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.
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?
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.
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.