA from the Fed as to the release date for RFP.
Currently FedNow is simply a push payment system i.e. bank account holder may be able to use FedNow to push money out from their bank account to someone else's bank account.
The limitation here is the bank account holder must know the account number of the recipient. This is a huge limiter in adoption since most people don't want to share their bank account numbers and maintaining a directory of people's bank account numbers is cumbersome to say the least
Yes, the Fed is working on a directory but they have not yet announced the launch date for such a directory, not have they mentioned the index i.e. will it be phone number ? email ? something else ?
Bottom line: FedNow launch: Step in the right direction but still a long way to go
> most people don't want to share their bank account numbers
While far less common these days, people gave this information to arbitrary payees (via personal checks) for decades. The idea that it's not to be given to payers, despite it having been given to arbitrary payees, seems misguided. If someone tries to commit fraud with that number, they're probably going to get caught, making it sufficiently unlikely, no?
When I first came to USA as a tourist in 2011, one of the most amusing thing I witnessed was at a party at my Couch Surfer’s host when a friend of theirs payed back a debt by writing them a check. This cranked me up, as I had not seen a real world check in use since I was a kid in the early 1990s. I was equally surprised to learn how nobody else at the party thought anything of this. Coming from Iceland where you simply transfer them money via a bank app (or a website back then), this was my first American culture shock.
Now I live in the USA and I actually use checks all the time. I get paid via a check, I pay with checks at my local farmstand, I used to pay my rent with a check, my immigration fees were paid with a check etc.
This is orthogonal to the original point. Passing around your checking account number isn’t that big of a security risk. We do it now and banks have built guard rails in place because we do it now.
Checks are easy to use: just write a name and an amount on a piece of paper.
They’re secure: they can only be cashed by the person they’re made out to (unlike cash).
They have theoretically infinite throughput: you can write any amount on a single check.
They have extremely high latency, which is why digital payments are being preferred in many situations. But the remaining situations where checks are used high latency is acceptable or even desirable.
Australia's "PayID" system gets around this by allowing you to pay to a mobile phone number or email address (generally findable via your phone's contacts). The implementation is a little clunky, but an additional benefit is that it's a bit like DNS for your payments - you can associated those details with different bank account to redirect payments if you move.
I’m going to lose $30 a month in discounts with T-mobile if I don’t switch to debit card or checking account. T-mobile has a horrible history when it comes to security. I definitely don’t want to give them access to my checking account
Create an account just for T-mobile. With someone like Fidelity setting up a new account is a few clicks. Ally makes it pretty easy too. Then set it up to fund automatically from another account within a certain limit. Or if your monthly bill is stable, setup a schedule to fund it monthly.
What are the rights of the T-mobile customer in the USA, if they somehow do mess up an automatic bill payment?
I'm searching using the European/international term for this sort of payment ("direct debit usa") which gives me API documentation from many American payment providers, but nothing about the customer's rights. I assume it's the technical term there, and there's another term used with the public.
(In Britain and the EU this kind of bill-paying agreement has very strong rights for the payer, they can ask their bank to reverse any transaction for a long time without giving a reason. My online banking interfaces have easy buttons to do this, or to block future transfers.)
I’m not sure about ACH (directly from your checking account) rights. But, debit cards issued with the Mastercard, Visa, Amex logos give you the same rights as credit cards. Where you can get the charge reversed.
However there are a lot more knock on effects while you’re waiting for actual cash to be put back into your account than there are when you’re just waiting to get a credit card transaction reversed.
Not only can they potentially drain your checking account. They can also drain any linked Savings account that you have to cover overdrafts.
I only keep $500 in my linked Savings account to cover any of our accounts.
ACH has many of the same consumer protections as credit card networks. The window is 60 days instead of 90 days and the dispute outcome is always in your favor—merchants cannot respond to the dispute or win.
I still don’t get the phone warranty that comes by just charging the bill to my Amex card (potentially saves about $500 a year) or the close to 5000 Amex points per year (worth about $75)
"Hell, T-Mobile just started requiring you not use a credit card to get their $5/mo autopay discount."
Yes. Visited a T-Mobile store to set that up. Brought in a voided check. Said "Set up an ACH transfer, please." "What's an ACH transfer?" Took about half an hour, two rejects from the T-Mobile payment system with both me and the clerk checking the numbers, and a conversation with Bank of America customer support ("We didn't reject that, we won't see it until the daily batch.") Too many people are going to be paying T-Mobile a $60/year "convenience fee".
(Worse, BofA is apparently still charging for outgoing ACH transfers. And they're not on FedNow.)
Yea BoA is not the most consumer friendly bank. I specifically have checking accounts with 4 different banks to capitalize on the various services they all offer, and to avoid being caught by a bank run type situation (or even just a bank’s services being down for a technical reason).
If you’re looking for a large bank that has a large physical presence, I like chase more. They offer more services than BoA for free, though they don’t have a totally fee-free checking account (unless you have monthly direct deposits, or will maintain a minimum amount of money with them). Their website is much much better and honestly their cc offerings are better.
I was never a big fan of any of the smaller credit union websites. A lot of stuff still required either going into a branch or hanging out on the phone, though here’s the one place they’re almost all better: you’ll never talk to someone overseas with a local credit union, often tech support will be a real life unix greybeard, who you’ll appreciate talking to once you provide the right shibboleth. But everyone else will most likely be branch employees manning the phones when they’re not busy in the branch. So if you’re ok with needing to talk to people to perform a lot of stuff the bigger banks offer web services for, a CU is definitely a more personal experience.
If you’re ok with no physical presence, discover is a pretty good option, totally free checking, and last time I checked they gave checks for free. I got like 500 almost 10 years ago and haven’t used more than 50, so idk if this is still something they offer but it sure is nice not worrying about inning out of checks or needing to pay for them.
"any vendor that doesn't pass along credit card fees to the customer in some way"
I think every vendor passes along the fees, either in aggregate through pricing, or to the individual as a charge. At least in the latter case it is more transparant and fair to non cc users.
I moved to Europe in 2018. The banking system is decades more advanced than the US. At least where I am, no restaurant will “split a check” and one person is expected to pay. We settle the bill between each other in a matter of seconds.
Most bills are paid using this exact system. Credit cards are very rarely used except in-person. Since you have to accept (or tell your bank to always accept certain vendors) debits using this system, there’s never any surprises. You usually have nearly a week to accept a debit.
Inability to "split a cheque" is still a very annoying limitation; completely normal behaviour to do this in NZ, still moderately weird in Australia (although it's got better).
The ability to resolve this electronically rather than with cash makes it less bad, but still easier and faster to resolve it in store.
The GP shouldn't be generalizing across Europe with that statement. It's somewhere between completely wrong, half wrong and correct depending which of the 50 European countries are included.
Credit card fees that aren’t passed through to you are a bit tragedy of the commons. Probably good for them to go away. It’s fine if you choose to pay them, and it’s still worth it to you, but otherwise you’re forcing everyone around you to subsidize your credit card rewards. That’s not fair.
Alternatively, everyone not taking advantage of the credit card protections isn't taking advantage of what's offered around them. Everyone should be subsidizing everyone else, because no one should be using a debit card to make direct consumer purchases in 2023. It's too fraught with risk comparatively, and even the scummiest of the sub-prime credit cards give you a grace period to not accrue interest.
It is relevant that credit cards with good reward programs are more accessible to wealthier people, meaning that both people who don't use credit cards and poorer people with inferior credit cards are subsidizing them.
No one? That's a rather brash statement to make. Here in Ireland I can count on zero hands how many people use credit cards on a day to day basis. Debit cards are the norm in much of the EU I would assume.
Credit cards are pretty common here in AU; I don't care so much about the fraud protection, but up to 55 day interest free periods are common (if the bill is paid in full each month) and so the cards literally save me money because I earn interest on savings and/or don't pay interest on mortgage vs having to pay everything immediately.
To me I feel the money Id save on using the credit card is so infinitesimally small that it’s easily worth it to use debit for the ease of mind that everything is settled and I truly can afford everything I pay for. I also hate credit card rewards programs with a passion because they just complicate our lives to get back money that should’ve just been lower credit card fees to begin with.
The argument that you save interest on savings account doesn’t make any sense at all because I count my credit cards towards my emergency buffer. If I maxed out the credit card I would absolutely make sure to keep more money in my savings account.
I get that it’s different for people living paycheck to paycheck. But arguing that credit is a solution for the poor is a slippery slope. We should solve those problems other ways.
I use cc for literally everything but car payment and mortgage and pay off every month. The only time I pull out my debit card is to get cash out. I feel peace of mind that nothing is going to drain my bank account fraudulently, I have one bill per month to look at, and I end up with 1-2 vacations (hotel and flight) for my family each year. Seems like a pretty good deal to me.
I'm not arguing it's a solution for the poor, the absolute opposite - because I have sufficient income to pay my bills in full it just comes out cheaper than paying them with cash. It's a terrible solution _if you actually need credit_ because it typically comes with really bad interest rates.
You come out ahead because the card issuers expect to make money from you because you'll stay with them a long time so offer substantial sign up bonuses (I don't) and that you'll pay interest (I don't). There are generally annual fees, but if you ask they'll often waive them (if you spend enough, again not accessible if you're living pay to pay).
It's ~effortless (bills paid automatically in full from a mortgage offset account) and saves money even without rewards and other perks (0% loans via interest free "balance transfers").
You can get a 2% cash back rewards card and literally receive 2% of every dollar you spend back, deposited electronically in your bank account whenever you press a button on your credit card website.
Everyone agreeing to not conduct financial crime would be nice, agreed, but there would be no societal need for common law and court mediated legal relief.
In lieu of that, how would you envision any society arriving at such an end state?
> Then we would live in a high-trust society, like the United States and Europe used to be 100 years ago.
The United States didn’t even “trust” Black folks enough to allow them to drink from the same water fountain, live in the same neighborhood, go to the same school or be part of the financial system as late as the 60s.
Cool, now follow this logic and do health insurance right
The failure in your logic is that different credit cards do have different fees and that some form of consumer protection should apply to debit cards as well
... umm, no, at least in my experience. I happily ordered stuff online for years from many merchants.
I want banks and stripe and gateways and shopify and visa/mc to weed out bad actors fast.
and if some small shop starts to transact a lot, let them manage their risk, don't require consumer side credit for this.
there's already a ton of data, endless kyc/aml paperwork put on consumers and banks/gateways they should figure it out, and if someone still insists on paying hundreds of thousands on totally-free-bitcoins.top after the bank, the app, the browser, their neighbor warned them then let them. and let them try a chargeback.
Interesting, most credit cards with rewards I have seen in Aus have substantially higher interest rates which is where I assume they capture the cost of rewards back. Is that not the case in the US?
As for fairness, I agree they should go away. Companies with margin can swallow the fee, companies without could be unprofitable and make no sense if they don't pass on the fee. It's a practical reality of the dollars and cents, but it is a private apparatus we opt into so I guess we can't complain that much.
Have you looked at other systems across the world for inspiration / design choices, and if so, could you elaborate on how this system compares? For example, the use case mentioned is probably the prime use case for UPI in India, which has now been extended to become a full fledged payment network alongside CC networks etc.
"Netflix is part of the RFP Work Group. So presumably they are interested in offering consumers the ability to pay for Netflix using FedNow instead of a credit card. Instead of Netflix paying ~$0.50 in credit card processing fees per U.S. subscription they'll probably be able to find a bank willing to charge them < $0.25. It also gives consumers more control as they have to authorize each charge."
NB that last sentense. FedNow does NOT support recurring.
I had to read this twice - is it really not like in the UK? Is this the first US implementation of "Faster Payments"? Sure people in the UK sometimes use PayPal, Revolut, but most of the time its always just a friend gives (and you save on your banking app) their bank account number and sort code, and you instantly send it across. edit: with no fee
No, Wire Transfers have been the official fast settlement method in US for a while. They have a fixed fee associated but given the larger transaction amounts that people generally use it for, it's not a bad thing. Everyday consumers have their silly apps for money transfer (PayPal, Cash app, iMessage Cash). Other than that, people are just used to transactions taking 2-3 days and over drafting because they made another payment and forgot about it. Yay, ACH!
ACH has been next day for like 2 years now at least with every bank and employer I’ve used. I’m sure there’s some banks that didn’t join the next day system, but I haven’t experienced it. Then again being part of a credit union has lost a lot of its allure these last few years, so maybe that’s where you’d see that sort of thing more.
I just received a next-day ACH via Apple savings to my credit union. CUs still have their allure, I'll never get over Wells Fargo charging me fees for minimum account balances when I was 18 and working for minimum wage. What a sour taste to leave in a young customers mouth and good way to shoo them away once they start gaining some value.
Yes, and only next day settlement. Because there’s no real time authorization, payments have two business days after settlement for the banks to report ordinary failures like insufficient funds.
How quickly a bank responds in that window depends greatly on the bank. In practice at decent scale, we see banks using every possible hour of that two day window to fail transactions.
An ACH debit made on Friday night technically has until open of business Wednesday to fail.
People outside the US stopped using cheques ~decades ago. At 40+ from New Zealand I've literally never paid anyone with one and have been paid with them only a handful of times.
Oddly, given the context of this thread, the UK is an exception. Or at least it was until a few years ago (I left in 2019). They have Faster Payments, but they also still use (used?) cheques more often than any other non-US country I've interacted with. For example, a number of UK universities still do (or until recently did?) expense reimbursements in the form of paper cheques, when reimbursing people not employed by the institution. One university even mailed a paper cheque, made out in British pounds and drawn on a UK bank, to our French invited speaker! The speaker found it inconvenient/expensive to have to deal with that, but their bank was fortunately able to figure out how to deposit it.
The only time I've seen a cheque in the decade since I moved to UK has been from DVLA. They send refund as a cheque, and for relatively small amounts likely expect a significant fraction of people to never cash it in because handling the bloody things is just annoying.
My bank's mobile app supports cashing them in via camera. Niche use case, but nice to have it for this attempt at government agency nickle-and-diming the populace.
They are still in use in France from time to time. Typical use cases I have seen are security deposits, and for small non-profits to expense volunteers and getting paid without bothering with payment terminals.
You probably have a very small illegal population, here in the US, if you don’t wanna hand someone a ton of cash but wanna pay them for something and they’re not allowed to open a bank account, a check is the easiest way to give them money. They can go to a check cashing place pay the 1-3% fee and cash the check. Otherwise you’re giving them cash or doing some complicated load to a prepaid card.
I remember my father had a checkbook in the 1970's. I never had one, not sure they even exist here anymore (Belgium).
For payments to friends we use bank apps. Usually the receiver generates a QR code for the payment on their phone, which you scan from your bank app, sign with a pincode, and the payment is executed immediately. If you are not near you can also use their account number to transfer money instantly.
I got a cheque book with my first real bank account in 2004, and felt like a real grown up. In the time since, I have written 2 cheques.
However, I have cashed some cheques - a tax refund cheque and a refund for my remaining balance when I closed a utilities account.
They have the advantage, for the sender, that you can discharge your responsibility to offer a refund by sending a letter, rather than having to interact with the other party. Of course these days you could email them a link to a web form.
I am currently disputing an international payment and wire transfer (or walking/driving my happy ass to their office and paying cash) is the only method allowed by the lawyer representing me. That's at least one occasion you are not accounting for (a foreign entity that needs the equivalent of cash to proceed)
Zelle is crap. It was created by banks to skirt regulations which make them responsible for fraud. It exists to make things worse for their customers which is why they pushed people to use it so hard.
The UK and Ireland have identical banking codes (six-digit sort code & eight-digit account number) and constructed IBANs the same way (BIC, sort code, account number), but Ireland switched to using IBANs domestically, while the UK didn't. That means that you in the UK need one interface for domestic payments and a different interface for SEPA payments, while we use the same for both.
Wire transfers exist, but have a high fixed-transfer cost ($20 is not unusual).
The larger banks have their own systems that only work within the bank; some smaller banks offer systems that work with any bank that offers the same system.
ACH exists, and I've used it to move money between accounts I own, but there is some friction to set up. I don't know anyone who uses it for C2C payments.
This got me surprised too. In Mexico we are also used to giving our bank account CLABE number (https://en.wikipedia.org/wiki/CLABE) that is used to transfer without fees and instantly. Even small shops use it to get paid, friends to split dinner, etc.
Poland has BLIK, which links your bank account number to your phone number. Then, just send a transfer to the phone number instead of punching in the 26 digits of the account number.
And if you don't want to share your phone number, you can use a temporary six digit code instead.
Mostly the worst system you can imagine from power user perspective:
* banks won't let you use it without a bank app (there is one exception that will let you use only some only outgoing transfers through the web page) although it is technically not required
* giving out your IBAN is not a problem but I don't want to give everyone my phone number, and the temporary code is temporary
* don't ask what happens if you have multiple accounts and multiple phone numbers.
It sounds very much like some of the Interac services that we have here in Canada (and have had for ages). We can do what is called "email money transfer" where as long as I know your email address I can go into my bank app, transfer money to you and it will automatically show up in your bank account.
The US already has Zelle which does this. However the roll out was botched, many banks don't seem to use it and most people (including me until a few months ago) thought it was a paypal competitor - but it's actually a government based system system which renders free transfers between bank accounts (your own or others) with a cap of 3 or 5k/month.
The interface is very weird. Many people can't figure out how to use it. I ended up having to set up new email addresses and assign them to different bank accounts in order to distinguish my accounts.
> but it's actually a government based system system which renders free transfers between bank accounts (your own or others) with a cap of 3 or 5k/month.
Zelle is run by Early Warning Services [1], a joint venture between Bank of America, Truist, Capital One, JPMorgan Chase, PNC Bank, U.S. Bank, and Wells Fargo.
1) The recipient needs to download the app and sign up. How does the Payor know whether the recipient has Zelle app or not
2) Even with the app, there are only about 50-100 banks that allow Zelle transfers. If someone's bank does not offer Zelle they are directed to enter their Debit Card number using "Push to Card" to receive the funds. While the funds land up in the bank account instantly either way, some Debit Cards have limitations and will not be enabled to receive funds
3) Zelle is essentially a "messaging layer" i.e. the actual settlement happens overnight using ACH rails. As a result the sending as well as the receiving bank are taking some risk in terms of allow the recipient to withdraw money when the underlying settlement hasn't happened. If the settlement fails the receiver's bank will need to claw bank the money from the receiver
As a result there are some really low limits on daily transfers i.e. between 1-2K/day for most banks
4) Above all Zelle (like most other payment rails ) is a push system i.e. one can push money using Zelle. One may not pull money using Zelle
You’re heavily limited in terms of transfers also. I need to split my rent over several payments over several days using zelle. It really sucks compared to something like SEPA
This depends entirely on the bank. Chase, for example, has a Zelle outgoing transfer limit of $2k/day and $16k/month for regular consumer accounts. There's a higher limit of $5k/day and $40k/month for their higher-end and business checking accounts. Other banks' limits are higher or lower than that.
Interac is a company formed by the big banks in Canada to link all their networks and help insure we have uniformity. I believe it started as a way to standardize ATM machines and has grown to a bunch of other things and is largely why Canada was able to so quickly and completely adopt chip and pin and tap to pay literal decades before the US did.
Not OP, but I thought FedNow will do this on day one for participating banks. Someone correct me if I’m wrong. FedNow will also settle faster than Venmo currently does (unless you pay for Venmo’s instant settlement) because it’s instantaneous. To be fair to Venmo, their bottleneck was precisely the lack of FedNow. I assume Venmo will make instant settlement free. But they will need to add more features now that people might substitute with FedNow. Anyway, this is a big deal for Americans and was a long time coming.
From the perspective of most people from other developed countries, it’s honestly incredible that the US hasn’t already had this for years like we all have…
1) Write a physical check (2-10 days from deposit, usually 2)
2) Use ACH (a virtual check) (2-10 days, usually 2)
3) Fedwire which costs $10-$15 to both the sender and receiver (15 minutes).
There are some banks that give free Fedwire transfers, often just to higher account tiers. Fidelity Investments gives free Fedwire to everyone, though.
Tell us as much as you can about the tech stack. What is going to be able to handle truly massive volumes of transactions? Database, hardware, communications channels, programming lang, everything.
At the very least, one would hope that credentials and perhaps also certain design documents such as threat models aren't public.
