(+) Partial answer found here, but not satisfying https://money.stackexchange.com/questions/27474/why-are-wire...
[1] https://www.theclearinghouse.org/payment-systems/rtp/institu...
I also heard someone say at some point that Americans are very wary of having people transfer money to their bank account. Not sure what the rationale is (maybe taxes or afraid of criminal money?) but I was wondering if you have heard this and if so, whether RTP has some protections or safeguards against this?
https://www.nacha.org/same-day-ach-resource-center
Anecdotally, I recently moved my banking to a discount broker and my paycheck is now credited to my account the night before. I don't know if that has anything to do with same-day ACH.
Also anecdotally, Ally takes 5 business days (!) to open a CD via ACH even for an already verified bank. Definitely faster to have a checking/savings account with them, wire in the funds, then open the CD from checking/savings which is instant.
I suppose this isn't inflation indexed, so RTP will become increasingly useless over time? -- halving in 35 years per fed plans and much sooner under monetary policy twitter-proposed by the president?
- it costs a lot to fix or redesign a money system moving billions of dollars in volume per day
- change is risky
- any impacts on reliability would be unacceptable and have significant economic impact [both direct and indirect]
- stakeholders that fully understand the existing system and have the knowledge to redesign it are part of that system and benefit from it
- as an insider, it's hard not to make money within the system
- it's a closed ecosystem - access to the system is controlled by the established players (like Wells Fargo, BoA, Visa, Mastercard, etc.) and they will revoke access if you threaten their position.
- Insiders are making so much money at this game that end consumers have little leverage at this scale.
Paypal, stripe, venmo, zelle, square, name-your-favorite-fintech-start-up are all working within the existing system by exposing easy to use integrations and interfaces. They aren't really fixing anything, just wrapping it up, putting a bow on it and making a handful of basis points on your transactions.
The RTP system is a chance to fix it but I suspect it will take years for that to replace the existing systems. I've heard it discussed as an additional feature not a replacement.
[I know HN likes proof but any real numbers I can't disclosed due to NDAs. I'm basing my opinion on the margins I saw and heard referenced while working at a smaller financial institution]
Even ten years ago in Australia I could do more with my online banking than I can today in North America.
Checks are for what now?
Automatically approved bills didn't get auto paid - but they appeared in the "upcoming bills" when issued, with a pay date of the due date on the bill. I could go an hit "pause" or "stop" on any bill - and it either wouldn't pay or would be removed entirely. Anything that wasn't auto-approved would start in paused mode and I'd have to manually approve it - but that was a single click.
Still, I agree that when I'm in the states it feels crazy old tech. They still require signatures on credit cards!
For me this week: Paid for a city license, paid the cat sitter, paid for a small magazine subscription, made a charitable donation, and paid the rent.
The cat sitter and the charity were check only. No other option. The magazine has a PayPal option, but I don't trust PayPal. The city license could have been done with a card online, but I'm not interested in setting up yet another account with yet another third party to mishandle my information. Paying the rent by check is free, but paying with a credit card is a $74 fee. And this is with a very large company that almost everyone knows.
People do abandon checks when possible. But for the most part it's the businesses that put up barriers. Or, in my case, a lack of trust, which has caused me to use checks more. I like the paper trail. I check my bank statement every month and at least once a year there is an error.
I am coming around somewhat on the trust thing. If I can use a virtual credit card number, I will. But not if I have to make yet another account with yet another password and yet more gathering of information that is nobody's business.
Edit: I forgot that I also had to send a check to a county recorder out if state to file some legal documents. But that was a cashier's check, not a bank draft. Still, the only form of payment accepted by that county government is cash if you live there, or a cashier's check if you're out of state.
Also, my accountant only takes cash and checks. I consider it a virtue since it indicates that she watches every penny. But I didn't put that payment in the list because it was a couple of months ago.
When your life is simple, banking is simple. As you get older and your life becomes more complicated, banking gets more complacated.
I have stamps to use up, and it costs them probably $7-$10 to handle it.
Second, US banks are regulated on both a Federal and State level. A system that works for a bunch of banks in California may not be viable for interoperation with banks in, say, Georgia.
