[objclxt]

I think the right direction would be to have a system of inter-bank transfers that was instantaneous, and didn't suck. The banking system in, say, the UK isn't perfect by a long shot, but at least I can move money from one bank account to another (across banks) a) instantaneously, and b) for free.

The fact that the US insists on operating on such a terrible system where it takes five business days reflects really badly on the infrastructure in place.

So on the one hand, I really like Square Cash as a concept. On the other, I wish banks would actually stop sitting on their hands and make a transfer system that works. Of course, there's no incentive for banks to do that, because they can keep charging money for 'instant' wire transfers right now.

[tadfisher]

You've described Dwolla's FiSync [1]. And you're right; in every case where the industry has gotten together to make ACH faster or agree on a new standard, the potential impact on wire transfer revenue was cited as the reason not to move forward. Building a new standard from the bottom-up, as Dwolla is trying to do, is nigh impossible when most credit unions and banks actively profit from limiting the liquidity of money.

[1] https://fisync.dwolla.com/

[PeterisP]

Payment delay has only a little bit to do with infrastructure and a lot with competition and incentives.

If you're required to do, say, next-business-day payments but your infrastructure gets them done in 5 minutes, you could still want to delay all those payments to the next day since there it makes a significant addition to your revenue (float of the money held, interest on overdue customers, payment fees for 'more-urgent' payments) - unless competition forces you to do so.

Banks aren't sitting on their hands - you should expect a "transfer system that works" from banks as soon as someone actually threatens to outcompete them. Square Cash doesn't seem to be that thing - it relies on banks allowing the debit-card-refunds (AFAIK they are allowed to kill this ability as soon as they wish to), and I'm sure the banks make sure they earn 'their due' in fees on every such payment anyway.

[jonbwhite]

Square is taking advantage of the existing terrible system to give users an experience that is a step in the right direction.

But I agree having instantaneous transfers instituted at the bank level would be real progress. Unfortunately congress can't even agree on the incremental changes it makes to the existing system, so I have little hope for sweeping reform.

[PeterisP]

As the global experience shows, it won't happen without government regulation forcing it - the current system has a strong financial motivation to keep it slow and expensive forever, but other than that there aren't any serious obstacles.