There may also be implementation details or code which are subject to NDA, either from the Fed itself or from service providers such as IBM in this case. Sometimes you can get that info from a FOIA request, but that doesn't negate the fact that the employees working on the system are bound by an NDA. The FOIA has to happen and run its course.
certain design documents such as threat models aren't public
That smells like security through obscurity (which admittedly is the status quo in the banking world).
Contrasted to approaches like Bitcoin, for which full code and whitepaper are public, and which has managed to survive every attack vector thrown at it for the last decade and a half. Not arguing for Bitcoin as money here, just highlighting the diverse approaches to security and that it shouldn't be taken as a given that hiding those details makes it more secure.
Fraud detection heuristics, at least, fundamentally have to rely on security through obscurity. If fraudsters know exactly what is detected as fraud, they can avoid detection.
Bitcoin gets around this by having absolutely no fraud prevention, and just saying "lol sucks for you should've been more careful"...
There is fraud prevention (yes, you being careful, and more importantly, only doing transactions with parties you trust to reverse in the event of a mistake), you've just been accustomed to outsourcing this to a third party for some expected added value.
Using that ridiculous definition, there is no conceivable method of transaction that DOESN'T have fraud protections in place, which makes it a meaningless distinction. When people say that a system has fraud prevention methods, they obviously mean something on top of some vague notion that people shouldn't send money to people they don't trust.
LOL what? Keeping private keys private is not "security through obscurity". Or if it is then basically all security is security through obscurity.
No one is posting their private keys on github, and when they do their crypto goes poof nearly instantly. None of the exchanges publish their threat model documents. I sure as shit don't tell people where I store my private keys.
The bitcoin whitepaper and code are more analogous to the ISO standard, which is public.
I must have missed something. Wasn't the person you replied to talking about design documents? I don't think they suggested credentials like private keys should be public.
That is exactly that kind of thing that needs to be in a contract. When someone inevitably shares private keys and it results in some kind of financial loss ... who is responsible for the damages? Contracts codify the liability if it isn't otherwise defined by statute.
guess -- knowing the currently discussed threat models is a competitive advantage for the dozen fintech security firms that are in on this, and a "moat" against the other four hundred fintech security firms that are frantically trying to find a way to get inside this obviously well-funded Big Gov project.
After 9/11 everyone in the Fed working on the payments systems had to get National Security Clearance. These systems are considered critical national infrastructure. Exposing the source code will get you jail time.
Fraud and people trying to mess with the system has been a long term problem and likely always will be. The results of which can hurt people. Keeping details private can make it more difficult for those folks.
If we try to prioritize goals of a system like this... security for people should be one of the highest. I think of the middle income single parent when I envision an example of a person in this system.
> The FedNow Service requires all messages to be cryptographically signed. The service validates the signature
and association between the entity sending the message and the key used to sign it.
Hey, that's neat. I'm super curious how much the internals of this thing could be compared with something like a cryptocurrency. Are those signatures representative of the identities making the transaction? Might it be technically feasible some day for me to craft a transaction on my phone to send money to someone, then publish it directly, and have the person instantly confirm that they received a payment without needing to talk to a bank?
I'm really curious if this is what is going to eventually morph into the CBDC that everyone seems so excited about, or if that project is going to start from scratch.
I'm no expert on this so this is pure speculation, but what immediately jumps out from this document is the amount of security- and availability-critical work that depends on each member bank. With wire transfers this has historically been achieved by gating transfers behind physically visiting a branch (not universally true). The synchronous nature (recipient must confirm transaction in real-time) of transfers may also cause annoying failures when recipient banks do maintenance or something at inconvenient times.
What is innovative and/or well engineered there? Could any bank or financial institution connect seamlessly with the system? How does it handle security keys, transparency, and transaction log duration?
As I see it, the innovative part is that the service is push-only. With ACH and most other systems in the US, payees can pull from accounts, while FedNow has no support for forceful debits. That's a significant shift in the way we think about payments (for the better, IMHO). This has been done before by other service providers, but not by someone with this kind of influence and clout in the US.
Hmm, surely there's some kind of support for a pull request that has to be approved, no?
It seems like requiring the consumer to manually set up a push payment to a company would probably be annoying and error prone, compared to having them entering their details on a website and then the company requesting payment.
We already have a push system called Check 21. You scan an image of a check and it will send the money instantly to the bank instead of through the Fed. It created after 9/11, as money couldn't move when the Fed was frozen.
Super curious, were you involved in the implementation of ISO20022 from software perspective or were you more on the hardware end? Asking because naturally entire banking in US is kinda waiting to see hows its implementation going to turn out ( for non-fednow payments ).
Is there anything special about the IBM MQ implementation which makes it worth naming them? It looks like you can connect to it using AMQP so I wonder why they wouldn't just say something generic like "MQ" or "AMQP protocol".
I assume IBM Message Queue Interface (MQI) is the only supported protocol in this installation. Don't know of any other compatible brokers to support MQI.
It’s a little especially strange as IBM hasn’t exactly made a great reputation for themselves over the last several years. Name dropping IBM makes me think that the reserve is generally not confident and is ready to blame IBM for what they expect to happen.
IBM MQ has been the standard for message queues for literal decades.
Hitching a horse to a different technology platform that has only been around for a few years to complete a project that should last for many more decades would be an architectural choice that would only lead to high costs and high risk of major changes in the future and puts the whole system at risk.
There is a huge variation in "quality" across IBM's product line. There are still a few sectors where they are legitimately top-tier competitors, and there are others where they're a joke.
Half the banking sector runs on IBM and has been running on IBM for decades. They know the domain well and have legitimate credibility for being reliable. It's not comparable to some of their other markets.
Last time, a decade ago, I played with RabbitMQ and similar open source queue system they didn't handle congestion and rate limitation well (crashed). From my little experience with classical IBM systems like MQ they knew about that stuff.
I spent a couple years deploying and integrating IBM MQ, and I own a couple of services currently that interact with it. It was (just a couple years ago) and probably still is more robust than current open source solutions, as long as you weren't planning on forking the code for some very specific use case that requires heavy modification, or the more likely situation of just wanting to save money.
As far as message queues go for something like the federal reserve, IBM MQ is really the only option that wouldn't raise a lot of eyebrows in the industry. The Fed is not the kind of institution that I think people would be lenient on for being open and innovative with their software solutions, banks really need to know that this thing is going to work and they all run IBM MQ themselves already. Not to mention the integration possibilities with Db2 and IMS, which are both huge in finance.
My only complaint is that it is very expensive. That's the story with most of the kind of hardcore technical products IBM sells that are likely to wind up near mainframes. I'd imagine the Fed gets a sizeable discount though.
Being able to publicly claim your product as the one that underlies part of the federal reserve banking system has got to be worth some real money to IBM.
That's part of it I'm sure, but it's much more than just advertising. What bank is going to make a risky move to a new message queueing service to save a few bucks when all their connections with the Fed use IBM's? And the hook there goes even deeper, because all of this stuff is deeply integrated with your databases.
On the one hand, I guess. On the other hand, I have a pile of the WebSphere product stack in my life. The app server is ten times the cost of MQ. WPS is another ten times the cost of the app server. It looks cheap when you're buying the really expensive stuff!
Also if you're using MQ for things like guaranteed delivery and making use of clustering and security controls I suspect it's cheaper to pony up for the IBM software than it is to spend time messing about in the thickets of the free alternatives.
FIX is, at its core, a message queue, and it’s a free financial industry standard. And, for any serious use in which the message queueing ability is important, FIX is wildly unfit for purpose.
Seriously, a deliver-once [0] message queue between two parties is very simple, and it’s truly remarkable how severely it can be screwed up. I’ve never used IBM’s solution, but I assume it actually works.
[0] Yes, deliver-once is impossible. But arranging for a failure to result in all messages up to a point being delivered, subsequent messages not being delivered, and the fact that a failure occurred being obvious to both parties is straightforward.
I can try, but the difficulty there is that Kafka is not really a traditional message queue system and the use cases are different. In short though, redundancy isn't sufficient to solve the reliability issues inherent in financial applications and transaction processing.
If you want througput, Kafka is the better option. Use a message queue for transaction processing against a specific target, where it is a requirement for you to have guaranteed, one-time and one-time only delivery, and possibly that its secret and should only be delivered to one target. You should conceptualize Kafka as being a tool to maintain a sort of distributed, global state. A message queue is more like getting served to go to court.
Technically, Kafka is an event stream, not a message queue (this can be confusing because event streams are often implemented at a surface level like message queues). The difference between an event and a message on a conceptual level is important though. There's plenty of good literature out there if you want to dig deep into the difference.
I'm aware that Kafka is low-level (and that there is kmq, which tries to implement a message queue on top of it https://github.com/softwaremill/kmq/ ), but the exactly-once semantics seems isomorphic to having the sender and the receiver doing a 2 phase commit using the log.
what are MQ's guarantees? how are they implemented?
I think that it's a pretty handy format to be familiar with, and is quite simple to work with too.
If the Fed or participating banks decide to open up the system like European banks have done so, it can be handy to get familiar with it for us financial hackers out there!
Ironical that same system in Russia, was built (around 5 years ago) using _exactly_ same set of technologies (and many others of course). Central Banks fucking loves IBM
Man I was talking about how badly IBM fumbled the last ten years of AI between getting Watson on TV and then getting sent back to the minors by every other player. And yet here they come with a bajillion dollar government contract to keep them afloat for another 100 years. Gotta tip the cap.
What is your opinion of the FedNow Service bespoke flavor / enhanced message schemas vs what is formally defined in ISO 20022? Do you foresee any impact those differences having on how future versions of ISO 20022 can evolve? Is there an aspect of ISO 20022 you wish was different in some way?
TLDR: Nearly all payments will irrefutably settle within a handful of seconds
Strictly speaking the primary means in which money moves in the United States from a volume perspective is ACH today. That system is a T+1 day from a default perspective, but it has offered the option to same-day settle during a handful of batches throughout a business day. However, ACH is not irrefutable and so it is common to have holds associated with this movement of money.
FedNow is truly 24/7/365 and push only.
All payment flows are subject to an end-to-end payment timeout clock of 20 seconds, starting from the creation timestamp to the point at which the recipient FI (almost always really a Service Provider on their behalf) sends a formal response that they intend to accept or reject the message.
An accepted payment must then be posted to the receiving account "as soon as practicable, but no longer than a few seconds” unless there are compliance/fraud concerns.
In practice, it should rarely take 23 seconds and will likely take 1-5 seconds from an end-to-end perspective depending on the processing speed of the originator, receiver and FedNow Service itself.
Couldn't having payments settle so quickly result in increased risk of overall system instability? I don't have a specific example, but I'm thinking of things like bank run panics. I'm sure this sort of thing would have been considered, however.
Yes, it absolutely does increase the overall system instability. However, that is at great benefit to the consumer. There are some safeguards in place in the actual FedNow Service, but it is primarily up to the Service Providers to give the financial institutions tools to manage risk. This includes features like liquidity management, circuit breakers, fraud/compliance monitoring, limits, etc.
Faster settlement can also have stabilizing effects. With less money in transit there's less counter-party risk. Annoying rules like having to wait 10 bank days to spend money from a larger check you deposited can go away. The whole point of a checking account is liquidity.
I'm not sure if that's what the previous poster was referring to, but before SVB officially collapsed it tried to get an emergency loan but failed because the system for such emergency loans is slower than the systems its clients could use to transfer money out.
> And yet! Man! What the heck! A lot has been written about how SVB was a bank run for a speedier, modern age. Instead of hearing a rumor at the coffee shop and running down to the bank branch to wait on line to withdraw your money, now you can hear a rumor on Twitter or the group chat and use an app to withdraw money instantly. A tech-friendly bank with a highly digitally connected set of depositors can lose 25% of its deposits in hours, which did not seem conceivable in previous eras of bank runs.
But the other part of the problem is that, while depositors can panic faster and banks can give them their money faster, the lender-of-last-resort system on which all of this relies is still stuck in a slower, more leisurely era. “When the user interface improves faster than the core system, it means customers can act faster than the bank can react,” wrote Byrne Hobart. You can panic in an instant and withdraw your money with an app, but the bank can’t get more money without a series of phone calls and test trades that can only happen during regular business hours. And so sometimes a bank that theoretically has a lot of liquidity can just run out of cash.
"retail investors" normally refers to individuals at home and T+2 doesn't affect them because they have margin accounts.
The only limitation is that if you day trade, you'll need $25k in your margin account. If you don't day trade or you have $25k, you can withdraw $0.01 a few milliseconds after selling $0.01 in shares
You can use that, but there are pretty well understood terms in finance already (like retail investors), and probably best to use the standard if you want to be well understood.
Apologies if I’ve misunderstood you (edit: I have) but assuming you are saying that 1ms to transfer funds between banks is ridiculously slow, why do you say that?
Light travels about 300km in one millisecond in a vacuum, about 200km in optical fiber. The best achievable theoretical fiber optic RTT for NYC-LA is about 35-40ms. In practice 65ms+ is more realistic due to routing overhead and the fact that cables aren’t always laid in a great circle. This being a financial API with three parties involved in most transactions (the two banks and the fed clearinghouse) there is sure to be more than one round trip involved for TLS establishment, authentication, verification of funds and account availability etc, many of which involve traversing many inevitably complicated systems on each side. It would shock me if such a system could realistically target anything less than 500ms P50.
Not sure it's even useful to call it a "transaction" at that point, since nothing has been transacted. It feels like the difference between updating a value in-memory and committing a value to the database. Maybe you can hide the latency, but that hasn't removed the need to actually do the transaction, eventually, and now you have the added problem of managing consistency.
The problem is, which "database"? If you know the data is always going to be in the range of ~1TB, use Postgres or some other ACID database. But I don't know of any petabyte scale ACID compliant database.
Also I'm not sure if ACID is sufficient or not for banking systems.
Yes, but in addition to being ACID compliant (serializable ANSI), you need to support a million transactions per second - it’s not just about data size.
Any database easily handles terabytes, idk why that's a condition.
DuckDB and SQLite easily handle terabytes of data. They're just not so much for cloud based apps, or things that need multiusers and access control junk. They're the best choice for just about everything else though.
Was it difficult avoiding using an ESB? I've heard stories about how requirements to use those were listed as an example of an interoperable system in law and then ended up being mandated across DoD for everything.
Is there going to be a universal SDK / API we can use with this? This would cut alot of middle companies out of the payments industry (or at least put pressure on lowering fees). That would be a huge win.
Wish we could do the same for the credit card companies. Would be great if the Federal Government could intervene in some way to have Visa / Mastercard / American Express / Discover use the same API interface for payments. Would dramatically increase competition for providers.
> This would cut alot of middle companies out of the payments industry
Not really. All it will do is let the same companies change the way they handle average citizens' payments.
It's the same as Open Banking in Europe. It is supposed allow small businesses to leverage this to enable innovation and all that stuff, but when you want to use these APIs you find there are limitations on who can actually use it. For example, you can only put your service to production by being on a "directory" of approved providers, and to be on that directory you need something 25k or 50k in an account. So, not really that useful for a small startup wanting to make a product out of it.
Banking systems are the backbone of world power dominance, big players won't let small people share it.
> So, not really that useful for a small startup wanting to make a product out of it.
I mean, 50k puts it out of “a couple people starting something in their garage”, but it doesn’t really lock out much beyond that. That’s pretty close to the franchise fee for opening a McDonald’s.
Yes, it could be more equitable, but if that’s the only barrier to access, it’s… pretty open for even quite small businesses.
I would assume such a system is capable of facilitating fraud, so it's probably good to have some kind of financial hurdle you have to jump in order to use it? Not that having $25k or $50k is a guarantee that you aren't a fraudster, but I imagine there are a lot of would-be fraudsters who don't have that kind of cash on hand.
I do think this is a bit of a weak justification, though.
50k is small peanuts, even for a friends and family round. I’d expect any startup dealing with banking transactions on my or my businesses’s behalf to have at least that much in a bond or escrowed away for counterparty risk.
A lot of people complain that 50k isn't much of a hurdle. Yes, I also agree that I as an individual can actually get that loan tomorrow if I want, but the point is "open" banking is meant to open up opportunities and should have as little hurdles as possible and the 50k is just one example.
Look into going into the business and you will realise other hurdles like having some insurance that will cost you tens of thousands, and more costs. When you compare that to, say, creating an app and putting it up on an app store, we can agree that there is a huge difference.
Of course I understand that banking means playing with people's money and therefore measures need to be put in place. But instead of requiring financial assets maybe the 'measure' should all be around technology and your service will need to have gone through extensive testing to ensure it won't be exploited. Otherwise 50k is peanuts like someone said when it comes to covering any financial loss incurred if your service is messed up. So that 50k is just to filter out a huge majority of individuals wanting to create something for themselves.
Currently this works between banks only. Banks have reserves at the Fed, and those reserves are what gets adjusted when a FedNow transaction happens. The banks then adjust their own records on their customers' behalf.
The fed lists a number of service providers on their page. I assume they will now roll out some interfaces. Glad to see the US banking system start to catch up with the rest of the world ca mid 90s.
Walmart supported FedNow when it was in development. I'd bet they want to save those credit card fees they currently pay for people buying their groceries with them.
It's also not like bitcoin because the exchange doesn't own dollars deposited at them and isn't run by a guy living in Dubai who's going to steal all of it.
this is an odd consensus because you just described how all bitcoin exchanges in the US operate.
they are centralized in which funds can be seized, censored, and they all have money services licenses just like their corresponding banks do.
right, not like bitcoin, like bitcoin exchanges, just like the person said and you somehow ignored.
far more similarities than differences for this comment and the other comments at your level to be focusing on the differences and confused about the existence of similarities.
Go old school neighborly. Convert it into something your friends or family want, then trade with them for the cash you want. If you don't know anyone that wants to help you reduce your bags of btc or eth, then consider finding a different community.
Some crypto maximalists ignore many of the intrinsic aspects of crypto (decentralized consensus, cryptography, etc.) because in their use case, it's just 'digital money.'
So when a completely dissimilar example of 'digital money' comes up, they equate it to crypto, even though it lacks many of the intrinsic aspects of crypto.
None of the intrinsic aspects of crypto matter if its in a centralized exchange. In the cases of a centralized exchange BTC may as well equal fiat, for it has all of the downsides of fiat alongside the risk of an exit scam/mass theft, and with none of the insurances one may have with a fiat institution.
So, unfortunately, for these “crypto” maximalists, the crypto aspect of their digital currency is just some fun trivia and not something they even bother to leverage.
No, completely opposite. It is like a regular, centralized, and controlled by the government ledger[1] but faster, no more batch files at the end of the day like ACH and that is all.
Now is a matter of banks to pay the providers[2] to integrate with their systems and ledgers.
I work with a couple of organisations that have been advising public institutions on their investigations into CBDCs, and the entire timeline of FedNow development took place after CBDCs had initially been conceptualised. CBDCs became a mainstream concept in 2016 when the Bank of England started discussing them publicly. The Faster Payments Taskforce report (which was the basis of FedNow’s design) came out in 2017, and the Fed announced its plans to start work on FedNow in 2019. Many advanced economies announced plans to start seriously investigating the use of CDBCs in 2021, but they’d all been discussing the concept for years at that point.
I don’t know whether the fed’s investigation into CBDCs will result in it adopting one. But FedNow has been designed in such a way that it could easily be modified to support one. You’d just have to implement a version of it where the allowed participants were everybody who’s allowed to have a bank account, rather than only banks.
>But FedNow has been designed in such a way that it could easily be modified to support one.
Curious how this would work, it would be a pretty big inversion of asset control to make it work.
Saying "just have to" is a very big "just", considering it was aimed at only a few thousand institutions with very tight reporting requirements being the target audience instead of hundreds of millions of nontechnical users that would need something that just werks.
From the Fed's perspective it would be mostly changes to business processes to allow this to happen. Making it just work for end-users would could work in exactly the same way non-central bank digital currencies currently work, as in 3rd party institutions manage customer interfaces.
It won't take long before all banks are using it. Once the banks are using it, employers will begin making payments using it. Once employees are receiving digital currency payments from employers, cash will end soon after.
Maybe a long time ago, but I get my pay which is supposed to be on the 1st and 15th on like the 13th and 29th or something. Getting paid "two days early" is a pretty common feature with Direct Deposit these days. It is always credited to my account before my actual paycheck technically gets posed.