In short, US banks cannot easily set up a way cheaper system with the vast number of banking partners they'd need to coordinate with and the large amount of regulatory systems to navigate.
The EU has 6,250 banks though. Each with different countries. With 28 different languages, cultures and governments, with far more differences than the states in the USA.
You're really arguing that it's harder to unify that in the homogeneous USA than it is in Europe? Come now.
Technically this is true but the clearing houses were set up a long time ago to solve this problem and they work fine
You may want to read the findings of the Faster Payments Task Force (FPTF) https://fasterpaymentstaskforce.org/
Free and nearly instant email address based transfers directly through your bank account without having to sign up for anything extra. I've done a bunch of transfers with it and it's been solid.
It's about as easy as you can get and most US banks support it.
Which is why services like Zelle have a bunch of things in their terms to make you more responsible for fraudulent transactions - so they're in a better position of not having to roll back as many. For that same reason, I think it's a terrible idea to sign up for things like Zelle with any account that handles more than petty cash
But the total cost of ownership is expensive. I mean the time and money to develop the process to integrate with your bank on ACH is going to be a heavy fixed cost and that is one of the reasons of the cost. Now Wire transfer and other type of transfers, they use different system and the costs varies because of that.
Also regarding about the speed of transfer, that is hinging at the speed for the banks to reconcile all transactions with the Central Bank. I think the US Central Bank is planning to implement real time transaction and that consequently will speed up transfer.
I think that the nature of wire transfers makes them somewhat risky. The institutions facilitating the transfers assume some of that risk for their consumers. If a large some of money is moved from your account to someone else's, and you dispute the transfer, the institution sending the wire may have to refund you the money.
The cost of a single transfer offsets the risk of the aggregation of fraudulent transfers. This could be a calculation of volume, fraud rates, average amount transferred on that channel, etc.
This is all in addition to network costs as payment processors (third party inbetween financial institutions)
So, fees = portion of network cost + risk offset
Hope this sheds a little light.
Cheques can be forged, just as easy, if not easier than a wire transfer.
FWIW in the US the banks are starting to play nice. They came up with Zelle, which is basically a federated payment processing system amongst the biggest banks to compete with PayPal/Venmo. You can instantly (almost, five minutes delay usually) send money to someone at another bank. The downside is that it is limited. Each bank has different rules, but it's usually just a few thousand a week. For example Bay Area rent can't be paid with Zelle.
Australia has fewer still, with the big 5 almost entirely dominant, yet we have instant bank transfers through Osko, have had almost universal contactless in store payments for years, etc. I suspect it's more about government corruption. Governments are captured, each for its own historical reasons, by different industries. Australia by mining industries, the US by medical & finance, local governments almost everywhere by property development.
The U.S. historically had many more banks than in Europe as the banking industry in Europe has historically been more centralized at the national level. Whereas in the U.S. not only did we have 50 states each regulating their own banking system (similar to Europe), but you had many more smaller banks rather than a few larger ones in each state.
It appears the U.S. now has fewer banks, but that's only because of a precipitous decline over the past few decades, and it's only been in the paste several years that the number of E.U. banks surpassed those in the U.S., long after the E.U. saw better payment systems.
So the reason the E.U. banking industry has more convenient payment systems, especially retail payment systems, is because they were historically both more centralized and less in number, which made consistent adoption of newer payment systems easier. Whereas the banking system in the U.S. was more fractured and far more diverse, and even with the dramatic drop in number and increase in centralization, we still see the repercussions.
If I give you a car / boat / house / gold bar to look after you will charge me a fee for the effort.
Where money is concerned there has been a magic trick - initially banks took your money and paid you a fee (interest rates).
However they sneakily make more money from other things
- Just offering less interest than you earn (competed away)
- Account fees (competition eats those away)
- Taking three days to move money (regulators eat those away in EU, in US finally the Fed is killing it off - soon)
But overall, giving someone else money costs us money. Positive interest rates it seems are a thing of the past.
now wires (near instant transfers) have usually been about $25 sometimes plus a certain percent of the transaction amount. I always assumed that was the cost of having a real human audit the request and perform it in realtime.
Given other stories I've heard about the difficulty of resolving problematic payments over Venmo with no recourse, I bet they don't have much of a robust system in place for resolving that either.