> maybe charging a transaction fee
I imagine someone would be paying for the transaction of physically handling all the cash, no? Its not like having all the logistics of handling cash to potentially thousands of employees is a zero dollar cost. I imagine its massively cheaper for everyone to pay whatever marginal cost my employer is paying for ACH/DirectDeposit through their payroll app than paying a ton of people to handle and keep track of the cash.
Getting paid early is essentially an automatic "Payday loan" provided by whoever you bank with (whatever institution receives your payhecks) as a perk of banking with them. I personally decline this service, because I don't like adding a paycheck-sized liability to my accounting books for two days.
My bank seems to trust my paycheck deposits, though, and they "clear" (update my balance and become spendable) under 24hrs after they show up as "pending."
They're based on notification from they payroll company about the incoming paycheck. They're not just assumed by the bank to be there, and I'm not charged any interest on it, so I wouldn't necessarily lump them into the same category as "payday loans" which usually carry extremely high interest rates and often don't actually have any basis on truly knowing if the paycheck is incoming or not. Getting paid early is not similar to going to a payday loan vendor and getting a loan.
So when my bank is crediting my account with my paycheck early, its because my work told them I'm getting paid that amount. Otherwise they wouldn't necessarily know of the amount. Sure, its like some kind of loan in a way, but its essentially paperovering the slowness of the ACH to actually clear in a decent timeframe.
Direct Deposit. The banks can see the incoming transaction before the amounts clear. Payroll often starts the process two days early anyways since they try and get it to land on the 1st and 15th or whatever the dates are, so when the bank sees the incoming transaction it'll just automatically give me the funds while the clearing happens in the background.
Its honestly the same kind of logic they're using when you deposit your paycheck and it seems to clear turbo fast.
Huh? Employers pay employees via direct deposit in many (most?) cases. This isn’t any different… Either way it’s money moving from one bank account to another digitally.
> Is there going to be a universal SDK / API we can use with this?
There is probably a neobank opportunity in providing this. FedNow is, reasonably, administered by banks. (The Fed doesn't want to provide end-user customer service nor incur liability for fraud.)
Right. I suppose that makes sense. I’m thinking about ease of startup costs for institutions that want to use it financially. The Fed would need to support that anyway. Perhaps by not limiting a qualifying institution to just banks but also opening up access to financial service firms would be enough. They could just have some sort of fair priced qualifying program that a company has to maintain to access it or something
> Wish we could do the same for the credit card companies. Would be great if the Federal Government could intervene in some way to have Visa / Mastercard / American Express / Discover use the same API interface for payments. Would dramatically increase competition for providers.
If FedNow can fit in with ApplePay, then it can displace credit cards in the first place! The corollary I’m drawing, is from India where “UPI” payments (something similar to FedNow) was launched about 7 years ago and today is the more dominant payment mode than credit cards.
Shameless plug, but Moov offers a single API for payments. The clearing house's RTP system will be supported shortly, and FedNow is coming soon after. Check out out here: https://moov.io/
Agreed. This is really strange from their pricing page:
>> Get started for free to test our APIs & unblock your development team. Talk to us about your transaction volume to get the best pricing with flexibility to grow.
You would think there would _at least_ be a ceiling price. Makes me wonder why they can't show _any_ pricing.
No. This is an interface for banks to settle between themselves.
A bank does not want to interact with you in the same channel as it interacts with another bank.
What there will be are services provided by banks which utilize this for instant transfers.
The middle companies between transfers you want. Most of the actual work is fraud prevention and dispute resolution... unless you want the only means of settling a dispute is through the courts.
> Wish we could do the same for the credit card companies.
FedNow can replace credit cards for cases where chargeback or actual credit isn't necessary. So for many ordinary cashless payments.
Arguably even for many cases (small to medium amounts of money) where the possibility of chargeback seems useful FedNow could be better in expectation, because the fees are lower. The credit card companies are making money after all. Using them for chargeback is like buying insurance for things you can replace out of pocket: On average, you make a loss.
however, the payment itself is almost besides the point. the tricky part is the scheme / governance surrounding payments. who is liable for what, preventing fraud, etc. these large payment actors + the middlemen are more about fostering trust networks than moving the actual dollars and cents.
fraud in P2P payment networks (e.g. Zelle) is already a huge issue because a lack of a governing actor like a card network.[0] a different question is would the government ever provide this mediating role / lay out guidelines? would we want it to?
Even when offered a more competitive option, consumers love credit cards - the merchant gets soaked, while they get cash back. Given how the networks are, you'd have to have an unprecedented collusion of merchants to break the credit networks open.
> consumers love credit cards - the merchant gets soaked, while they get cash back
It's never the merchant that gets hosed. It's the people not using credit cards.
Because, of course, the merchant just takes his banking expenses and forwards them right back to all customers by increasing prices across the board.
And it's not only the people not using credit cards that get hosed. Even the people with credit cards lose out - because the cash back is practically always smaller than the fee the merchant payed and forwarded to the customer.
As always, the real winner is only the bank. There's a reason for the market cap of MasterCard and Visa...
Credit cards also have really good consumer protection laws around them. I have 30 days to report any fraudulent transactions and on my card and the bank MUST give me my money back.
This is usually never the way it happens. The government does not make market ending decisions on a whim. It would have already met with the biggest stakeholders and fedNow is likely the result of many considerations and compromises. Visa will likely not be threatened any time soon.
Yeah. Unlike UPI in India, FedNow is not mandatory for anyone. But companies could still offer "discounts" to customers when they use FedNow, as they save on credit card fees.
UPI is not mandatory in India, don't know where and why such a message circulates. If I am benefitting with Credit Cards at petrol pumps, I deliberately use it and there's no concern from anybody. Merchants prefer UPI (for now) because money goes to their bank account without any cost. And cash still works at most places where UPI does.
Besides this, stakeholders/partners of the NPCI are mandated to offer UPI services. I'm not sure if signing up was optional, but it would honestly be suicidal for a bank not to, given that there are so many competitors offering the same.
I can see why that's the case for high turnover companies. It is to track and reduce money laundering and tax evasion. Also, it has become a no brainer for any consumer facing company to not provide UPI as an option.
I keep appreciating the regulations in India, it is overall supportive of the common man. From say SEBI regulations on derivative markets to digital payments. For eg. credit cards are becoming less frequent, people here won't take out their cards for every other expense. People have become aware of the fact that money at the end is in bank and spending from the bank account hits much more real than a 30 day stream of cash 3-4 times your salary handed to you whenever you need. And so, low income and middle income groups spend wisely and don't get caught in spend cycles above their capacity.
Such an angle goes unappreciated, but hopefully this continues and money still be real and in our pocket.
> This would cut alot of middle companies out of the payments industry (or at least put pressure on lowering fees). That would be a huge win.
> Wish we could do the same for the credit card companies.
I have no idea about fednow but you can directly transfer an unlimited amount of USDC to someone in about a second for $0.0025 right now on Solana.
This is a bit off topic for the post, but relevant for some of the comments here.
For those who are commenting about payment systems in India and comparing this to UPI (Unified Payments Interface), this is not like UPI in a few ways.
Firstly, this is more closer to a faster version of RTGS (Real Time Gross Settlement) in India, which is operated by the RBI (Reserve Bank of India). Speaking from experience, RTGS in India can take several minutes or even 20 minutes or longer, belying the “real time” in its name (this is true even now). The FedNow system is supposed to be real time (we’ll soon know how well it performs in comparison).
Secondly, UPI is a payments system by a consortium called NPCI that’s owned by private, public and foreign banks in India. It is not owned by RBI. FedNow is owned by the Federal Reserve, and not by a bunch of banks.
With both RTGS (and the slower batched transfer system called NEFT) in India and FedNow in the US, the interbank settlement is done via the central bank (RBI or Federal Reserve).
Anyone with an euro bank account is probably using TIPS in some fashion. In most cases, you can send a bank transfer anywhere in the euro area within 10 seconds for zero fees. Some banks may charge an extra fee on the sending side, and the receiving side might be a bit slower (in which case the payment might take a few hours to show up or act like a normal bank transfer). It's also used by merchants like Amazon or payment systems like PayPal to reduce fees on their payments.
Another difference is the use of phone numbers and simple email like identifiers in UPI. That doesn’t seem to be part of FedNow itself. What makes UPI very usable is that entering the phone number or a simple UPI id brings up some metadata about the person to confirm that the transfer target is accurate. In FedNow such a layer has to be added by Zelle or similar layer above, it appears.
Well, given that FedNow has nothing to do with UPI, per the parent's comment, and it's about inter-bank settlement, it makes sense for an application layer like Zelle to provide that.
To clarify, the Federal Reserve is owned by the 12 Federal Reserve Regional Banks which are in turn “owned” (as in stock that pays a dividend but can’t be traded) by the commercial banks in that region.
the ownership and stocks are entirely legacy symbolic gargoyles on a standard central bank. independent government agency. it's a loosely coupled top-down public institution, the monetary policy is set by a public committee,
I don't think you are drawing the right parallels here. RTGS is only meant for transactions where sums to be transferred are very large. It only accounts for 0.24% of all transactions. While UPI and IMPS guarantee instant payments and account for 57.27% of all transactions.
The announcement is very unclear. What I as layperson will get from it?
Is it an app FedPayPal/Fedmo that I will be able to use for sending funds? Is it something that will be used by other apps to have cheaper funds transfer? Because if it is latter then I'm afraid that entrenched players will just keep doing what they're doing, keeping the profits but offloading processing to that system if it will be cheaper.
The fees by Paypal/Square/Stripe even Visa and Mastercard are enormous. Personally, I strongly believe that if one will dig deep enough he will find cartel there that sets prices. And when that will happen, LIBOR scandal is going to be a kindergarten play.
This is not a consumer-facing, social payment platform (e.g. Venmo), it is another payment rail (e.g. ACH, wires).
Laypeople are not the target audience for this, payment rail users are (i.e. entities who regularly utilize ACH/wire transfers or build services on top of them).
Not necessarily. In Germany we have "GiroPay", which literarily redirects you to a prefilled form in your online banking website. You have to choose your bank, enter your PIN, and click "okay". It's basically the same complexity as PayPal. (It's not hugely popular currently because it's fairly new and credit based services like PayPal have a headstart.)
But GiroPay is a product built on whatever payment rail is in use in Germany. In the same vein you need "FedPay" to make this as easy for the consumers. FedNow by itself won't really cut it.
Basically you know how you can ACH payments from your account to someone else’s and back but it only happens the next morning as long as the next morning is a business day? Now it would happen instantly on any day.
That said, FedNow is still an improvement over ACH. ACH is fundamentally batch-based processing, they just run the batch multiple times per day now. And all the batch times are East Coast biased, so people on the West Coast get worse service.
As I understand it, eventually this should lead to ubiquitous, cheap/free, instant payments, similar to UPI in India. That can be very convenient and useful.
Now, obviously there are various competing services for this kind of use case already: Venmo, Cashapp, Zelle, etc. So maybe it won't be better enough to feel like an improvement, but that's the aim.
> No. There is no FedNow app. The Federal Reserve does not provide payment services directly to consumers and businesses. Banks and credit unions can provide their customers with access to instant payments through new features on their mobile apps, banking websites, or other interfaces such as those used for business payments. Bank and credit union customers will probably not even see the name "FedNow" on their bank's instant payments platform as the FedNow Service is the high-speed highway that helps payments move from one financial institution to another. Banks and credit unions build new products for their customers that connect to the highway.
Amazing news. Kinda sad to see that Stripe was not on the list of early adopters but I'm sure they will implement it soon.
In Switzerland we build an awesome eBill system ontop of the equivalent thing to FedNow. Its all run by Six Group which is the biggest Stock Exchange but it is jointly owned by the big banks and government. So they all agreed to add this eBilling system. Its so much superior to having paper come in the mail all the time.
So much is possible once you have instantly confirming transactions supported by all banks. Suppliers can assume all possible customers have a bank account that can do this in contrast to the crazy world of sending paper checks by mail.
> Suppliers can assume all possible customers have a bank account that can do this in contrast to the crazy world of sending paper checks by mail.
I wish I, and anyone else, could get a bank account directly with the federal reserve bank.
> According to a 2021 report by the Federal Deposit Insurance Corporation (FDIC), an estimated 7.1 million adults in the United States do not have a bank account. This number represents about 2.4% of the adult population.
You could even place limits to "child-proof" such accounts.
I'd be ok with not allowing the account balance to get below zero or exceed the FDIC insured limit.
My only condition is nobody should be banned from it or kicked out for any reason.
You could say this account earns no interest (as long as there are no account maintenance fees or transaction fees).
> Kinda sad to see that Stripe was not on the list of early adopters but I'm sure they will implement it soon.
Given Stripe's role in the system, it doesn't make sense for them to support it until there's sufficient support from the banks as well. Until banks support it, it doesn't matter if Stripe (or any payment platform) does, because the users won't see any benefit.
> Driving the news: "We're tracking it closely," President of Product and Business Will Gaybrick says, noting the company is not actively working on anything related to FedNow. "I really do think real-time payments are going to be a big deal."
> "As I understand FedNow, there isn't yet a mandate, so banks don't have to implement it," he added. "For things to completely change the landscape of payments, you need universal coverage."
> If, for instance, only 30% of banks support FedNow, then it's unlikely to become a priority for merchants to adopt the system.
> The Financial Technology Association, which represents fintechs including Block, Marqeta, Stripe and Wise, among others, is urging the Fed to make direct access to the new faster payments system, called FedNow, more widely available so fintechs can tap the new service without going through banks.
> Generally, only licensed banks have access to the Fed’s master accounts, giving them clearance to use FedNow’s faster payments system when it’s available, but nonbank fintechs argue it’s shortsighted to exclude them from the same direct access to the new public system. While there is also The Clearing House’s rival RTP Network, the new FedNow system may provide more cost-effective services.
How could stripe adopt this? Accounts are limited to depository institutions, aka banks. Stripe is a money transmitter, and their customers are businesses.
I've been receiving and sending all my bills and invoices by e-mail for the last decade, without any need for some awesome or amazing system. I'm sure millions do the same.
You attach for example a PDF file with the invoice, including bank account number etc. The person receiving the invoice logs into his or her online bank and pays it.
Since decent online banks will let you save the details of recipients, in practice it is very smooth and uncomplicated.
You could also receive and send invoices by fax, and there's nothing wrong with that.
In many cases that is just the bank printing a check that is mailed to the recipient.
Sure, it works. But it's super slow and archaic. In the same way some people think people writing personal checks works, but others think its ridiculous.
That's not how the invoices I receive or send are. They are real invoices with specification, sum to be paid, who to pay it to and date to pay. So let's take a bog-standard example: Your phone bill. Get the invoice in your e-mail, see what amount they want, log in to the bank, select them as the recipient, fill in the sum and paste the reference number. Assuming you're saving recipients in your online bank.
There's nothing slow or archaic about that, at least I haven't noticed that after a few thousand invoices sent and received by e-mail. With modern banks you can even make batch payment of invoices by uploading a csv file.
> Banks and credit unions of all sizes can sign up and use this tool to instantly transfer money for their customers, any time of the day, on any day of the year.
Whoa. Is this as awesome as it sounds? Is this akin to government-backed Venmo, or something?
> Is this akin to government-backed Venmo, or something?
Yes, exactly. But you have to keep in mind that this is a two-edged sword. On the one hand, it's going to be convenient and probably secure. On the other hand, it's going to let the government see every transaction you make, which for some people will be a very high price to pay.
> On the other hand, it's going to let the government see every transaction you make
Can you go into more detail here on what you think will change from the status quo? Existing bank transfers are obviously not secret from the government on request. While the government doesn't have direct access to run search heuristics on the whole dataset they just delegate that to the banks' internal compliance team.
If the government wants to tax these transactions - and let's admit it, they do - they'll take it right off the top. Unlike with the banking system where different banks have different prices for wires - or even free under certain conditions - you can't "shop around" for a new government.
Further, if a government determines you are not an "acceptable" participant, they have the ability to stop transactions to/from you.
*Ability doesn't necessarily translate to authority - you can probably fight it - but the government's legal fees are paid by us so they're effectively unlimited.
> If the government wants to tax these transactions - and let's admit it, they do - they'll take it right off the top.
If the federal government wants to tax things they indeed can. But I was asking about a chance from the status quo.
If you owe the US government money right now they can take it out of your bank account.
> Unlike with the banking system where different banks have different prices for wires - or even free under certain conditions - you can't "shop around" for a new government.
You can shop around for a different bank but it will still follow US law and also go above and beyond to help out the feds.
> Further, if a government determines you are not an "acceptable" participant, they have the ability to stop transactions to/from you.
> *Ability doesn't necessarily translate to authority - you can probably fight it - but the government's legal fees are paid by us so they're effectively unlimited.
Yes but your legal remedies might actually be better under FedWire. US fourth amendment law has a massive loophole whereby if a private business "voluntarily" assists the government it doesn't count as a search. So if the government searches your government bank account you'll have potentially better remedies than if they ask your private bank to pretty please send a printout. (and there's very little chance your current bank tells the feds to shove off and come back with a warrant in that kind of situation)
If the government could stop cash transactions entire classes of crime would be significantly more impractical (while at the same time significantly invading the privacy of all citizens).
> But I was asking about a chance from the status quo.
> If you owe the US government money right now they can take it out of your bank account.
Yes, but they can't see your transactions unless they go ask your bank. Now, they could do that, but they're not set up to do this for all transactions. FedNow changes that for all transactions within FedNow. The government wouldn't start taxing transactions until FedNow is the only game in town or all other payment systems also give them that kind of visibility.
As well, with FedNow they get real-time transaction visibility, which is very different from getting non-real-time batched transaction data from banks.
> Yes but your legal remedies might actually be better under FedWire. US fourth amendment law has a massive loophole whereby if a private business "voluntarily" assists the government it doesn't count as a search. So if the government searches your government bank account you'll have potentially better remedies than if they ask your private bank to pretty please send a printout. (and there's very little chance your current bank tells the feds to shove off and come back with a warrant in that kind of situation)
>wouldn't start taxing transactions until FedNow is the only game in town or all other payment systems also give them that kind of visibility.
....Or they can just demand banks immediately start taxing transactions per merchant codes _right now_ without FedNow. And the banks would comply. They don't need real time visibility. The bank could take money off the top and/or send the tax form required to you at the end of year and IRS just like anything else. It would just be similar to Form 8949.
> If the government wants to tax these transactions - and let's admit it, they do - they'll take it right off the top.
The Federal Reserve isn't the government. Yes, if they want to charge a fee for this service, they could. The same is true of every existing money-moving mechanism.
> Unlike with the banking system where different banks have different prices for wires - or even free under certain conditions - you can't "shop around" for a new government
FedNow is essentially free[0]. If FedNow imposes a higher fee in the future, you can always choose to use other services (ACH, wire payments, etc.). It's a competitive market.
> Further, if a government determines you are not an "acceptable" participant, they have the ability to stop transactions to/from you.
This power already exists. FedNow doesn't change it one way or the other.
It won't be any worse or better than existing federally administered systems. The government already oversees all the major existing bank-to-bank transfer systems mentioned in the press release. In the US banks charge different wire fees because they can as a competitive matter, but they all use FedWire to talk to each other. Just like they can impose arbitrary limits on ACH transfer size but they all use FedACH to handle the actual transfer. This one is just a faster, more secure version of the latter.
> If the government wants to tax these transactions - and let's admit it, they do - they'll take it right off the top.
They have no authority to do this unless you're subject to a tax witholding order. The government cannot collect taxes on arbitrary transactions as they occur - it can levy taxes, and then attempt to collect them (it hopes via voluntary payment by taxpayers).
You, like so many other commenters here, seem to fail to grasp that FedNow is a replacement for ACH, the existing inter-bank exchange system that already involves the Federal Reserve to precisely the same extent that ACH already does.
> If the government wants to tax these transactions - and let's admit it, they do - they'll take it right off the top
the implied alternative being they don't take it automatically and now it's your responsibility to figure it out and pay it? Or is the alternative that you would not pay it if it were not automatic, aka tax fraud?