Banking controls are expensive. It's cheap when you simply don't have them.
https://penguindreams.org/blog/the-american-banking-system-i...
If only NACHA files were JSON as shown in the example in the article.
I wrote a NACHA processor in MS Access many years ago for a client in the insurance industry. That thing is still being used. God, I wish it would die. Although, I'm not sure which is worse: Parsing and generating the NACHA record format, or trying to parse and generate JSON in VBA.
Why MS Access? Their entire claims processing system (which I did not write) ran on it. I only just got that damn thing migrated to an MSSQL backend. The pain.
One thing I remember was I think there were 3 different places in the ACH file to insert company name, and they were fixed length, each with a different length. I had a list of companies to support, so for each company, I carefully created 3 different abbreviated names for it, one for each length, applying more extreme abbreviation strategies for the shorter lengths.
[1] http://www.thoroughbredsoftware.com/reference/DOCUMENTATION/...
20022 does a lot more than just payments, too.
https://gocardless.com/direct-debit/receiving-messages/#audd...
"2 Payer deceased You have attempted to set up a DDI on the account of someone who is deceased. Extremely rare."
The US military keeps its own death file for its beneficiary population (all members of the military, retirees, and their dependents). I have been told (not surprisingly) that there are disagreements between the various authorities on who exactly is dead.
So, even if you get an R15 and the bank tells you they certified the death against the SSA's MDF, they may only be mostly dead.
https://www.npr.org/sections/money/2018/01/10/576879734/epis...
Why is it so slow? I get that this is a system that can work built on top of any number of manual processes, but check-cashing scams are rampant and function in world where a major bank gets a check (apparently) from a different major bank and the customer is told it is all good....and possibly weeks later the check is noted as invalid and the deposit reversed.
...why can't the big players (at least) confirm things quickly? Why can't there be an easy status to say if a check has truly "cleared" or not?
The amount of fraud committed using this must be astronomical, based on how many reports I see without really looking.
What is the piece I'm missing?
The federal bank iterates through all of the records in the file and attempts to perform each transaction using the pair of account info, the type of transaction, and the details in the transaction record.
To answer the question about why it takes so long?
Generally it doesn't actually. Most companies will tell you it takes 24hrs to send you money, and that's because most companies generate and submit an ACH file once a day, and the federal bank will process those files at some point after that.
Why does it take weeks for a deposit to be marked invalid and reversed? Well, analytics, fraud detection, and those kinds of activities are not all real-time. More than you think are actually caught _remarkably_ fast, but many take time to find and often include collaboration with multiple banks, government agencies, and policing organizations from multiple countries. That means geo-political concerns, international treaties, timezones, communication problems. You name it.
It assumes intermittent serial connections between systems to transfer the payload. The systems then process the payload offline, generate a response, and send back the result during the next transfer window.
Nowadays this is done via the Internet,* but the same basic architecture, and in many cases, the same mainframe backends, are still being used to do the processing.
* I'm not sure how the banks and the Fed are connected, actually. But ACH from businesses almost always go over the Internet. They used to go over dialup.
Like some of the other comments said, ACH payments are handled by a middle man(The Clearing House/FedACH). In terms of speed, this is what their current guidance is:
"Specifically, the Nacha Operating Rules require that ACH credits settle in one to two business days and ACH debits settle on the next business day. Recent enhancements to the Nacha Operating Rules now enable same-day settlement of virtually all ACH transactions."
(https://www.nacha.org/news/what-ach-quick-facts-about-automa...)
For what you're asking about with check reversals, there are protections that let you challenge payments after they have "cleared". ACH payments from individuals can be challenged for up to 60 days and for businesses, up to 3 days (although sometimes banks will let you do it beyond that window).
ACH is built to be reversible. If you want avoid that, you can use wires or (soon) RTP.
And the accompanying hackernews thread - https://news.ycombinator.com/item?id=7636066
But basically it seems like ACH is slow because the federal reserve runs once a day batches.
Consider a forged check with valid identifying information. Think about what the other side of that transaction looks like. That other customer needs time to review incoming transactions to their account, notice the errant one, and dispute it. And so waiting this time is the only practical way the receiving bank can fully clear a transaction.