It lowers the cost of the government performing wide surveillance of financial activity; the fear is that lowering this cost will enable more advanced forms of detection and enforcement that ultimately look and feel like harassment.
As mentioned by a few folks elsewhere in these comments, if FedNow is wildly successful and takes a meaningful portion of payments, it centralizes information about lots of peoples' financial activity in one place, across banks and across payment platforms. This potentially leads to FedNow being a one-stop OLTP shop for governments to run queries against realtime data, or even build stream processing agents that filter or take action on patterns.
Currently, it would be more difficult to build this database as it's hodgepodged together from suspicious activity reports and subpoenas. There's of course the unknowable possibility that law enforcement and security agencies have secret ways of building a comprehensive realtime dataset - but, if they do exist, their secret nature reduces the scope of situations in which they can be used.
ACH is slow and coarse, FedNow is capable of being realtime and fine-grained. Two institutions might have one giant ACH per day between them that includes a ton of smaller transactions that are all invisible to the ACH system itself.
What does the timing have to do with visibility though? What government move is quick enough for that to matter? Do you really believe that if “the government” wants to look at money flow they won’t do it until FedNow is live? Each transaction is tracked by an ID accessible by people in the system, not sure why you men by “invisible”.
Venmo doesn’t use ACH when moving from Venmo to Venmo. And is the same with FedNow. If you send money from BankA account to bankB account, that’s an ACH transaction and it’s recorded as such. Same with Fed now.
Right, these concerns are predicated on apps built natively on FedNow gaining market share to rival Venmo enough that these transactions are no longer opaque. If everybody uses it the same way they use ACH, there's no difference to the state of the world today.
The magnitude of the change is somewhat in the eye of the beholder. On the one hand, the government already has a lot of visibility into your finances. On the other hand, this removes some friction that currently exists for certain kinds of transactions. This matters more to some people than others. There is also concern that this might be a step towards the eventual elimination of cash.
I find it annoying that we have these endless debates in the US where it's assumed that if there's some magnitude it of course must be more than epsilon.
I would be interested in if anyone can give a example where the friction increases in such a way as a person would experience an actual difference, or how this would actually make cash easier.
Otherwise this sounds to me like the endless silly arguments against a national id card by people. (State ID cards that then go into a federal database are no more private but come with annoying downsides like ID.me)
I wrote a comment on another thread today about this wrt surveillance. Reduced friction in surveillance definitely is something to be feared, as the evidence is that if the government/police/alphabet agencies can use a power (literally, not necessarily legally), they will. The only thing holding them back in the pre-digital age was the high cost of physical surveillance and even data storage, when "files" were things you held. The difference in quantity of possible surveillance has become a difference in quality, where it's just "common sense" that the government can easily pull your movements from cell tower records, and that they'll do so regardless of whether they're allowed to (or say "terrorism!" allows them to)
Automated surveillance and automated interference. If you think YouTube's algorithms for determining copyright or Facebooks algorithms for "community standards" are bad, wait until you have your bank account locked and can't buy food.
I don't see how this is much different than the current situation. The Fed already processes ACH transactions (basically all bill-pay, most transfers to/from Paypal/Venmo etc), and all wire transfers (most high dollar money transfers)
The government can already see all your ACH transactions like payroll, rent, etc because the Fed Reserve literally runs ACH. This also isn't replacing credit cards or the like, so it is basically an ACH replacement.
That's on top of reporting requirements banks already have for your transactions.
The Fed only runs FedACH, which is one of two ACH networks running the same protocol. The other is The Clearing House Payments Company's Electronic Payments Network. Indeed there used to be more private network operators, but the other two eventually folded, leaving just these two remaining.
Put the flag of North Korea into the notes of a venmo transaction. You will very quickly find out the extent to which the government knows what you are doing with your money.
Thats actually a private corporation having an excessively skittish interpretation of federal regulations.
The government would still need to go out of their way to know about that transaction. And the liability would only come after you or the organization got in trouble for something else.
which once again has nothing to do with the government and everything to do with Venmo incorporated (Paypal Inc.) choosing to operate that way out of fear of the government
Current finance laws are such that if PayPal stopped having this kind of fear of the government it would likely go under. It's just a loophole to get around the 4th amendment.
> > Is this akin to government-backed Venmo, or something?
> Yes, exactly. But you have to keep in mind that this is a two-edged sword. On the one hand, it's going to be convenient and probably secure. On the other hand, it's going to let the government see every transaction you make, which for some people will be a very high price to pay.
So, almost like SEPA, but not as good, as not all banks are in it? I can type anyone's IBAN* into my banking app and transfer them money pretty much instantly. However, ours will have a delay outside banking hours, which is annoying. Sounds like FedNow is always instant, which is a definite improvement.
"Normal" SEPA isn't instant either. You need SEPA Instant Payments for that and many banks don't support that yet although an EU directive is supposed to make it mandatory to at least be able to receive them, I think.
My mid-sized Italian bank has a promotion right now to make instant payments with only 1 € in fees (instead of the usual 7 they charge, or 0 for "normal" bank transfers settled overnight).
> > Banks and credit unions of all sizes can sign up and use this tool to instantly transfer money for their customers, any time of the day, on any day of the year.
> Whoa. Is this as awesome as it sounds? Is this akin to government-backed Venmo, or something?
>Unless you want savings limits and expiry dates on your money.
I don't believe in saving limits or expiry dates in the sense of losing 100% of your money. But think about what impact limiting savings has on debt. In aggregate, there can only be as much debt as there are savings. This means if you want to limit debt in the economy, you are going to have to limit savings as well.
This is particularly relevant with debt brakes. A country with a debt brake but without a savings brake is going to run into a pretty fundamental limitation.
Savers can delay their spending decisions and this ultimately delays the ability to repay debts but since debtor's are at the mercy of lenders, we blame the debtor for the lenders tardiness.
Which, as the article says, is an inaccurate model of how modern monetary economies actually work. Bank loans create new money, they don't lend out existing deposits, and repayments destroy that money. Reserve requirements - in countries that have them - don't affect whether a loan can be made or not.
> Bank loans create new money, they don't lend out existing deposits
Do you mind clarifying? I agree banks create new money, but they do that by lending out existing deposits. A bank can’t lend out money that don’t have on their books…
It helps if you think about it in accounting terms where assets minus liabilities needs to add up to zero. When a bank makes a loan for $100 it adds $100 to the balance in your account - which is a $100 liability - and the $100 loan to its assets, balancing the books. Bank deposits aren't stores of physical cash, they're numbers in a ledger indicating what the bank owes you, and when you get a loan it means the bank owes you more money and not that it owes anybody else less money.
This Bank of England paper is by far the simplest and best explanation of the whole process, well worth a look even if just for the summary on the first page :)
Right, but I’m not tracking your previous statement that banks don’t lend out existing deposits. They do! Sometimes up to 100% of existing deposits! I suspect we’re saying the same thing though. For example, a bank might take a $100 deposit, keep $10, and loan out the additional $90. That creates $90 because they original depositor still has the $100 in their account.
They don't lend out deposits, if a bank had zero deposits it could still loan you that $100 just by adjusting your balance and adding the loan to their books. It's a subtle difference, and honestly, the BoE explainer I linked to is by far better at explaining this than I am.
Yes, at the point where you try to withdraw actual cash the bank will have to use any cash it has as its assets, but nowadays the majority of transactions are digital and all that needs to happen is to adjust the balances of the payee and payer accordingly (potentially this can involve the interbank settlement network but the end result is the same).
Once you stop thinking of money in terms of tokens and bank deposits as those tokens getting stored in individual buckets - or there being any buckets at all - you can think of it in terms of assets and liabilities it makes sense. Also that commercial bank money (deposits) and central bank money (cash) are different because they are liabilities to different entities - commercial banks and the FED respectively.
Or more fundamentally, modern money is just I-O-Us being moved around.
Yes, I agree with all of this. But you’re still not going to have a bank with zero capital. We don’t have infinitely leveraged banks, for good reason :)
I’m still missing how this negates the money multiplier though. If banks are subject to reserve requirements, doesn’t the money multiplier still give a reasonable upper bound for the amount of money that can be created?
Also, this doesn’t negate the money multiplier. Assuming non-zero reserve requirements, the money multiplier is still an upper bound on the amount of money that can be created.
I don't understand why FedNow and CBDC are such a big issue in the US. FedNow looks quite attractive from a fees perspective, especially when compared to PayPal and alike. Part of me wonders if the middlemen who stand to lose out might be trying to muddy the waters. It wouldn't be the first time.
Are you under the impression that ACH, the thing FedNow is replacing, is free from government influence?
This is what's bizarre to me about the FedNow hysteria. It's not a government system replacing a private market system. It's a government system replacing an older, worse government system. It's like having a panic attack because the Federal Reserve is updating their PCs to from Windows XP to Windows 10.
To be fair only about half of US ACH traffic flows through the Fed (the other half goes through the Clearing House Payments Company), but the Fed is very much involved (and a critical component of) the ACH network, even if the system is not explicitly a government one.
Ignoring the fact that FedNow doesn't change much in this regard...
I'm torn on this. Visa, MasterCard, Venmo (aka PayPal), etc. all know about large subsets of my transactions, and they go and sell my personal data to other companies in sleazy ways to cover their costs.
Is that better or worse than the government knowing all this stuff? Sure, the government can also legally use force against me and deprive me of my freedom and possessions, and might pervert my transaction history into justifying doing bad things to me. But that's a risk, not a certainty. Private companies selling my data and using it in nefarious ways is a certainty.
We can stop private companies from selling that data if we wanted to. Once the federal government has direct control of our financial transactions, how do we limit what they can do with that power?
The point of keeping the government out of the banking business would be to keep the door cracked for the chance to improve it later. That door slams shut once the federal government has the insights into every transaction, and more importantly the ability to deny ones they don't want us to do. We also Wil have much less control over the creation of a social credit score, theoretically the government would have everything it needs to make that happen with control over our transactions.
It's not about KNOWING, it's about CONTROLLING. The concern is they can shut off your ability to make transactions if you don't cooperate with whatever their agenda is at any given moment, like what the truckers in Canada protesting vax mandates experienced.
in effect the requirement to file these activity reports leads to banks simply requesting a lot of data from clients (contracts, trading data, invoices), and if you can't convince them, they'll eventually close your account. so you go to a different bank. their compliance department eventually also starts asking questions, and so on.
the freezing of accounts related to the "Freedom Convoy" is quite different, as it was an exercise of emergency powers. the Trudeau admin could have ordered gas stations to not sell fuel to them, or Visa/MasterCard to not process certain cards, or anything similarly extraordinary.
This is the difference between the government needing a search warrant and having to come to your house, and them needing a search warrant but a law enforcement officer already living in your house. Sure, they still "need a warrant", but that doesn't make the situation acceptable.
Do you think private unregulated businesses (CashApp, Venmo, etc.) that this is trying to replace are any better? These companies just sell your transaction data to the highest bidder, no warrant needed.
But these companies don't have a legal monopoly on force. It's in my best interest, if I have to deal with both these problems, to keep them separated.
Seems to me people is failing to understand what CBDCs will bring, especially even more “bad money” and economic slavery caused by “incentives” to spend.
Please explain to me what FedNow changes compared to the current ACH system in regards to government recording of transactions? Please explain to me how FedNow prevents cash transactions from occurring, or otherwise justify your statement “every financial transaction I make”?
I can buy an icecream anywhere in the world without anybody tracking me. Even with the "wrong" political opinion (even if I would be a trucker in Canada during certain protests).
I cannot do that with CBDC.
No. CBDC (aka: the ultimate totalitarian's dream) is not the same as the current banking system, despite the current banking system also being very horrible for privacy.
* All of the above assuming that cash will be banned and CBDC will be mandatory for everybody.
> I can buy an icecream anywhere in the world without anybody tracking me.
No you can't. Companies like OpenEye and Deep Sentinel offer facial recognition solutions that are targeted at loss-prevention, and these systems are commonplace in the USA. Facial recognition-based consumer analytics systems are also available.
In fact, I think you'd be hard pressed to find a pint of ice cream that you can buy without having a camera pointed at your face. Even the little stand at the beach in the state park near my old place had a camera, and I didn't even have real LTE coverage there.
Privacy comes only from the force of law; not the other way around.
Anyways, the whole conversation is a red herring. This is a replacement for ACH, which already exists, and there isn't substantively more information sharing between banks and governments than already exists.
FedNow doesn't allow any more or less tracking than what's already possible through the Fed's visibility into ACH. So for the purposes of FedNow the entire conversation is off-topic.
Anyways, you missed the point.
The anti-new-technology and anti-gov-technology response to privacy and control is misguided. Corporations will fuck you, left unchecked, and governments will fuck you through corporations. There is no technical solution to political problems, and physical cash vs FedNow vs digital currency is a suite of technical solutions.
Trying to solve a political problem by eliminating technology is literally the same thing as trying to solve political problems with technology. The fallacy is in focusing on technology where the actual problem is political.
The problem is political and needs to be treated as such. The solution is building and maintaining political consensus in favor of strong privacy and personal property rights, not carrying around a billfold full of physical cash.
The reality is, supermajority (including me) of people prefer not using cash. Especially up here in the North.
Can’t even recall to ever pulling some out other than some casino entertainment night. I understand all the “freedom” (or whatever one might call it) I’m losing, but the positive sides are much better (never have to care about losing my wallet, much faster transactions, convenience and etc.). Sure, sounds bad on paper, but I haven’t felt any negatives in 10+ years, especially when in practice makes my life easier.
>The reality is, supermajority (including me) of people prefer not using cash. Especially up here in the North.
Unfortunately, in my experience, I'd have to agree with you on that. But it also brings to mind a relevant Samuel Adams quote:
“If ye love wealth better than liberty, the tranquility of servitude better than the animating contest of freedom, go home from us in peace. We ask not your counsels or arms. Crouch down and lick the hands which feed you. May your chains set lightly upon you, and may posterity forget that ye were our countrymen.”
Not as load bearing when you look at the legal limits of cash transactions in countries in Europe. Also not so load bearing when you consider the unconstitutional civil asset forfeiture of the current US.
Your employer doesn't pay you in food stamps, they pay you in money you can use to buy anything you need in the entire world.
The government provides coupons that allow you to buy food which is remediated to the seller in dollars. The authority and funding to provide that service is something that voters can impact or change.
These are very different things, not "that already exists" at all.
> they pay you in money you can use to buy anything you need in the entire world.
This is an primarily American phenomenon though and it's only really true because of the dominance of the US and US petrodollars over global society. It's probably not easy to spend Turkish lira in Madagascar, for example. Yes there are banks which will exchange approved currencies, but that's one step removed from being paid in a global global currency as you imply.
"Petrodollars" are completely unimportant. They just mean Saudi Arabia's financial reserves, and KSA is not a large country so it wouldn't matter if they abandoned the dollar. It already doesn't matter that we stopped Russia from trading in dollars.
If anyone ever mentions petrodollars, CBDC, or crypto to you, they are crazy and I recommend stealing their wallet. (Since they're into crypto they're used to it.)
The populist right's obsession with currency -- pointing fingers at state banks and currency systems and money lenders and so on -- is a product of their unwillingness to point fingers at real corporate sources of power & control in the world. In large part because they're sympathetic to them (or outright funded by them in some cases.)
At best this kind of stuff is a harmless ideological pressure release valve for a discontented middle class / small business / entrepreneurial layer squeezed from above (esp after COVID). At worst it veers into outright authoritarian & xenophobic politics and often blends in some anti-Semitism. Starts with rants about Bretton-Woods and the next thing you know you're hearing about the Rothschilds.
There was a whole wing of this stuff ascendant in the 1930s (in western Canada we had "Social Credit", for example) whose ideological purpose was to displace left wing populism and anti-capitalist politics with an explicitly pro-capitalist highly social conservative narrative which pinned blame for problems on "international banking" and, ultimately, Jewish people.
The latest flavour is obsessed with talk about "petrodollars" and cryptocurrency, and then you scratch a little and there's the face of Sergei Lavrov or Marie Le Pen hiding under the paint.
The world is f*cked and unjust but not for the reasons that these people go on about.
Shows where my brain was at yesterday - that was a pretty ill-formed comment. I regret including the term without a fuller understanding of what I was saying, however I reject the notion of being associated with racist populism for making a criticism of the oil-based economy.
That's fair, I was more riffing on parent's comment, buzzed on early morning coffee. Not calling you a fascist.
I do agree that the bulk of the foundation of the world's economy is constructed over the petroleum economy. Though I also don't think the nature of power in the world would change significantly if that were to be replaced with something else or if the nationality of the currency it is traded in were to change.
Remember the US is an oil exporter now. Most of this oil analysis stuff is leftover from the 2000s; it's also coming from overly materialist analysis of the Iraq War, where they assumed "this war is for Iraq oil" instead of the real answer which is literally "we invaded Iraq because we felt like it".
Honestly, if governments paid out all social benefits in a demurrage currency which they accept for tax payments, they would save a lot of money because the velocity and therefore fiscal multiplier of a demurrage currency is very high.
I mean if we're talking that level of societal breakdown they would just use the system we already have for tracking semi-restricted purchases which is scanning and reporting your government ID.
Then you can enforce meat and fossil fuel rations with no way to buy yourself around it.
Look at what happened with the Canadian protests and banking restrictions.
Many are concerned that cdbc will allow the gov to create carbon rations that are enforced by disallowing purchases. Cash is fungible while regulated digital currency isn't.
But how could something like a carbon ration possibly be implemented? They'd have to retrofit every PoS system in the nation to classify sales and tag payments with that information. This would already be possible using the existing settlement infrastructure, nothing unique to how a CBDC would work.
Plus, if the goal is to limit carbon emissioms, it's more of a liberal market-shaping attitude that mainstream economists have to simply tax carbon heavy activities rather than invent new and unpopular technological measures to force it to happen. Same applies to the fears about limiting meat consumption, etc.
Something along the lines of ‘We face a climate emergency that is even more serious than the Covid emergency, we have to do this, this is about saving lives’?
(I’m not in any way a climate denier, just a huge pessimist when it comes to attempted solutions)
You are already starting to pigeonhole people with your stereotype. I'm as liberal as they come and I find the thought of a CBDC to be an unimaginable Orwellian nightmare. A boot stamping on the face of civil liberties and privacy forever.
Maybe if our democracy wasn't broken this wouldn't be an issue. The government is supposed to be ran by us, but it's been taken over by bureaucrat cosmopolitans & multi-national corps who have a distinct will to power.
The same thing happens when a town decides to string fiber on their utility poles and sell transit. All sorts of reasons why that's a terrible thing. Same for importing drugs from other countries. And on and on.
The ISP duopoly/monopoly is worse from a consumer perspective and functionally equivalent from a civil rights perspective. To think otherwise is naive.
In fact, the private sector solution is perhaps even worse from a civil rights perspective.
Consider a prosecutor in Jurisdiction A hell-bent on violating the civil rights of a citizen in Jurisdiction B, and suppose Jurisdiction B is sympathetic to this citizen. This isn't even hypothetical in the USA. Abortion, immigration, civil disobedience, etc. In the corporate duopoly setup, Jurisdiction A can compel the ISP to comply -- either by physically entering the property of the ISP and taking data by force, or by threatening market access. In the muni ISP case, Jurisdiction B says "shove it".
And that's before noting that corporations such as modern ISPs are -- like governments -- also large bureaucracies endowed with incredible power that are de facto impossible to opt out of. Except at least in representative government you have some sort of voice, however small, which isn't dependent on amassing vast sums of cash.
> The same thing happens when a town decides to string fiber on their utility poles and sell transit. All sorts of reasons why that's a terrible thing.
Many of the arguments revolve around concerns that the government will gain too much control, power, and personal information. It the government directly controls financial transactions they know every transaction we make, and more importantly can deny transactions they don't like.
Arguably the US government effectively has these powers today, but beingtthat they don't directly own our banks there is a level of red tape they have to go through. As long as they are technically separate there is also the opportunity for us to change the laws and strip them of that access, once combined we give up that possibility.
The US was originally design with a very strong distrust of our own federal government. For the last 80 years we've completely flipped the script and given more and more power to a massive federal government, but the undertone of distrust is still around for quite a few Americans.
IRS auditing targeting has been at the explicit behest of Republican controlled Congresses. That is, they were told to stop/reduce targetting high net worth individuals, or face even further cuts to their budget.
What benefit would targeting low wealth individuals have to the IRS? I worked on a state tax system briefly at Accenture and they offered the product for a percentage of reclaimed taxes. They started with high debts with good credit scores. Since they had skin in the game (which it could be argued the IRS doesn’t), they wanted to maximize the unpaid taxes they collected.
Because wealthier people have more complicated returns and are much more likely to litigate, resulting in more time commitment.
For high net wealth audits, you could have potentially dozens of people working on it for years so there is a possibility that a judge / jury rules in your favor.
They are going after low effort people, but making it up by volume.
Because it's easy to mess up claiming the EITC and only low income people can claim it. Also, there's a lot more (relatively) low income people than high income people.
This also depends if by "audits" you include every kind of correction letter the IRS sends you.
I got a letter from the IRS today and thought it was some kind of ironic punishment for commenting this, but it turned out it was just warning me I'd used the website last week(??)
The press release lists a few big banks like Chase, Wells Fargo, BNY Mellon, US Bank and Fiserv, along with a dog's breakfast of random service providers and credit unions.
Since free realtime payments presumably would still require both the sender and the receiver to use a participating financial institution, instead of all participants just transacting directly through the Fed, how is this supposed to work if most of the industry isn't participating?
There are already other options for instant payments in the US. The Zelle network and The Clearings House's RTP have been running for several years, and provide pretty good account reachability today. FedNow is the result of smaller banks and credit unions wanting an alternative to Zelle and RTP which are both owned by consortiums of the big banks. The expectation in the industry is that there will eventually be interoperability between these systems, and it will not make much difference to consumers which one their bank uses. Similar to how paper check and ACH clearing works in the US today.
Zelle isn't a good comparison because it's not made for things like paying employees or other businesses. It was made specifically for payments between individuals and in fact, the big banks that run Zelle could very well change the terms to specifically forbid using it for things like payroll (actually, they might already forbid it but I'm not sure).
FedNow is good for basically everything: Payments between individuals, employeers/employees, B2B, etc. More importantly, the fees are so low it might as well be considered free ($0.045/transfer) which is HUGE.
> The expectation in the industry is that there will eventually be interoperability between these systems
Why? Why would the companies presumably making good money with Zelle interoperate with something that's stealing their customers? It seems like there's no advantage for the entity running Zelle to allow interoperability, and there might even be ToS language preventing any bank or credit union currently in Zelle from so much as moving towards FedNow.
the entire reason FedNow exists is because (simplifying somewhat) the large banks launched their own real-time payments system (RTP through the Clearing House) and small banks in the US lobbied the govt HARD to get a government option out of the reasonable concern they would get squeezed by the majors.
nearly all banks in the US should support FedNow within the next few years, if not much sooner, as it is seen as tablestakes for most bankers.
It takes time for adoption. These were the early adopters, who wanted to participate in the design and also be prepared from a business standpoint to ready at launch. If it proves it’s worth, broader adoption will follow. Like anything else.
In December 2019, noting the success of UPI, Google suggested the US Federal Reserve Board to follow UPI as example in developing FedNow,[22] a real-time payment system for United States.[23]
It will be interesting to see how this affects "toxic," deplatformed, and to some degree debanked (at least from PayPal and CC processors) entities, like the KiwiFarms. While this page is somewhat vague about the private/public status of the Fed: https://www.federalreserve.gov/faqs/about_14986.htm
I think KiwiFarms is a cesspool and I think Null in particular is an extremely crappy human, but despite that I disagreed with the credit card processors pulling them, because they really did have a near-monopoly for online payments, meaning that this could be considered stifling of free speech.
However, I think I'll have less of an issue for it if there's the government-backed means in which to send them money; at that point I think the "it's a private company!" defense would actually apply to the credit card companies.
This is a dramatic whitewashing of KiwiFarms. KiwiFarms was not deplatformed for wrongthink or because people disagreed with their ideas. They were deplatformed for coordinating harassment campaigns that resulted in at least three confirmed suicides. That is not protected speech.
Any speech could be attributed to the N-number of suicides we unfortunately see happening. This is not a good argument for censorship or punitive actions against individuals or entities whose speech was followed by a suicide with dubious / unproven connections to that speech.
If any speech is to be considered targeted harassment, then let the courts decide that in a defamation (or otherwise) case to determine damages and reconciliation of those damages.
Private entities should not be allowed to limit their business services to customers they suspect are behaving in a way they disapprove of, especially since these customers are not asking for tailored services such as cakes and custom websites. Payment providers are the backbone of a functioning economy, and problematic speech should never be the reason why they deny service.
One of those "confirmed" suicides occurred in Japan and the individual was also a US citizen. The US State Department doesn't list any suicides when it was said to have happened (June 2021 - there was one prior to that in May and another in February 2022). Reporting the death of a foreign national to their respective embassy is mandatory in Japan.
Do you have an original source for this and is there a breakdown by cause? US State Department data only accounts for non-natural causes - namely suicides and accidents.
I assume you're talking about near (fka byuu)? Heartbreaking...such an unbelievably intelligent and insightful person.
I had the pleasure of getting a couple direct replies from them once on an obscure subreddit under my own realname account. That turned into a few DMs, and despite the fact that I was publicly working on tech completely antithetical to their technical views, they were so gracious and thoughtful and engaged...it was truly humbling.
I have my own thoughts on KF too...I wish the individuals responsible for their targeted and direct harassment had been held accountable. But I'll try to preserve some tact in their memory and leave it at that.
The nexus between KF harassment and the suicides in two of the three cases is extremely tenuous ("KF had a thread X disliked" -> "X committed suicide" -> "KF induced X's suicide") and in the third the evidence that a suicide occurred to begin with is lacking.
I'm sure many, many more suicides could be linked more strongly to any of the major social media platforms.
In any case, the reasons for deplatforming have always been more diverse. CloudFlare dropped KF for representing some sort of imminent and ongoing threat to human life which you'd think a good-faith review of would indicate was misguided (and thus their service should be restored.) KF has not been able to establish relationships with other hosts not because literally everyone finds them repugnant, but because entering into a public relationship with any company immediately makes that company a target for a hate campaign, and even "free speech" hosts and such have found the cost-benefit math unfavorable.
If KiwiFarms hosted/was responsible for illegal activities, then it is up to law enforcement to deal with it, not payment processors.
It is not desirable that private infrastructure companies such as Visa or MasterCard are effectively playing as judge, jury and executioner in modern society, even if (sometimes) they are happening to do the right thing.
A counterpoint — every day tons of financial disputes are handled by banks and insurance companies. Unlike with government, no violence is involved, and things go well. Why involve governments and violence when we can avoid the bad things without violence?
The parent is claiming a serious harassment campaign which seems functionally equivalent to violence. Both are harmful, illegal activities. Also, no one is advocating violent government intervention.
>A counterpoint — every day tons of financial disputes are handled by banks and insurance companies. Unlike with government, no violence is involved, and things go well. Why involve governments and violence when we can avoid the bad things without violence?
Good point, maybe the private financial institutions (or more!) of the country should lean into this and offer a shadow legal system whereby anyone can bring suit for any allowable reason with the ultimate threat being a sort of (nonviolent!) exile from digital society. That could surely not go wrong.
> They were deplatformed for coordinating harassment campaigns that resulted in at least three confirmed suicides. That is not protected speech.
and how many has reddit lead to?
Just admit that they were deplatformed because a very powerful person pulled their strings at our frigging backbones of the internet for personal favors, and got the site banned there.
Thankfully, the site is no longer available via clearweb, so we can just take its characterization by its harshest critics at face value, rather than having to actually read it ourselves and make up our own minds.
However, I do find it strange that the site now only being available through Tor--and thus not showing up in Google search results or being easily browsable by "normies"--seems to have been enough to assuage the people spearheading its deplatforming, since Tor should pose little of an impediment to those capable and willing enough to IRL harass and SWAT people (the purported real reason KF exists). It's almost as if their real concern is people being able to google them and find a site that comprehensively documents their bad, and perhaps illegal, behavior.
Well wait, maybe they gave up the deplatforming effort largely because it’s not as easy to deplatform an onion site as it is to harass web hosts on Twitter.
Also, wasn’t a big complaint with KF their doxxing? Even if I didn’t do any bad or illegal things, I don’t really want a bunch of trolls knowing my address.
But if you HAD done bad things and they WERE documented on KF, you might try even harder to get it shut down. And if you had plenty money and influential contacts, and no moral qualms, you might succeed. Only temporarily though.
Last I heard, at least one of those "confirmed suicides" failed to appear in government databases, which casts doubt on its legitimacy (I assume it is one of those counted as "confirmed"), and another was associated with outside harassment and falsely attributed to KF. I don't know what the third one is.
I dislike that site and the general behavior of its users too, obviously, but during that time when it was in the spotlight I saw plenty of evidence of egregious behavior and blatant lies from people campaigning to censor them, and much of it seemed to work. It's not hard to see how debanking could affect less "problematic" organizations or individuals through censorship campaigns (or government interference) regardless of your feelings about KF itself.
This is a bullshit take.
Kiwifarms always remind users to stay away from gossip subjects.
The fact that some people disregard that is the equivalent of someone reading a tabloid or "Elon Musk jet tracker" and harasses celebrities mentioned there.
Also if you do what's likely to cause a KF article documenting your antics, you can be sure 4chan/8chan/countless discord channels will have a go at you as well, and those are typically not so restrained.
KiwiFarms was not deplatformed for harassment campaigns* or suicides**; they were deplatformed due to coordinated harassment campaigns against the companies on which the site relied.
*There were no such things. Users were aggressively reprimanded and banned for suggesting and engaging in "poop-touching," respectively.
Because they commit a crime of... what exactly again?
They never crossed even a civil liability threshold, it's strictly a gossip site with multiple reminders never to contact gossip targets.
Isn't it the case that you still have to have a relationship with a bank to have an account to transfer into or out of via FedNow in the first place? In that case I don't think this would change the picture at all. It's not the intention to help the unbanked pariahs, that's for sure.
I presume the system uses bank account and routing numbers? So besides concerns with sharing that information with the public, concerned citizens will figure out who they bank with, and will most likely be able to easily pressure the bank to drop them.
Certain things should be difficult to accomplish in a functional society anyways, and administering a profitable hate group is one of those things. If not bankrupted by their lack of credit card access, they'll eventually run into legal troubles from the damage they cause to innocent people.
> they'll eventually run into legal troubles from the damage they cause to innocent people
Which is how this sort of thing ought to be handled, in stark contrast to "Chrystia Freeland sends an email to the heads of major banks to get troublemakers debanked with zero transparency or due process."
Like the person I was responding to said, there are thousands of banks. If not a single one wants to do business with this organization, that's not a first amendment issue and you don't need to lose sleep over it. Being so unpopular that nobody with a shred of decency will do business with them is not a rights issue.
maybe. maybe not. it's definitely not this simple. those thousands of banks likely share back office software, many fraud prevention vendors, background check provider.
and yes, sure kiwi farms can simply accept checks or whatever. it doesn't change the simple truth, that there are many things the current economic system doesn't provide despite extant demand and profit opportunity. transactions cost are too damn high.
> maybe. maybe not. it's definitely not this simple. those thousands of banks likely share back office software, many fraud prevention vendors, background check provider.
My attorney also advises a local credit union, and has shared some insight in the past with me on the complexity of agreements they have with vendors. I don't think it's a realistic concern that X vendor denouncing Y hate group would cascade down into a bank being forced to drop them. Agreements are just so complex and the financial incentive wouldn't be there to justify such a high risk demand. It's all too hypothetical to worry about.
> and yes, sure kiwi farms can simply accept checks or whatever. it doesn't change the simple truth, that there are many things the current economic system doesn't provide despite extant demand and profit opportunity. transactions cost are too damn high.
Absolutely. Cash still exists. Marijuana shops near me are able to operate profitably without credit card processing. It's also great that online payments in the US banking system are finally being improved.
Every one of those thousands of banks is dependent on remaining in the government's good graces. Canada doesn't have thousands of banks (a setup we'll almost certainly move closer to as the regional banks face ongoing problems), but in the case where an official at Freeland's level said, "jump," they all said "how high?" It's very similar to how censorship, including of many true propositions, was enforced on social media during the COVID/vaccines hysteria. In that case people are also arguing it's "not a first amendment issue" and not having unqualified success in the courts. But your notion that any of this comes as a result of grassroots popular demands is largely a fantasy.
they're not a "hate group," they're a "collecting embarrassing info on creeps" group. of course the creeps aren't happy about that, and frame it as "hate."
Nonsense comparison. We're talking about business partnerships. If everyone with a shred of decency turns your organization away, that's a great litmus test for its existence. Worry about the next revolution being banked when that becomes a real concern, not over an online troll farm that tries to convince vulnerable people to end their lives.
Yes, one doesn't have an account with a participating bank in order to receive and send payments via FedNow. It is same with Zelle; with Zelle, one sends money to an email or a phone number of an intended recipient. Both senders and receivers of Zelle need to registered with Zelle from their banking apps. USBank and Chase are notorious to close accounts who use Zelle heavily, because they see such activities as nefarious. Maybe, other banks use Zelle transaction history as another point to in order to debank people.
I don't want my banks to know who I send money to via Zelle; but they do. If banks are happy with customers writing checks to 'problematic' people, why they think that frequent Zelle activity as source of risk, as long as customers are not depositing or withdrawing cash/money orders.
The Federal Reserve is a private company with a chair that is chosen by the President of the US with advice and consent from the Senate, and serves a four-year term. There is no term limitation for this office.
The reason the US government has a national debt is because that debt is owed to the Federal Reserve, which is a private bank that loans the US government money and that sets the US monetary policy.
>>Federal Reserve is a private company with a chair that is chosen by the President of the US with advice and consent from the Senate, and serves a four-year term
Sorry but no... You can not be a "Private Company" and have your leadership appointed by the President like any other Government Agency
The Fed is a Government Agency,
>>The reason the US government has a national debt is because that debt is owed to the Federal Reserve,
Incorrect
Some of the Debt is owned by a Federal Reserve, more recently as no one want to buy US Debt any more but....
>>which is a private bank that loans the US government money
Again FALSE....
The Federal Reserve can not Loan the US Government anything
The US Dept of Treasury issues Bonds which are sold on the Open Market, 3rd parties then Buy these Bonds, then the Fed Buys them
The Fed can not legally buy Bonds directly from the US Government. How do you think Black Rock got to be do big...
The Fed is a contractor with pomp and circumstance to make it appear different. Any private group charter can require their club leader to be approved by the Pres. and the Pres. may or may not play along.
Parent and GP are using different definitions of "dollar."
GP is using a strict definition (only dollar-denominated liability of the Fed is a "true" dollar), parent is using a looser definition (a dollar-denominated liability of any bank is a dollar).
If you have a fractional reserve (e.g., a bank has $100M cash backing $100M deposits one day, then loans out $30M the next day), with the strict definition you still have $100M dollars ($70M controlled by the bank, $30M that was loaned out and used to purchase stuff). But with the loose definition you have $130M ($30M is still loaned out, depositors are $70M).
Essentially the depositors have made $100M of (debt) investments in the bank, and those investments are now 70% backed by cash and 30% backed by paper (mortgages or other kinds of IOU's from whoever they loaned the $30M to).
That's incorrect. A bank can't give out more dollars than they receive from depositors. It can give out all kinds of paper that is _valued_ in dollars, but not the digital representation of banknotes with the pictures of dead presidents on the front.
In contrast, the Fed can create actual dollars. It can just buy an asset and pay for it with money that it has just created.
you may have an analogy if your "Any private group charter" was established by an act of Congress, where by the Appointment of the leader was required by law to be done by the president, with the advice and consent of congress
Show me "Any private group charter" that was established by such an act of congress and i will agree with you.
>The reason the US government has a national debt is because that debt is owed to the Federal Reserve, which is a private bank that loans the US government money and that sets the US monetary policy.
I'm pretty sure every holder of US Treasuries (including me) is owed money by the US government.
trusts, foundations, and a host of other entities are ‘orphaned’ entities and is essentially a third category which is more accurate for the Federal Reserve as well
The Board of Governors is a public entity with an appointment, and the rest of the entity has a rotation of members and pretty full autonomy on how it runs on the inside at the employee level
It's a club funded by interest rate skimming with opaque structure and reporting requirements which don't conform to typical reporting requirements. CEO of Silicon Valley Bank was on BoD of SFO branch, which failed to adequately regulate SVB.
why do you think it was a regulatory failure? it's not the Fed's job to make sure every bank has a sane business plan and rock solid conservative riskless strategy.
its job is to make sure the entire system can take the stress of failing banks.
The private club Federal Reserve branch in SFO was supposed to regulate SVB which had C-level executive on BoD of the regulator. The regulator failed to take prompt corrective action when SVB had capital inadequacy. SVB subsequently, months later, had inadequate capital to continue operating.
A discussion forum similar to, say, Something Awful (or indeed HN), with a focus on mocking online misbehaviour and a reputation for unpopular political views.
Pretty accurate. You make yourself a name suing a waxing salon for not waxing your balls, you get a KF thread. You harass a github project for accepting contributions from a hardcore Christian, you get a KF thread. You declare "everything is racist, everything is sexist, everything is homophobic and you need to point it all out", you get a KF thread.
The "immediate threat to human life" was not identified specifically; the only post meeting that description was taken down by moderators in less than an hour (which compares favourably with many social media sites' response times to similar incidents) and was from a new account that hadn't posted anything else, so hardly representative of the site's culture.
While I don't know the specifics behind your other link, like most articles about it it's using second- and third-hand claims; given there was an orchestrated smear campaign against the site, I'm sceptical. It was certainly convenient that Kiwi Farms was removed from the Internet Archive just as articles like this were being published, making it impossible to verify or disprove any of their allegations. If you're worrying about sources (which you are absolutely right to!), I'd start there; do the posts that article is talking about actually exist?
It's about as impossible as proving what "caused" someone to die after they got run over by a train. They could have had a fatal aneurysm in the moments before getting run over. Or perhaps it was the train that killed them. A perplexing game of probability indeed!
One of the three suicides seems to have not happened at all (would have been reported to the US consul in Japan), two others were attributed to posts that did not comply to KF moderation standards, were created by freshly registered users and were removed much faster than similar stuff typically remains visible on Twitter of Facebook.
Thought experiment: if KF founder committed suicide, would you demand deplatforming MotherJones?
It is crazy how much credit card companies get paid just for making sure that money goes from A to B.
Yes, they also offer fraud protection and chargeback, but in 90% of purchases, I don't need those. I have other means of establishing trust and recourse, and I just want to send money, instantly.
Paying $200 on the internet should cost $0.01, not $10.00.
I think there is tremendous opportunity in unbundling payment and fraud protection.
My intuition is that the existence of fraud protection probably lowers the incidence of people attempting fraud.
I'm someone who (still!) believes in the Bitcoin project but I'm hesitant to use it for online payments because if someone rips me off there's no one I can go to for help.
I hope so, when it trickles down to the commercial bank user level.
That's how it works in pretty much the entire rest of the world. PayPal is mostly incomprehensible to Europeans, it solves a problem that they never had.
This isn't strictly true, at least in NL. Most domestic online businesses use iDeal for instant payments, but if you aren't shopping at an online retailer that explicitly supports it, you need to use a real credit card or Paypal as a pass-thru. Some businesses will support you sending a payment via IBAN, but then you're waiting days potentially for someone to reconcile the ledger manually and deliver your digital product.
Since I don't particularly enjoy having debt, Paypal is a nice middle ground as long as the fees aren't outrageous.
The hope is that banks open it up for their consumers to use. Log into your bank app -> send money to friend's bank and it will all happen over FedNow under the hood.
How can a consumer actually try this to send money? This says Wells Fargo is live now but after logging into Wells Fargo I don't see any obvious new feature.
Think of it more as an alternative method to fulfill the kinds of things that ACH and Wire Transfers are used for. You'll probably never see 'this is a fednow function' on any consumer facing documentation, but billpay, payroll etc will use it.
I'm assuming that banks and payment services will add it to their services. Everything that goes over ACH will gradually switch to FedNow. There will be no noticeable difference to users except that transfer will be instantaneous instead of taking days.