I probably read my statements (online only) about every two months...
edit: yes, downvote me to -3. I love you all
* An article about a null-pointer bug in GCC that doesn't explain what pointers are
* An article about Stripe that doesn't explain what Stripe is or does
* An article about the programming language Julia that doesn't explain what Julia is.
I think it's your expectations that are out of whack. Not every article needs to explain everything as if the reader is completely unfamiliar with the topic being discussed.
Oof.
User s9w appears to be German. ACH is a USA construct. The closest analog would be PE-ACHes for SEPA, of which OP might be familiar. Without context and operating from a localized search zone, googling ACH may render results irrelevant to the topic at hand, requiring marginally more google-fu than might otherwise make sense just to embrace a hackernews thread.
Hackernews in general is pretty US-centric in terms of assumptions, and this comment is emblematic of this defect.
In the future, you could just answer the question, or you could opt out of replying entirely. You never know what constraints a person has encountered when trying to answer it on their own. For all you know, the user asking must work with an impairment or disability rendering simple web queries as taxing or arduous.
The Stripe article starts with "I worked at Stripe for 3+ years" so Stripe is clearly a company, the article itself is focused on the operations & team cohesion side of stripe not on their line of business.
The article about Julia is hosted on `julialang` and within the first paragraph there is a sentence containing: "So I thought it might be helpful to the broader Julia community—and maybe even for other programming language communities—to actually write down Julia’s release process"
None of these articles give you a full and complete comprehension of their topics - walking away from Strip I don't know if they're a listed company or what their market cap is - but I was given enough information to make it through.
ACH is not a common jargon term, and even with common jargon there usually is some explanation, if someone writes a well-written article about some MySQL quirk, it'll probably have the term "SQL" somewhere in the first paragraph and it'll certainly have the term "database" and "query" - those hints are enough to grasp the general subject matter. The word "bank" doesn't show up in the article until paragraph three and the jokey description of doing it to "a dead person" immediately derails the users ability to grasp that it's a monetary transaction - it's perfectly logical that monetary transactions need to have error handling around dead, missing and not-yet-existing people, but leading with that point harms readability.
I think this article is a great example of a poorly written piece that with some very minor edits to clearly define the scope of the article would be a lot more legible.
>* An article about a null-pointer bug in GCC that doesn't explain what pointers are
That's obviously the finger you point at people with, a null pointer is when you don't point at someone but just angrily stare at them.
>* An article about Stripe that doesn't explain what Stripe is or does
Obviously a stripe is those lines on zebras that make them zebras
>* An article about the programming language Julia that doesn't explain what Julia is.
Clearly the one and only Julie Roberts...
Obviously I'm being stupid but that's genuinely how I feel sometimes when I open HN
- "RUST does..." erm, why are they screaming rust, I know rust is annoying if you don't sand it down and deal with it quickly but why are we yelling about oxidation
- "ExFAT..." why are they talking about their weight loss on HN
- "Wave-based non-line-of-sight computational imaging in Julia" some woman named Julia used a computer to figure out how to best appear in photographs of them waving? Must be one of the royals.
- "A+, the Programming Language of Morgan Stanley" why do I care about Morgan's grades?
- "YouTube should stop recommending garbage videos to users" I dunno, I watched a really good one on landfills one time, I think it also recommended me one on how fuel trucks refill gas stations after that.
- "Curl exercises" yeah, I hammer curl on Tuesdays as some of my accessory work, not a real fan of bicep curls though.
- "Is Ringo Starr a Good Drummer?" I assume this is about the Beatle but it's probably about some computer programming language in some network security application.
- "Perils of Constructors " must be English as a second language, clearly they mean Perils of Construction, certainly a mod will fix that title soon. I'm guessing death and hemorrhoids.
If someone submitted "How I managed to emulate Super Mario in C without using more than 30 Kb of memory" I'd be super interested and look to see what sorts of crazy pointer tricks or unioned structs were in use - even though I don't currently work with games or C in my daily.
SEPA uses STEP2 as the pan-European clearing house. Each European country also has their own equivalent to the ACH.
From https://en.wikipedia.org/wiki/Automated_clearing_house, Germany's seems to be a service offered by the Bundesbank.