It is live on star one credit Unions mobile app. On their interface, it still requires you to specify the target’s routing and ac number like an ACH transaction. So not the most usable now.
> “The FedNow Service is neither a form of currency nor a step toward eliminating any form of payment, including cash.”
What people are accusing them of is taking steps toward creating a digital dollar. This is their response, which is pretty mealy-mouthed if it's meant to address those accusations. A better way to express a denial would be "the Federal Reserve has no intention of creating a digital dollar and is not planning for nor working on that project," if indeed that is true.
Because if they DO create one in the near future, then this product SHOULD be designed as a step toward that. If they create a digital dollar and it uses any version of FedNow, then they're liars. If they create a digital dollar and it uses an entirely different product, they're incompetent.
I actually don't have a strong opinion about the digital dollar. I learned about it as a concrete idea in this very article. My opinion is: sounds reasonable, probably pretty complicated to pull off. I am opinionated when it comes to bad, weasely non-answers to questions though, if that's what you mean.
If they create a digital dollar and it uses any version of FedNow, then they're liars. If they create a digital dollar and it uses an entirely different product, they're incompetent.
The characterization of the Federal Reserve as incompetent is the strong opinion I observed. I personally don't agree with the logic you communicated. I think a completely separate CBDC project that is separate from FedNow is perfectly appropriate.
IMO, many policy makers view FedNow as a better ACH.
Whereas, CBDC is a much more controversial project for some policymakers.
Separating the two projects offers some risk mitigation and ensures we will at least have something usable (1) in the short to medium term and (2) even if CBDC is mired in political non-consensus.
That's a reasonable response. I was being hyperbolic I suppose. What I meant was: if they are working on FedNow and a digital dollar at the same time, a more efficient use of resources would be to plan for FedNow to be interopable with the digital dollar, so that they don't have to replace it with something that is in a few years.
Perhaps they are planning for that already. My main complaint is the lack of both transparency and clarity in the quoted statement. I don't believe their response will satisfy anybody who is wondering if the Fed is working on a digital dollar, when it would have been very easy for them to do that. I sort of expect that kind of needle-threading response from private companies and individuals, but (naively) expect more transparency from public institutions.
Consider "We have every intent of creating a digital dollar and are actively planning and working on that project BUT FedNow has NOTHING to do with that project".
Founder of a developer bank, Column N.A. here. If people are interested in starting to build on FedNow hit us up. column.com/fednow and my email is william at column dot com .
Do you support cannabis business? Or rather, those of us who provide services too cannabis businesses? Some folk (eg: Stripe, Twilio) frown on even using their platforms for things next-to (but not touching) cannabis.
So, is the cost of moving money at the retail level zero to almost negative at this point? I mean, literally, we as a society have invested tax dollars to reduce money movement to something that's damn near minimum entropy.
We've had something similar (OSKO/PayID) in Australia for a couple of years now. In our case it wasn't the government, but the private banks getting together to launch it themselves.
Unfortunately its a big target for scammers. Once the cash is instantly transferred, there is little to no chance of getting it back. There are no chargebacks like with credit cards and the instant nature of it means payments can't be reversed like the old bank transfers.
So its good for sending money to friends, family and trusted people, but not so great for buying anything online as your protections are basically zero.
You have to remember that the instant payment also stops the scam of "it will be in your account in a couple of days". You can see right there and then that the payment went through.
I hope it's a success - but I am doubtful in the US payment landscape, as absurd incentives persisted so long:
- C2B payments (everything from cable to insurance) is dominated by credit card payments, as consumers chase rebates/miles/cash back [paid for by the people who don't pay their card in full every months]
- C2C payments, because it was virtually impossible for an average person to pay another bank account to bank account, a whole shadow banking system like Venmo, PayPal, Zelle, CashApp was created.
- B2B could always pay via ACH, doing it in real time for vendor payments has no advantage
- B2C payments, maybe - when you insurance company settle a claim same day (just kidding...).
So I hope that the US gets to a place where it is secure and convenient to pay others bank accounts with the balance in your bank account - but I doubt it.
The working assumption (on the part of the US Federal Reserve) is that eventually all/most US banks will use FedNow and offer it to their customers (probably via mobile/online front-ends developed and sold by B2B third parties).
So when can businesses start utilizing this to replace ACH? I run a b2b company and right now ACH is our most popular payment option, but the settlement time is a pain.
Right away. My organization verified that an account at one of our banks could send thousands of dollars to an account at another bank, in seconds, and then send it back. It's pretty cool. :-)
Yes, that’s the current state of affairs. My bank receives the money in my account from my employer’s bank but it takes a couple days to clear. Right now many banks will make this money available to you right away rather than waiting for it to clear.
I assume you are being snippy, but to actually answer the question: Kinda - if you are paid on Fridays then payroll is submitted on Tuesday or Wednesday.
ACH is generally overnight. I don't know the internals, but if I get paid on Friday, I actually get the money in my account on Friday. Perhaps they actually send it a day or two early.
Zelle is already owned by a consortium of banks. Even if FedNow were to make Zelle obsolete, it wouldn't do anything to harm the banks, so they ultimately wouldn't care.
Meanwhile, Venmo is owned by PayPal, who deserves to become obsolete, so we should all be cheering this on.
Not for Zelle/Venmo/etc.. Zelle is for P2P (person to person) and FedNow is for A2A (account to account). There are no take backs on FedNow so it's not intended to be used for P2P. No take backs means no recourse for fraud etc.. FedNow should supplant ACH waaaaaaaaaaaaaaay down the line.
I can't speak to Venmo/Cashapp, but Zelle does take backs. It's for specific areas of fraud such as the fraudster impersonating a government official/agency, or things like fake not for profits.
There are takebacks on Venmo. Someone recently paid me and then asked Venmo Support to reverse it. Venmo pulled the money out of my account without even checking with me. I'd have happily reversed the transaction if the sender had just asked me. If you're selling something to a stranger, nothing beats cash.
What I have heard is that the banks that own Zelle will try to convert it into a directory service mapping identifiers like email addresses and mobile numbers to bank account information. The actual payment clearing will move off of Zelle, and all payment clearing and settlement will happen on FedNow or The Clearing House’s RTP system. That makes some sense to me.
Funny thing about topics like this is that people of any given country is oblivious to how other countries have solved that problem, or the challenges other countries face, or inturn the problems that they themselves face.
Regarding payment systems specifically, people generally don't realize what they're missing.
Pick anybody from anywhere and they'll tell you they've been able to do everything they ever wanted to do (with regards to payments) using the already-existing systems of their country.
When I lived in Japan twenty years ago, everybody just wired money electronically and checks were long obsolete. In the US, I write checks every week or so. They also had a system where you would put your checkbook into the teller machine and it would print your credits and debits into the book for you. It was very convenient. On the downside, the ATMs were turned off (!) during national holidays, so you had to get cash beforehand.
It depends. I have to use checks to pay my landscaper and housekeeper, because there isn't another unilateral payment document.
By this I mean, in the US everyone could use CashApp, Venmo, PayPal, Zelle (glorified ACH, right?), etc. for p2p payment. If you have the same bank, many banks have a trivial "send money to another customer's account" feature. However, to do so requires essentially a 'handshake' where the two parties agree on a method. Checks require no up-front handshake, since everyone knows what to do with a check (deposit it at your ATM, take a picture of it with mobile app, or take it to a check-cashing place or the issuing bank).
If I could print on paper a key or QR code that allows you to claim the money into the account of your choice, like a check does, I'd use that. Sadly, banks seem to have put their effort into Zelle instead.
Zelle may still allow for you to send money to a non-Zelle account - as a dark pattern, they'll hold that cash for the recipient and give them an opportunity to sign up and receive it. This was a big pressure point for smaller banks and CUs to sign up.
Sure, so will all the real fintech payment companies that came before Zelle too, but you can’t count on someone to be interested in signing up. They might just say “no, screw that, I don’t like Zelle/PayPal/CashApp, I demand you pay me I with cash or check or I won’t work for you anymore.”
For all I know, they might even be banned from that app, and unable to sign up to retrieve my payment.
Yeah. And with online banking apps, it's basically not worth anyone's time to do the handshake because depositing just isn't a big deal [ADDED: If there's an in-person transaction]. I use credit/debit/ACH 95%+ of the time but if that's not an option check is easy.
I mean, all you need for Zelle to send someone money is an id, if they have a Zelle-supported bank account. Which is effectively the same situation as bank transfer payments in other countries.
Large checks are cheaper to handle than an equivalent amount of cash. Most people won't just toss $10k in the back of their car and drive to the bank, but would think nothing of taking a $10k check to the bank.
Also, there is less of a need for a receipt when paying by check. If I pay someone by check, my bank has a record of it. If I pay them by cash, I better get (and keep) that receipt in the case of a later non-payment dispute.
I gather check verifications have gotten better. I had to buy a new car last year and my deposit was via CC but, for the final payment, they were fine with a personal check whereas I've always had to pay with a cashier's check from the bank in the past.
I run into this myself a whole lot with various home service businesses in particular.
It’s not unusual for me to get an invoice for a company via QuickBooks Online, with cash or check as the only payment options.
Other businesses around here have started giving discounts for paying with cash or check versus apps or credit/debit cards, to avoid the recent increases in fees.
I’ll also write checks when having a “hard” traceable payment instrument physically makes sense for auditing purposes or fraud prevention, although that’s less frequently needed.
Checks never took off in Japan because their 1947 Labor Standards Act (Art. 24) actually made it illegal to pay wages by check [1]. So it's not that checks were made obsolete, it's that they were smothered in their crib. Until the advent of electronic payment, it's said that tens of millions still got paid in cash rather than bank transfer in the early 90s [2].
I think it's easy to forget that societies that adopt a technology early might be doing so because the slightly outdated alternative from elsewhere was never brought over. Japan has no shortage of those, like a lot of dining is still cash only. Who knows, perhaps in 10 years those restaurants will skip credit cards and contactless and go straight to face-based automatic payment.
I'm only nominally a grown-up, but I've lived in the US my entire life and I don't think I write a check more than once a year. Most stuff I buy is done with credit cards (which I generally pay with their respective mobile apps with bank transfers), my mortgage is automatically withdrawn from my checking account, and I use CashApp or Paypal to send money to people directly.
I think the last time I actually wrote a physical check was when I refinanced my house in 2021.
I don't think cheques are obsolete in Japan, so much as never having been popular and established in the first place. A lot of things are just done in cash (even e.g. buying houses!) and that's not seen as unacceptably risky the way it is in many countries; COD is an established practice that again just doesn't exist (and wouldn't remotely be considered safe) elsewhere. Furikomi is slow and expensive and cheques would actually be an upgrade in many ways.
> When I lived in Japan twenty years ago, everybody just wired money electronically and checks were long obsolete. In the US, I write checks every week or so.
And yet in Japan they're still obsessed with using backwards fax machines and paper.
> They also had a system where you would put your checkbook into the teller machine and it would print your credits and debits into the book for you.
That's intresting to know.
Where I'm at, we had (still have?) a "passbook", a small booklet where you could get all your transactions printed onto.
But AFAIK we couldn't do it ourselves through the teller machine though. Once in a few months or so you go to the respective bank and ask the staff there to update the passbook. They use a machine, however.
Of course, there days it's unnecessary as you can electronically download a list of your transactions for a given period from the bank's website/app.
> Pick anybody from anywhere and they'll tell you they've been able to do everything they ever wanted to do (with regards to payments) using the already-existing systems of their country.
This is like comparing candles and lightbulbs. Sure you can light up your home using both methods just fine, but you end up realizing how inconvenient candles were once you've made the jump to the newer technology.
Yes, but in many cases the people using candles fight like hell to insist that electric bulbs aren't better, can't be better, and even if they were better, there's no way to have electricity in the US.
I don't think anyone is arguing that an automagical system of electronic payments that everyone uses wouldn't be desirable [so long as cash wasn't also an option] but writing/depositing a check now and then is so far down my list of weekly annoyances it doesn't even register especially given my bank actually "writes" most of them based on online payment instructions. I'd be much more annoyed if I had to use cash on a regular basis as is the case in some countries.
Sure, but in most countries, those services are provided by banks, not the government. There is certainly something to be said for legislation like open banking regulations that encourages/forces banks to facilitate instant peer to peer payments. But that's a far cry from a service offered directly from the government (okay, technically the fed isn't the government, but it may as well be).
Interbank payment systems are actually provided by central banks or the government (or affiliated organizations of either) in quite a few cases.
Europe has TIPS (an ECB-operated implementation of the SEPA Instant Credit Transfer scheme), India has UPI (which is pretty close to the central bank, as far as I understand) etc.
In the case of FedNow and TIPS, there are private alternatives as well, such as RTP in the US or EBA Clearing's SEPA Instant implementation in Europe. This is similar to ACH – there's both a public (FedACH) and a private (The Clearing House) implementation/network available.
What happens when it becomes so good that it's the only option? There's no need for it to be profitable, so it can inevitably undercut private sector competitors. Do you want to live in a country where the central bank controls and monitors your ability to transact with other people?
Just last year, the Canadian government weaponized "debanking" in an effort to quell peaceful protests against vaccination mandates. They restricted the bank accounts of people who peacefully disagreed with government policy stances. And that was just with the status quo of deputizing private banks to enforce the sanctions against the individual citizens - imagine how much more systemized and effective it would be as a coercion measure if the bank accounts were directly managed and controlled by the government.
We're not a banana republic and actually have laws governing what the central back can do, and they can't block transfers without a warrant. Any private banking solution would be subject to same kind of laws.
Banks use Bank Secrecy Act as a cover to debank people. When you complain, banks retort that you agreed to their terms and conditions. Add machine learning and/AI to this mix: debank people because their algorithms flagged them as risky. Just as c-level executives use code language to talk to their yes-men to execute unethical and/or illegal activities. Now replace yes-men and code-language, with maching learning/AI; viola, perfect way to debank without any evidence of unethical doings.
But it doesn't seem to me like there's a huge difference between "Know Your Customer" + FDIC and Fed Now aside from removing risk to consumers that most people ignore anyhow.
There's a big difference between checking passports before onboarding a customer, and sending every transaction to the federal government in real time.
> There's a big difference between checking passports before onboarding a customer, and sending every transaction to the federal government in real time.
I guess there's technically a difference between "sending every transaction to the federal government in real-time" (FedNow) and "sending every transaction to the federal government, in batches three times per day" (the status quo).
But from a privacy standpoint, the two are functionally identical.
Can you clarify something? I thought FedNow was for settling up when I, as an ABC Credit Union customer, initiate a transfer of $5000 to you, a Chase customer. Now ABC needs to subtract it from my account, and if successful, tell the Fed to take money out of ABC's Fed account and put it into Chase's, and to tell Chase to expect $5000 (Transaction ID: XXXX?) and here's who it's for.
Does FedNow, or whatever batch job it is replacing, involve ABC telling FedNow "This is for a transfer from Jane Doe (SSN 123-45-6789) to Joe Bloggs (SSN 098-76-5432)"? As I imagined it, FedNow would only need to know what bank is sending and what is receiving.
You should do some research on the Automated Clearing House (ACH) system. It's how most bank transfers are done. Most ACH transactions will likely move over to FedNow as it's implemented. I believe both systems do account to account transfer, fed now is just faster and settled instantly, while ACH takes a couple days to settle.
> Most ACH transactions will likely move over to FedNow as it's implemented... fed now is just faster and settled instantly, while ACH takes a couple days to settle.
FedNow is more of an extension to ACH than a replacement for it.
Same-day ACH also exists, although it's relatively new. FedNow is faster than same-day ACH though.
>Pick anybody from anywhere and they'll tell you they've been able to do everything they ever wanted to do (with regards to payments) using the already-existing systems of their country.
As an American, this definitely isn't true for me. I've found so many large organizations fail to make auto-pay work, transferring money is mind-bogglingly slow, and going from magnet to chip-and-pin instead of straight to tap-and-go was a regression. Some companies are able to bill you after you no longer wish them to bill you, while other organizations make it difficult to find out how much you even owe them in the first place when you want to pay them. Not sure how much the last couple can be solved with incremental tech.
I could see that. "Anybody from any country" could have included the US or meant "any other country."
But if it did include the US, it would have the assumption that Americans are unaware how terrible our payment systems are (generally untrue I think) or unaware that other countries have better systems (may or may not be generally true).
When I want to know what the future of money transfers could look like, I'd ask people from, say the Swahili-speaking regions of Africa, not Silicon Valley.
> Funny thing about topics like this is that people of any given country is oblivious to how other countries have solved that problem, or the challenges other countries face, or inturn the problems that they themselves face.
I thought FedNow was explicitly inspired by the success of India's UPI?
I haven't learned all the details of the service yet, but I hope this helps eliminate the ridiculous check-based / Zelle fraud that seems to be growing (or at least, seems to be highlighted in news and discussion as growing).
The very fact that we have money that can appear to be yours initially, but then removed from your account if a check is reversed or disputed is costing people in time and $, and benefitting fraudsters. (advance fee fraud, Zelle "mistakes", and similar). 3 day clearing times that give people an opportunity to be scammed.
Although, irreversible + instant payments may open some new types of problems for people, I could totally see that. But people will need to learn how to deal with this more rational system. Other countries are decades ahead of us in that you are the one who has to initiate payments from your account, and only you can do that, and payments are instant and settled.
In India, there’s something similar to FedNow called UPI — “Unified Payments Interface” that really disrupted the market completely about 7 years ago — it is interoperable, works instantly and has no charges. It was phenomenal how that grew and got adopted, keen to see how FedNow changes the American payments systems.
Do you think that eventually UPI will be a vector for more efficient taxation?
IIRC India has relatively high tax rates, but has struggled with collection in the past -- maybe I'm being overly paranoid, but UPI seems like the perfect mix of usefulness and convenience to get everyone hooked, then once it's widely adopted enough (let's say 80/90%+ of payments) a sales tax could be enforced.
I don't know the specifics of how much identification UPI requires, but you could levy all sorts of taxes that way if you knew who was who.
>I don't know the specifics of how much identification UPI requires, but you could levy all sorts of taxes that way if you knew who was who.
UPI connects with your bank account -- that's the only way it works. So the identification that UPI has, will be same as that of what the bank account requires. Typically, higher the amount, more the IDs required to keep the account active.
> IIRC India has relatively high tax rates, but has struggled with collection in the past ....
The way tax evasion primarily happened in india was through cash payments. When you rotate money in cash, it's really hard to trace it back. Now with UPI becoming mainstream, the thing that is now accessible to govt is your day-to-day transaction history.
> once it's widely adopted enough (let's say 80/90%+ of payments)
If the IRS was used against political opponents, this will be too.
I think this is a case where setting a standard and requiring payment processors to adhere would have been a much better idea. More centralizing of power is not what we need right now.
Can you point me to any examples of the IRS being “used against political opponents”? Please specify who the opponents of the IRS are in your examples.
I'm not the person you asked and as an Australian it's difficult for me to find a concrete irrefutable example of the USofA IRS being weilded as a political weapon on short notice.
I can, however, provide two examples of an incredibly
unlikely event that happened to two political enemies of the then seated POTUS:
The first several paragraphs of that page imply that targeting didn't actually occur, at least not in the way the Tea Party claimed. Both liberal and conservative groups were selected for scrutiny by the IRS. James Comey - a Republican and FBI Director at the time - found no evidence of wrongdoing.
How does this system impact the normal person? Like who is the customer for this? Can I uninstall Venmo and Paypal? Or is this something banks would use under the hood and consumers would never interact with?
Powell has mentioned[0] that the Fed is unable to affect fiscal policy, which is the fastest and best solution to certain economic crises. Does this bring the Fed closer to being able to simply give people money?
FedNow doesn't change anything other than transaction speed & cost. If your concern is the Fed giving people money directly, they've had the technical capability for a very long time.
Well done America. This has been available for literally decades in Australia. I was doing bank transfers over the phone from a landline in the 90s before mobile phones were common and the internet was all dialup. I don't think I've been paid by cheque (check) since the 80's.
When I started dating my wife, she called me an old man for even owning a cheque book. That was in 2006.
Is there a way to restrict my bank to only allow incoming deposits to use this for my account? I'm scared of VULNs in a new system being abused to withdraw money quickly. Yes, I know the bank is on the hook for making me whole, but recovering from a financial issue like that is more annoying and time consuming than just avoiding it and being a late adopter.
From what I see people on HN writing, by and large they downplay the risks of these as well as AI. Or alternately seem to suggest that CBDCs and national IDs are not coming, and that it’s a conspiracy theory. However, the “enshittification of Big Tech platforms” is already a fact, so they simply complain about it, but anytime solutions involving open source, decentralization, and utility tokens are introduced, they are violently voted down. So — since no solutions are welcomed, I guess many denizens of HN support hurtling toward extreme centralized control. After all, we’ll be able to complain about it once it’s in place, and that’s enough!
Edit: literally 5 seconds after I posted it, I received downvotes. Not fast enough for a human to read the message let alone explore the links. I wonder if it’s even automated by keyword now.
I would love to see government IDs be available as a form of auth on the internet. It would open up the possibility of real-person communities with fewer bots and trolls.
Similarly with digital payments, I'd much rather trust the government with that than some rando cryptobro of the week.
There is nothing extreme about this. The government already does both functions in the analog world. It's about time they caught up digitally.
Meanwhile some YouTuber screeching about some Bible quote... not a convincing start
Edit: didn't downvote you btw, just don't agree that this is a bad thing
> I would love to see government IDs be available as a form of auth on the internet. It would open up the possibility of real-person communities with fewer bots and trolls.
And reintroduce all the chilling effects of knowing everything you say is on a permanent record linked to your name. I know the government wouldn't be running the sites, but they'd have activity metadata, and data breaches could be correlated to work out who the "opaque" ID refers to (perhaps it would be possible to mitigate that by having the IdP identify users to the site as a hash combining the site and the user. Not sure). There are a few types of companies that may have a genuine reason for requiring government auth, but generally we should not make it easy for Facebook or Google to require it
A community with fewer bots and trolls should be accomplished with moderation, and not just allowing a firehose of signups
Ideally, the government login/auth would be an opt-in for sites where anonymity isn't important. Facebook, for example, already has a real-name policy but still has fake accounts. Moderation alone isn't sufficient; it's hard to keep up with the number of bad actors. Limiting signups to verified humans, and possibly validating their nationality, can help with that IRT to bots and foreign agents.
It's important that the mechanism be opt-in, though, and yeah, metadata would be a problem. But realistically it's just a matter of degree... they already have access to all of that metadata today with just a subpoena or national security letter. Centralizing the login would make it easier for them to collect it, but also make it easier to audit via government mechanisms (FOIAs, etc.) compared to the opacity of private companies (which are under zero obligation to reveal how things are stored).
My concern with digital payments is the elimination of cash. Having the ability to transfer value without it being monitored or blocked is an exceptionally useful property of paper money.
I don't trust the govt quite as much as you, but could see this being a useful govt function if the issuing body didn't maintain any record of when, where, or why an ID was used--and only acted to verify the authenticity of an ID.
I don't know if it's really a matter of "trusting" the government, but of accepting that they already have access to most of my data anyway. Between credit cards, IP logs, subpoenas, national security letters, warrantless wiretapping, etc., they already know everything there is to know about me.
What makes this tradeoff (of convenience vs privacy) acceptable to me is not that I trust the government, but that I already accept I have near-zero privacy right now, as it is. Making it slightly easier for them isn't a big deal. I'm not a very exciting person to begin with.
And frankly I suspect that outside of techno-libertarian echo chambers, this is the case for most regular people. They just don't really care if the government knows about them. Not everyone has the same degree of desire/need for privacy.
I also fit into that camp of un-interesting people you're describing, but I'd say the intersections between privacy and law are a bit more underhanded and dangerous than the intersections between privacy and corporations.
In legal circles, for example, there's the refrain that you should never share unnecessary information with police, even if you're well intentioned and have nothing to hide, because innocence isn't a preclusion from being royally fucked in court. It's true that "the government" as a homogenous blob has mountains of information on you, but I guess I'm not so eager to dissolve what few helpful divisions within that blob exist.
On the whole though I agree that my information existing somewhere in that blob isn't the hugest deal.
And that's OK. I'm sure there would still be anonymous forums, the 4chans and reddits of the world and such. But this would enable real-identity communities that we don't currently have, useful for things like public comments and discussions for local news (god, those newspaper comment sections are horrible right now), government requests for comments (like when they're starting a new development or changing land use or whatever), things like a public version of Nextdoor/Yelp/etc.
The hope is not that it would kill anonymity altogether, but that it would create some alternative communities linked to real-world identities, and maybe that would help people behave better, with real-world decorum, in those specific identities. Yeah, some people would never sign up for those... and maybe that's OK, as long as the remaining community is more civil and thoughtful?
> maybe that would help people behave better, with real-world decorum, in those specific identities
I don't think that would be the result, really, because when sites do have real identity requirements, it doesn't increase civility much, if any.
I think it's the absence of a physical presence that makes people feel OK with being less civil. Emotionally, it doesn't feel like you're talking with real people.
Governments are far harder to remove than tech firms. You may be able to ditch Google, but there's only one government in your country. And "democracy" doesn't prevent state surveillance.
Most politicians back it, so voting differently makes little difference. Labour and the Conservatives support the Online Safety Bill, the Patriot Act was bipartisan, and voters have very little control over the EU and can’t stop Chat Control. And most of “government” isn’t directly elected: you can’t vote out the NSA, and Congress has little power over them either. The government blunts corporate abuses but doesn’t stop them: revolving doors ensure authorities target small fry while big companies like Visa keep going unimpeded. And finally, most voters don’t mind surveillance that much, since government and media manufacture consent for it. Don’t count on ordinary people to “vote it out” until it’s too late.
Lobbying against government surveillance helps marginally, but it's an eternal struggle. Governments take as much power as they can get, while abuses are exponentially harder to detect and stop than refusing to grant that power in the first place. The “slippery slope” isn’t a fallacy, it’s the record of the last twenty years. Don’t let them track speech and money with a central ID and digital currency, just because you don’t like a few tech bros or online trolls.
> Governments are far harder to remove than tech firms. You may be able to ditch Google
Ditching Google is not the same thing as removing Google from governance of your life, though. I don't use Google search, but I am sure they know who I am and sell that data to anyone who wants it, including government agencies which can't legally obtain that data on their own due (ostensibly) to citizen oversight.
Realistically, the average person has exactly 0 chance of "removing" either a government or a big multinational company.
However, the average person at least has some teeny tiny say in government via democratic processes and oversights. They have zero power against a big company unless they are a major shareholder.
The fundamental difference of "one person, one vote" and "one dollar, one vote" should not be lost in this discussion.
Big bureaucracies are terribly disempowering no matter who runs them, but in government at least you have some tiny amount of representation vs zero in the private sector.
The military? When was the last time they turned on the citizens? I don't live in Tiananmen, thankfully. Meanwhile it's private companies that oppress most of us: private hospitals, private prisons, private insurances companies, private credit bureaus, private banks, private tech companies, private surveillance companies, private small arms manufacturers and dealers. It ain't the government that's crimping my freedoms.
Taxes? So I get some roads and schools and parks and old people healthcare, and lose some to corruption. Better that than making Bezos and Zucky even richer.
Forget the military, when was the last time the government used force on its own citizens? Probably 1 second ago, and thousands of times a day. Are you really more oppressed by a private hospital today than you are by literally thousands of laws that have penalties that will put you in prison? I'm not pro private hospital, or anti-law, but let's be real about who has ultimate control of your freedom. Even if we grant the threat to your freedom by a private [fill in the blank], that entity only is allowed to exist by dint of the government. Not a coincidence that many of your examples are the most regulated industries, or directly in business with Government (hospitals, firearms manufactures, prisons, insurance companies).
If the question is "are you really more oppressed by the private sector than the government"... then the answer for me is, 100% yes. Healthcare is a big one (the insurance industry, along with Republicans, not wanting single-payer). Tax filing is another one (damn you, Intuit). Hospital pricing opacity another one (until recently).
Meanwhile the government protects many of my "freedoms" from private intrusions when it comes to things like bankruptcy protections, credit bureau limitations, telemarketing, angry gunowners, etc.
I've run into trouble with the law on a few occasions, but it was never terribly oppressive -- probably largely thanks to my race, class, and politics. If I were a poor Black man or a conservative white man, I'd probably have a very different view of government.
Thinking about it some more, I think think this just circles back to the old "freedom from" and "freedom to" debate... not sure that's worth getting too much into here, since we're unlikely to change anyone's minds or reveal new perspectives.
If your government's military wanted to oppress you, PayPal wouldn't protect you from the consequences. No payment system ever conceived by even the stanchest technoanarchist is immune to bullets.
It's a bit ironic... all this talk about crypto evading government hasn't really changed much. Then you have multinationals like Meta and Apple that really do have more money and power than most governments because of their centralization and scale.
The idea that the USD you earn in a wage is "yours" and the government has no right to tax it makes no sense to me. They printed the money. Your wage wouldn't exist without the government making the modern economy possible (in more ways than just printing it). Many of our jobs wouldn't even exist without the government's participation in the economy.
> Meanwhile some YouTuber screeching about some Bible quote
Why do you lie when it takes 1 second to verify the facts? I wasn't interested, but clicked on the video and the man is talking in a calm and collected manner, not even close to "screeching". Or is it always "screeching" when somebody says something you disagree with?
Nobody has seriously discussed a CBDC for months in the U.S. FedNow is the American financial system catching up to the 1990s. It has nothing to do with crypto beyond the cursory.
> Powell seriously discussed CBDC in his recent testimony to congress. He mentioned it was far off
It isn't being seriously discussed for implementation. The working groups are disbanded. The Fed won't write it off--they shouldn't. But CBDCs are as proximate as postal banking.
Right now, you hold your money digitally with a bank. The bank holds its money digitally with the Fed. If your bank caught fire, the bank and its insurers would be responsible for getting you your money back.
A CBDC would mean cutting out the bank - you would hold your money digitally with the Fed, and the Fed would be liable for it.
FedNow creates a ledger that allows two banks holding their money digitally with the Fed make an instant transfer. You never become a direct customer of the Fed, but your bank and the bank of the person you're exchanging money with - both already Fed customers - have a quicker way to record the transfer.
The only relation between FedNow and a CBDC is that the Fed is involved, and, like, computers, I guess? Other than that, their mechanisms and effects have very little in common.
It was obvious from the first line that your post was going to be axe-grindey conspiracy fodder. It's not us, it's you and your and tightly closed epistemological loops.
In this case CBDCs (the interest bearing kind) actually have the potential of disintermediating banks. Or atleast reducing credit/liquidity risk. Grandma's savings/deposits arent going to evaporate the next time a bank collapses. Cause her CBDCs are going to be sitting in her wallet.
Comically, the primary national ID we use is one specifically designed not to be a national ID.
The secondary "national" IDs most of us use are simply state IDs or driver's licenses. They're not in a federal database, but I don't understand how that's meaningfully different. It's still a big government tracking system.
It's also wildly inconsistent. The same political factions (vs individuals) that complain about Real ID also complain endlessly about fake ID. They complain about illegal voting, but also support the drive to withdraw their states from ERIC, which has done a good job in detecting illegal voting. Basically they're sometimes against solutions because their complaints infrastructure generates a reliable stream of political and financial capital from the credulous.
It's kind of strange that in other threads HNers will lament the end of the nerd internet and how everything is corporatized and 1984 wasn't a manual, and then here they downvote you.
I see it as an almost total impracticality to transition from our current system to a centralized national identity document.
There is no central database of:
* Citizenship
* Births
* Drivers Licenses
* Marriages
* Deaths (SSA death reporting is voluntary and customary by funeral homes -not required)
* Education history
* Criminal Records
* Firearm Ownership
* Property Ownership
* Vehicle Ownership
The only thing the feds or even the state government has a certain idea of is, how much you made in a given reporting period - not that reporting periods always overlap in any meaningful way. There is no requirement (as far as I can tell) to even request a social security number - most parents do, because they want to claim their children on their taxes.
Now, many of those records do exist - they exist at the county, state or local level in some manner or fashion - and of course, its not standardized either, sometimes its at the county, sometimes the state, sometimes at the county or state for the same record type based on year. (e.g. Marriages from 1902-1962 are in county records, and 1962 to current in state, or the other way around.)
Trying to link all of this data in a meaningful way, would be a monumental task that would likely require a vast amount of manual data matching - and it would still be wrong 40% of the time.
They could do an audit and census approach as a one off to get all this started. For a national ID though wouldn't you only need drivers license / property data / marriage data / criminal data / citizenship / births?
Not sure you need firearm / vehicle / education history for an ID system
The way they got SSNs through is by promising that it would be illegal to use them for identification. The only remnant of that is that it (still?) remains illegal to refuse services to people who refuse to give their social security numbers, although if you do it you'll break customer service.
Between passports, SSNs, state IDs, your birthday, homeowner records, and metadata like addresses/phone numbers/employers, it's already trivially easy for any actor to fingerprint you anyway. Even the private sector does this for cheap. To say nothing of biometrics like facial recognition, which ironically, the government sometimes tries to protect you from (like in Illinois, where it's banned).
It's so weird to me that people are afraid of the government knowing who you are when like every private company asks for the same kind of information all the time, and data brokers gobble that up and resell it all the time (including to government), and nobody bats an eye.
> The government already has the power to do this — just ask any trans person in the South
Any citations on every trans person in the South being singled out for denial of services by the government? Because that sounds like inflammatory nonsense.
Banning gender affirming care effectively is singling out transgender people and denying them services[0]. Additionally there was a recent Supreme Court decision allowing businesses to discriminate against people[1].
Additionally in living memory, many businesses and government services were segregated by race. In some cases some races were denied access to services or those services were severely underfunded. The legacy of that legal system still has impacts today.
> Banning gender affirming care effectively is singling out transgender people
For children. Or for state funding, but the state doesn't pay for the vast majority of plastic surgery.
> Additionally in living memory, many businesses and government services were segregated by race.
Race doesn't need affirming medical care, or identification to single out. Also, businesses and government services weren't abstractly segregated by race, they were specifically discriminatory toward black people.
1. The grandparent comment asked for “Any citations on every trans person in the South being singled out for denial of services by the government.” The great grandparent comment only mentions asking the opinion of a transgender person if the government has the power to deny services to them. By banning gender affirming care, even just for children, wouldn’t that be an example of government discrimination against transgender people?
2. The example of racial segregation was to point out an additional time that a minority group was discriminated against. Black people getting less than adequate medical treatment is not them needing specific affirmative care and being denied it but an example of discrimination that was government sanctioned. Beyond pointing to the two sets of laws and their discriminatory natures the link is superficial, just another example of legal discrimination.
I cannot speak for you but denying the government the power to discriminate or oppress minorities and empowering the rights of individuals to life, liberty, and the pursuit of happiness is worthwhile to me. Which is why seeing all these states pass these discriminatory laws is disheartening.
Yes, that part is unfortunate. It requires full routing number and account number. Maybe the phone number to account number mapping might be seen as a privacy risk in USA.
> Banks and credit unions of all sizes can sign up and use this tool to instantly transfer money for their customers, any time of the day, on any day of the year.
Come on... Being capable of sending money to someone easily should not be based on the bank.
Your money is located somewhere and your recipient has their money located somewhere. The places where your money sits needs to interoperate with whatever "thing" you're using to send money. Presuming that your money sits in a bank/credit union, you arrive at the quoted statement. If your money is paper in a sack somewhere, you can mail it, but it might not make it all the way.
Most of the comments below are about the tech. Is no one concerned about the privacy concerns that the government now has easy access to all payments made through this?
For those in the know, will this break the stranglehold Visa and Mastercard have over the entire payments industry and help prevent people from being un-personed on a whim?
As a non-US person, just to confirm I'm understanding the implications of this, have near instant bank transactions not being a thing in the US until now?
The network limit is $500,000 per transaction, although individual participants can set specific lower limit, which is defaulted to $100,000.
Furthermore any end user interface provided by the bank could have its own limit, since FedNow is just a backend service, frontends are up to each participating provider.
This and IRS Tax filling all happening today. From an outsider perspective the only two major thing left for US to fix is Medical Cost and Public Transport.
I thought Check 21 (enacted back in 2003) was supposed to eliminate that, allowing digital check images to substitute for physical copies during the clearing process. My understanding was banks (or even sometimes merchants) just scan in the paper checks on receipt these days and process everything electronically.
That could very well be... I remember many a late night run to the airport to help resolve some crisis back in the 80s/90s, to keep them canceled checks flying.
I'm glad the US is finally catching up the rest of the world...India already has the Unified Payments Interface (UPI) [0]. Additionally, I think fears of this turning into a CBDC are overblown. Banks already have to settle transactions between banks through reserve transfers via the Fed...this will just help automate that process so we can send money from bank account to bank account. Like a Zelle or Venmo, but government backed!
> India already has the Unified Payments Interface (UPI) [0]. Additionally, I think fears of this turning into a CBDC are overblown.
Yet, India is already working on E-RUPI [0] which is a CBDC on top of UPI by the Reserve Bank of India, also shown in the same Wikipedia link you just used. Eventually, FedNow will just be the rails for a US dollar CBDC.
The next time a protest happens in India after their government does something extremely unpopular, you'll see why CBDCs are a nightmare not to be ignored. This is why governments around the world are working with many central banks with pilot schemes to test them out and eventually roll their own.
> Like a Zelle or Venmo, but government backed!
Look where that went for Zelle. [1] A vehicle for rampant fraud on the system.
> Eventually, FedNow will just be the rails for a US dollar CBDC
This is unfounded. FedNow is a faster classical payment rail. CBDCs involve the central bank taking on a customer-facing role. The Fed has no desire, nor frankly basis in law, to do that. The only reason the two are linked is crypto (a) prompted the first serious discussion about American payments modernization and (b) promoters are using it as a thread by which to hang onto a dream of mainstream crypto.
The central bank digital currency concept has little to do with FedNow. It's denominated in dollars, and is cleared by all parties keeping ledgers which are compared if they differ. But between the crypto people and some right-wing conspiracy mongers, the two are being connected in some social media.
India’s system is more usable, though, apparently. This seems like an improvement but it doesn’t do the same thing?
> Because UPI is designed to be intermediated by computers rather than by humans, transactional information gets captured by the payments company while the transaction is in progress, and that can tell the clerk (or cron job) that the payment succeeded without them needing access to the bank account.
> This is a fun engineering challenge in many countries, which are often overlaying bank transfers as a payment method on top of bank transfers as a settlement method.
[…]
> Bank transfers are an extremely small percentage of customer-to-business payments in the U.S. In addition to the speed issue, which might get improved by FedNow when it launches (wags have referred to it as FedLater), bank payments have no consistent way to receive metadata, and despite being no-cost they compete with well-developed credit card ecosystems which credibly offer better-than-free pricing through rewards schemes (to the customer, who generally gets to choose which payment method they use to transact).
Reward schemes are funded by interchange fees funded by higher product prices. They are a tax on the entire economy. Merchants can push the CC fees to customers who opt to pay with CCs vs cheap or free instant payment systems. T-Mobile has dropped autopay discounts if you use a credit card vs deposit/bank accounts for payment, for example. Walmart wrote public comments on this topic supporting the FedNow implementation.
Reward systems won’t last as merchants push towards FedNow as a payment alternative and charge you to use a credit card. Nor should they last.
> Walmart has observed a severe misalignment of incentives that has plagued the payments system in the United States for decades. Certain incumbents and large participants enjoy massive profits by stifling innovation in payments, ensuring that account access is limited to a small number of networks, and perpetuating barriers to entry for alternative solutions. Controlling this access allows the dominant players to extract rents from other payments system participants, ultimately resulting in higher costs for all consumers, particularly consumers who are unbanked or underbanked.
My Citi Custom Cash card gives me 5% back on gas station purchases (my highest category), even paying the higher price at the pump for credit cards I still come out ahead. I'm fairly certain Citi is not making 5% on interchange fees
It’s a loss leader that is usually capped. They are marketing against other cards in your wallet. Most consumers use a card or two so the habit of buying gas drives more spend.
Discover does the same thing with quarterly promos. They are paying 5% for the first $1500 of Apple Pay/Google Pay transactions… an incentive to add Discover to your wallet.
Gas is also unique. Our local supermarket chain gives you gas discounts for spend. People are always annoyed about gas so they fixate on saving $1/gallon, forgetting that they spent $1000 at the most expensive grocery chain so they can save $12-20 for a fillup. That $12 probably cost them $50.
Isn't it easier to assume Citi is recovering the 5% via interchange fees versus Citi is losing money every time a customer uses an advertised card feature.
Citi is definitely not earning 5% via interchange fees, this is known. While they might lose some money on the 5% for some credit card users that use it correctly, it is most likely more than made up for by other credit card users who either use the credit card for other types of purchases and receive much less in rewards, resulting in a net gain.
Or citi has figured out that certain users of the card carry a balance and they spend more on interest than it costs in Citi in rewards. If the situation changes and Citi is losing money, then they change the reward amount.
You could think of credit card rewards as a form of price discrimination similar to coupons. Whether you get the higher or lower price depends on what you do. Credit cards with high rewards are discount cards.
There are many ways to pay and they have different discount rates. Some places have a cash discount, for example.
As a "tax," this falls on people who don't shop around for whatever reason. Some of them are wealthy and can't be bothered to play this game. Others might not find playing the game feasible for other reasons.
They could theoretically, but it is unlikely due to each transaction costing a few cents and the monthly FedNow fee being $25 (it is a utility run on a cost recovery basis). No banks charge for Zelle payments to my knowledge, for example.
This eventually replaces checks, money orders, Zelle, Venmo, ACH, and probably credit card payment volume over time (as seen with UPI in India and PIX in Brazil). Every deposit account can send to other deposit accounts instantly.
Given how generous credit card rewards are in the US, combined with the interest rates that get charged to people who buy things they can't afford, I don't see it replacing credit cards.
5% is still in the realm of cashback rewards, I use my Citi Custom Cash card to purchase gas and receive 5% back (it is cheaper this way even though the credit price is usually 10c higher per gallon)
Typically banks have many routing numbers[1], but it seems like they grossly undercharging banks here. Should be like $500/mo per routing number, that's still chump change for banks.
Feds already get money transfer data without warrants. Recently Chase closed my checking account because I use Zelle so often. Chase knows all Zelle records because they partially own Zelle. I would rather have Feds own the data, rather than banks. When banks own data, they make decisions to close people’s bank accounts without any proof of abuse.
I know you're making a point but there is a distinct difference in risk: FedNow transactions happen instantly, therefore fraud can take place faster.
That's all though. That's not a good reason to stay on FedACH.
For the HN crowd the best way to describe the difference between FedACH and FedNow is migrating from a batch-based system that settled transactions a few times/day to a real-time system. Just like such migrations developers and engineers encounter in many normal IT environments, real-time systems have their own issues but are also capable of so much more and are generally easier to improve/evolve.
FedACH was made for big, one-time transfers between bank accounts where it wouldn't matter too much if settlement took a few days. FedNow was made for lots of small(er) instantaneous transactions.
At first FedNow will likely be used as a simple replacement for ACH transfers but I suspect that it will eventually replace the back ends that handle debit card payments (because the prize--which would be taken from Visa, MasterCard, First Data, and similar--is too big to ignore).
> No. There is no FedNow app. The Federal Reserve does not provide payment services directly to consumers and businesses. Banks and credit unions can provide their customers with access to instant payments through new features
See y'all in another 25 years, when banks get around to implementing this.
This is really concerning. I wonder why they couldn't have looked into what (if anything) prevents the private sector from offering this service, and fixed those obstacles instead?
It seems to me like a government run shoe factory, or a government run mail service.
Zelle has been a nightmare to use. Apparently they rolled out a major update that caused many financial institutions to drop support. Because of that, my phone number is now unusable/blocklisted in their system because it's in a limbo state that neither Zelle nor my bank can fix
The Federal reserve banks are only one operator of ACH, with there also being a second private operator. The fed denies that Fednow will replace ACH.
Not sure if that denial makes much sense, although it certainly could take a long time to replace ACH even if it eventually does, simply due to how many systems interact over ACH, and that many of them will not be high priority to change.
I'm also a little surprised that FedNow went with real-time gross settlement, simply because that means posting every transaction to a Federal reserve account (which would be a large increase in transaction volume for those accounts, relative to say daily or even hourly net settlement). Reading Operating Circular No. 8 tells me that is exactly what they are doing, which is honestly a little impressive.
It surprises me because in Canada the Interac e-transfer system has been flawless in my anecdotal cases. Albeit one known issue is reversals allowing fraud, but I assume any non-cryptographic solution will have the same issue.
Thanks for posting this excellent example of why you shouldn’t use ChatGPT to summarize documents. Page 4 of the PDF has an understandable diagram and list of steps, and this doesn’t match it.
FedNow is a replacement for ACH which is an ancient, creaking monstrosity. If we can't ever replace or fix old, busted infrastructure because of conspiratorial rambling, we are fucked as a civilization.
I’ve seen a lot of crazy conspiracy theories reveal themselves to be true in the past five years.
Apply some critical thinking on this. Governments and corporate elites worldwide are salivating over the level of surveillance and control that a CBDC will enable.
Possibly so, but an instant payment system is not a CBDC, and I don't see how keeping bank account transfers slow/impossible to initiate for individuals (as seems to be the case for ACH credit transfers) would help against pervasive government surveillance.
ACH and even check clearing are already largely performed by the Fed today!
The NSA monitoring any and all electronic communications (foreign and domestic) that they can get their hands on, without a warrant.
The federal government cutting off financial services for legal but disliked industries such as the gun industry (see the Obama admin's Operation Chokepoint).
The Canadian government freezing the bank accounts of those who supported the trucker protest.
Not directly related to finances or electronic surveillance, but some government fuckery greatest hits that actually happened:
- Kidnapping hobos and force feeding them LSD
- Intentionally infecting people (mostly black) with syphilis
- Feeding irradiated oatmeal to mentally handicapped children
- Obama personally ordering the execution of an American citizen without trial and having the military carry it out (and killing the target's 16-year old American citizen son as well)
C'mon. The OP makes a claim, which is unsubstantiated. Another user lists a whole list of issues, which might be objectionable, sure, but not what OP claimed.
Next thing you know somebody comes up with the moonlandings and JFK.
I cannot abide. What is your point? That the last 5 years have seen _fewer_ true conspiracies and clownish gaslightings? Are you quibbling over the number 5 or something?
I'm writing this post for whoever is interested, so please don't take it as specifically directed towards you.
People who doubt the government and especially the fiat monetary system usually end up as "gold bugs", they start preparing for financial collapse by purchasing physical gold. Before the 2008 financial crisis, I was involved in gold circles online and everybody there knew a huge crisis was coming and they were buying as much gold as they could. Now, the price of physical gold (and many other commodities) are determined by the prices on the Comex futures exchange, which are under the control of an oligarchy of big banks.
During the financial crisis and the years after, most gold traders and gold bugs noticed that the gold price would drop every day about 09:00 on the New York Spot market, and everybody was talking about how the big banks were illicitly manipulating the gold price to try to keep it down. Of course this talk was dismissed by uninvolved as loony conspiracy theories, together with every other insulting and dismissing adjective that commenters here are so fond of.
But it turned out that the conspiracy was true, and in 2022 a couple of the bankers' fall guys were sentenced, and JP Morgan agreed to pay $920 million in fines[1]:
"The evidence at trial showed that between approximately May 2008 and August 2016, the defendants, along with other traders on the JPMorgan precious metals desk, engaged in a widespread spoofing, market manipulation, and fraud scheme. The defendants placed orders that they intended to cancel before execution in order to drive prices on orders they intended to execute on the opposite side of the market. The defendants engaged in thousands of deceptive trading sequences for gold, silver, platinum, and palladium futures contracts traded through the New York Mercantile Exchange Inc. (NYMEX) and Commodity Exchange Inc. (COMEX), which are commodities exchanges operated by CME Group Inc."
The same things are going on all the time, sometimes the perpetrators are banking giants, sometimes the government or parts of government, sometimes tech giants, sometimes it's all of them together, sometimes other perpetrators.
#2 The market can stay irrational longer than you can stay solvent.
These are widely known and I make no claims of originality. However, your story about gold market manipulation brings up a corollary to my #2 rule that I do take credit for: Never underestimate the extent to which governments and other vested interests will go to in order to keep markets irrational for as long as possible.
To the down-voters: Feel free to comment on why my post shouldn't be seen. It seems so petty and Reddit-like to just down-vote without saying anything.
> I’ve seen a lot of crazy conspiracy theories reveal themselves to be true in the past five years.
Such as what?
>Apply some critical thinking on this. Governments and corporate elites worldwide are salivating over the level of surveillance and control that a CBDC will enable.
How is this any different from the current system? Your cash is 99% digital anyway with basically every transaction completely monitor-able to the Feds under the right circumstances. Don't see how this situation would change much.
The principle difference is that CBDC is programmable rather than just digital. We aren't expressing concerns over a digital currency, but rather the degree to which a nefarious govt will have control over it.
It makes me question why we allow government to be in charge of our money, and the price of money (interest rate meddling by govt contractor federalreserve). I suppose we grow up with it and don't question it.
>It makes me question why we allow government to be in charge of our money
This isn't true. Private currencies exist(ed) and are afaik still legal.
The reason we put governments in charge of our money is that up until about a decade ago it was either the government or a corporation as a decentralizes currency was not really implementable. Do you want to get paid in amazon coins only redeemable on amazon? No, you do not.
>interest rate meddling by govt contractor federalreserve
You need to do that. Any currency needs some mechanism to control issuing. If not the government who else could do that?
> This isn't true. Private currencies exist(ed) and are afaik still legal.
For most of my life, those were ancient history or theoretical. Then in 2009, something changed.
And ever since then, I've seen nothing less than the most zealous propaganda campaign to undermine those... it's bizarre to watch it unfold. I keep side-eyeing everyone, wondering if I'm the only one that sees it. Sure, it doesn't help that the cryptocurrency people are whackjobs that might have screwed it all up without any outside help. But I guess they couldn't trusted to do that, so the help was provided.
Saying that it's "legal" doesn't change the fact that if someone were to come up with a private currency, gigantic forces, government and not, would be arrayed against them to put an end to it.
> Any currency needs some mechanism to control issuing. If not the government who else could do that?
I think the implication here is: who could be trusted to do it in a way that doesn't favor some at the expense of others?
>Saying that it's "legal" doesn't change the fact that if someone were to come up with a private currency, gigantic forces, government and not, would be arrayed against them to put an end to it.
Thousands of private currencies exist right now.
Nobody would care about your currency, since it is useless, and as such worthless. A centralized currency is an enormous social asset. Nobody wants private currencies.
>who could be trusted to do it in a way that doesn't favor some at the expense of others?
Just try to imagine a currency controlled by amazon. Do you think they won't do some hyperinflation making you poor once a decade?
The controller of a currency has enormous power. If the government can't handle it nobody can.
> Just try to imagine a currency controlled by amazon. Do you think they won't do some hyperinflation making you poor once a decade?
Do you think that the US government and the fed don't do this? You don't see it, of course, because they also report the numbers you use to decide if there is inflation.
And who says that it has to be controlled at all, in the sense that some singular entity controls it, rather than an algorithm?
> The controller of a currency has enormous power.
Yeh, and it's no less a problem when it's the government rather than Amazon.
>Do you think that the US government and the fed don't do this? You don't see it, of course, because they also report the numbers you use to decide if there is inflation.
Inflation is an objective measure it is the price increase for a certain basket of goods. Yes, you can fake it to a certain extent, but this is true for everything.
>You don't see it, of course
What? That is totally false. Inflation is one of the easiest metrics to spot.
>And who says that it has to be controlled at all, in the sense that some singular entity controls it, rather than an algorithm?
Practicality. Either the algorithm is extremely simple (BTC) or you will ruin your economy.
>Yeh, and it's no less a problem when it's the government rather than Amazon.
I have thought about building an algorithmic stable coin kind of like RAI but the problem is that actually defining and measuring a price level is the hard part.
Doing that on a nation state level means betting your economy on the algorithm always working correctly.
You also have to be resilient to attacks on your currency and an algorithm gives your oppponent certainty on how you will react. You need human control at some point.
I mean, that is true in the same way that if I want to create some shrutebucks and loan them out at the schrute reserve rate you are also free to loan out shrutebucks at whatever rate you want.
The fed may have a small advantage you are willfully overlooking.
If we believe neoclassical theory then if the fed sets the rate too high we get deflation and if the fed sets the interest rate too low we will get inflation and we will get those things very quickly with very little delay. This means that the policy rate would have to mirror whatever the optimal market rate is.
If we accept some minor inflation, then the fed is always setting the rate a bit too low rather than too high.
In other words. Whatever the Fed does, it is mostly irrelevant.
On the other hand, if there is actually some leeway and elasticity then monetary policy can actually result in increases in economic welfare. In this scenario we want to see some utilitarian meddling.
Because it enables monetary policy which is in large part responsible for the most successful economic century in human history. Why do you think the "natural" interest rate is better than the feds?
Because you get bombed if you don't accept it. There's no "we have allowed", it is "they have imposed", and you and I were born into a slave system. Thank God there are ways to escape, such as crypto and foreign accounts.
I agree, American subjects have a much harder time to escape with foreign accounts, but where there's a will there's a way. The US also has some interesting domestic solutions, since it's a union of states.
If a country’s government really wants to get rid of a lot of large cash transactions, they could phase out some paper money like India (no cryptocurrency required) but in the US it doesn’t seem very likely?
Most money in the US already consists of electronic records in banks. Making bank transfers work better is fairly orthogonal to whether ATM’s work and retailers accept cash.
I wouldn't worry too much about replacing the US Dollar entirely. We're pretty slow even to get rid of the penny. The US Dollar has a _lot_ of fans, I'm certainly one of them.
Cash can be spent without being monitored or blocked.
A recent example of how this might be relevant is with the protests in Canada that lead to the freezing of the protesters’ bank accounts by the government. While I don’t agree with the protesters, the idea of the government freezing their accounts is alarming. After seeing such control exercised, it’s hard to be excited about a cashless society.
This feels like a boat that sailed long ago. I don't know anyone using cash for anything more than small incidental purchases, I'd say it's generally impossible to structure you life around using Cash at a large scale.
For one, unlike cash, the issuing entity can program CBDC to expire on a specific date unless utilized. Another horror use case is that they could track and limit how many hamburgers or pizzas you eat daily, weekly, monthly or yearly!
He merely suggested a small fee though. 5.1% per year and only on cash, not some CDBC with privacy concerns. If you keep your money on savings accounts you wouldn't pay anything. If the economy is growing you would get paid interest. If the economy is declining you might pay negative interest.
This is different from a coupon that expires instantly. That is a terrible idea. Don't do this.
Also, the idea of demurrage currencies is to replace the devaluation via inflation with a nominal fee so it is possible that in countries with high inflation rates, the new currency would end up losing less value over time simply because it maintains price stability easily.
Edit: btw. His theory is dated in the sense that Keynes and Dieter Suhr have an updated interpretation. With a hint of Fisher Black you are going to get one of the most interesting economic theories that can explain most of the suffering in the world based on very few assumptions. The money and land reform policy proposals still remain relevant today.
Why would the government program money to expire? Would the money not become effectively worthless the closer to the expiration date? Why would a business accept transactions from people with money that’s about to expire would that then mean they would be giving away goods and services for free potentially?
In theory you spending it would reset the expiration date.
If you know your money will expire you will spend it, thus stimulating the economy. We also can’t have the dirty proles save their way to a higher social class.
Where are these theories of how a hypothetical future CBDC come from? Is there an official announcement from the Federal Reserve about how they would like it to work? A committee hearing in Congress where this is discussed?
The theories come from concerned critics mostly. As far as I know there has been no discussion as to how the government might influence the functionality of a CBDC.
I don't get it. The government could just ban the things it doesn't want instead.
Also, nothing stops people from buying the goods in question by using a payment service provider/bank that provides a layer on top of the CDBC and automatically circulates the money for you behind the scenes to avoid the expiry.
“You could have a potentially […] darker world where the government decides that units of central bank money can be used to purchase some things, but not other things that it deems less desirable like say ammunition, or drugs, or pornography, or something of the sort“
Eswar Prasad, WEF Annual Meeting of the New Champions, June 2023
There are easy ways to get around this. This isn't actually practical to implement. You could just buy and sell stocks within a second.
> We also can’t have the dirty proles save their way to a higher social class.
I don't know what you mean by this. Rich people spend their money at a slower rate than poor people so the rich would be disproportionately impacted by this. Someone living paycheck to paycheck isn't going to have much money that can expire to begin with.
The government could issue money that can be tied to a specific purpose (allowed to be spent with specific merchants or establishments) and have a time limit. Think of the COVID-19 assistance that was given to people. If — instead of just transferring normal money into people’s accounts that allowed people to do whatever they wanted with it whenever they wanted and wherever they wanted - the government could force recipients to spend it across certain things and not others, and gave a deadline to move the money around, would that be something that’s in the best interests of the receiver? By expiring money or by applying negative interest rates, the government can offload its burden on to the people who hold and have to use this money.
If you are assuming how a hypothetical future currency will work then we could easily assume exactly the opposite and the money would be destroyed by a set date to maintain some stable rate of deflation. Do you have evidence that a time to live for a currency is being considered by the Federal Reserve and US government?
That’s fair enough. Ostensibly the government of any country should be accountable to the people but history shows that cannot be counted on.
As convenient as Apple Pay is, I would not vote for a cashless system. I am just confused that very specific ideas of how this hypothetical system is going to work and am not sure where these come from or why it has to work the way people say and not in a more accountable less abusive manner. Expiring money seems patently absurd so why a central bank would consider it seems so outlandish to me at least.
> Expiring money seems patently absurd so why a central bank would consider it seems so outlandish to me at least.
Some countries, like Costa Rica, do this with cash, but with a much longer timeframe. Every 10 years or so they launch new banknote designs, and the old ones are gradually removed from circulation, until can only be exchanged at the banks and eventually lose their value by becoming "demonetized".
When the government does something unpopular against its own people, they can easily quell protestors at scale and force the usage of CBDC adoption by closing ATM withdrawals [0] add savings limits [1] and can incentivise spending with an expiring date. [2]
Whilst many HNers were celebrating UPI as the payment rails from India, it is almost the same thing as FedNow and is planning to put their own CBDC on UPI called E-RUPI [3] taking all the same valid concerns that I have mentioned.
It's bad enough that banks have virtually unlimited insight into my spending habits that we need to give the Feds the same access. I should have the right to buy a big mac without some government server getting pinged.
Another concern I have heard voiced is that CBCD could be programmed - eg. you can't buy X, or you can only buy Y at certain times, or for certain prices, etc. and has the potential for reduced liberty vs. cash.
It could also be geofenced. Can't use your phone to buy fireworks from out of state because it's illegal in your state. Or you can only spend this money at a local store, but not at a store in another town.
I doesn't give the Feds access to anything. Suppose I bank at Wells Fargo and my favorite coffee shop banks at Capitol One. If I pay the shop $4 for a latte, the fed will have NO IDEA who sent that money to whom or for what. All the Fed sees is $4 moving from the Wells to the Cap One Federal Reserve master accounts -- amid a blizzard of millions of other transactions. The difference from ACH is just that these payments are settled in big batches rather than one by one. The Fed will get new and better data on payment volume, but that's all, really.
How will they protect us though unless they know the nature of every transaction we participate in? Are you really responsible enough to take care of yourself? A CBDC would combine the best aspects of company scrips with those of wartime ration tickets!
I don't think the government is trying to protect drug dealers or tax evaders from themselves. You intentionally chose a weak argument to fight against.
Thanks, I forgot about all the new taxes this technology could enable. Why not put a tax on every private transaction? Maybe have it increase the closer it gets to the expiration date.
The amount of people rooting for big brother here on HN lately is frankly terrifying.
I'm not rooting for or against anything other than shitty arguments. I come to this site to read smart takes, not half-baked sarcastic nonsense. Based on what I'm reading, maybe that's asking too much.
I have so many problems in my personal life, and I don't know how else they could be solved except for the government to carefully micromanage that for me.
The FedNow Service itself is the tip of the iceberg in terms of what actually happens from an end-to-end perspective.
We've been working to become a Certified Service Provider so feel free to ask me anything. I'm happy to share anything that is not under NDA.
[1] https://www.ibm.com/products/mq