Bank transfers as a payment method (2021)

He's very proud of his strange Twitter threading style where he asks himself questions then answers them in a way that makes all the threads three times longer than necessary.

judge2020• 3 years ago

The article is probably right about FedNow likely not drastically improving things immediately, but maybe people will build good products on top of it over the coming years.

The launch is for late July https://www.frbservices.org/news/press-releases/062923-organ...

candiddevmike• 3 years ago

Why can't it be setup in a way where people don't have to build good products on top of it? Why leave room for rent seeking?

pgeorgi• 3 years ago

Because socialism! (only partially sarcastic: having more-or-less public utilities, which the Fed is and is not, provide full services that "the market" can't make money with^W^W^Woptimize is anathema to some circles)

Analemma_3• 3 years ago

FedNow is infrastructure for settling payments between banks. It's replacing ACH, which is really old and slow to settle.

In computing terms, think of FedNow as something like TCP: it's very low in the OSI hierarchy and not meant to be used directly by users. The hope is that it will enable nicer applications to be built on top of it, things which are not really possible to build on top of ACH, but it is not a payment application in and of itself.

hlieberman• 3 years ago

Notably, Canada has a system that works like UPI from India and is very widely used: https://en.wikipedia.org/wiki/Interac_e-Transfer

anothermoron• 3 years ago

Wow, as a Canadian I always thought that Interact was international.

biscuitech2• 3 years ago

Same, until I went to the US where nothing is standardized and somehow there's private companies worth billions that cover this precise use case. It's actually mind blowing.

The single banking system of Canada is a massive win in this regards

AlexandrB• 3 years ago

Would be interesting to know how Canada's Interac e-transfers[1] compare to the Indian or Japanese systems. Probably the biggest inconvenience of Canada's system it the need to use an email address as the destination.

[1] https://en.wikipedia.org/wiki/Interac_e-Transfer

Scoundreller2• 3 years ago

I've never done it, but you can also use a phone number which sends a text message link.

toomuchtodo8• 3 years ago

“Aliases” is the term of art when determining if an instant payment systems supports using a phone number, emails, etc for mapping to an underlying account.

emptybits3• 3 years ago

For all of Canada's chartered banking bureaucracy and lack of customer empathy ... I have to say that our e-transfer system is pretty amazing. For business or personal, one-off or regular transfers. It just works.

clord• 3 years ago

I always have an awkward delay with interac transfers when doing in-person. like "so, what do you think of those jays" bla bla for several minutes. Works great when the transaction is not 100% live though.

grecy• 3 years ago

I do find it funny that to deposit an e-transfer in Canada you get an email, are required to click a link in that email and then login to your internet banking with your username and password.

Straight out of the "NEVER EVER do that" playbook.

hugocbp• 3 years ago

I can compare it to Brazilian Pix. I use both extensively.

INTERAC is like the beta version of Pix (which is basically the same as the Indian system in the article).

Pix works via email, CPF (a person's "SIN" number, which isn't secret in Brazil), randomly generated key, telephone number, QR codes. INTERAC is mostly email.

Pix works immediately. Some transactions take 1 second or less to credit on the other bank (you can see that when you are trying to send money to yourself, when the destination bank gives you a notification that it received the money before the UI of the sending bank has even acknowledged that the operation is completed). INTERAC sometime takes several minutes, up to 30 minutes sometimes in my experience.

Personally I think INTERAC is about 70% of the way there, but I would chose PIX every time simply because it seems like a much better iteration.

With Pix, you get credited and debited immediately. With INTERAC, I've noticed that sometimes you can be debited immediately and the credit takes longer, and vice versa. Sometimes for several minutes, your money can "double" (appear in second account without disappearing from the first one) or "disappear" (leave the first account but not get credited on the second one).

This last point might not seem like much, but it gets in the way of using for a lot of things that would need to be immediate (paying for a Taxi, or a supermarket purchase). Since Pix is instantaneous, it is used heavily for those kind of payments where you don't want to wait.

jrm44• 3 years ago

As someone who's not entirely opposed to crypto, this was an interesting read. Mostly in terms of the following: I sort of assumed that one of the factors (among many, for sure) limiting widespread adoption of crypto was that the thing we (in the US) already have was probably pretty smooth?

And reading this, seems like it really ain't. Interesting that crypto hasn't made inroads here. I mostly get why, incumbents don't like change, but still.

dist-epoch3• 3 years ago

Interesting that crypto hasn't made inroads here

A funny thing happened, 10 years ago crypto transfers were free, and bank transfers cost $15 or more.

Today the opposite is true, many bank transfers are free, but sending crypto costs about $10.

tornato73• 3 years ago

That's not really true of crypto if you consider any chain but Bitcoin and Ethereum. You can send USDC on Arbitrum (an Ethereum L2) for <$0.10, or Polygon for <$0.01.

Also, as the article points out, international transfers are still painful. Paying $10 to transfer money internationally is probably still a very good deal for most people.

earnesti• 3 years ago

I use Bitcoin a lot and I typically pay 10 cents for LN payment, and 50 cents for onchain. There have been very short periods when fees have peaked and you had to pay 10 bucks if you wanted it instantly.

latchkey6• 3 years ago

but sending crypto costs about $10.

You're already getting roasted for this, but the larger picture / issue is that many people have this outdated view.

The technology has moved so fast, in just a few years that it is hard for everyone, even such a technical group as HN, to keep up.

reese_john• 3 years ago

I mostly get why, incumbents don't like change, but still.

Or most likely, poor KYC/Fraud controls, lack of a central counterparty clearing house, limited performance, terrible UX...

jrm44• 3 years ago

These are all things that a theoretical crypto-based competitor could work on.

kelnos5• 3 years ago

In addition to what sibling commenters have said, I think part of the issue is friction and need. Out of the hundreds of merchants I transact with, probably only a handful accept cryptocurrencies, and that is in addition to "conventional" payment methods. So why would I bother?

Beyond that, paying with a cryptocurrency requires extra technical effort that many people don't have or don't want to deal with. Using an exchange to switch between fiat and cryptocurrency is an extra step that adds friction (and many of these exchanges end up embroiled in scandal and/or get shut down, making it hard for people to trust the extant players). And the sheer number of choices of what coin to use also muddies the waters for many people. Bitcoin is obviously well known, but transactions are slow (or are on a lightning network, which requires understanding more concepts and jargon) and expensive.

Then there's volatility: Bitcoin lost nearly 3% of its value (against USD) today. I certainly wouldn't trust that to keep money in as a stable store, like a checking or savings account analogue. Sure, you can go for things like USDC (and you probably should!), but the concept of a stablecoin is another concept to learn, and then you have to figure out how to get them and transact with them. A quick web search for "pay with USDC" shows quite a few options, and your average person isn't going to know what to do there.

Also consider that this article was about bank transfers, and bank transfers alone. In the US, for example, we get around the annoyance of bank transfers with credit and debit cards, and payment apps like Zelle, Venmo, and Cash App. Ultimately there's very little actual need for cryptocurrencies.

Certainly one big area is international transfers, but most people (in the US, at least) either don't need to do them at all, or have other options. For payments to many non-US merchants, I can still use my US-issued credit card. International person-to-person payments are the main pain point, and I expect some people do use cryptocurrencies for this. Others stick with the older-school methods like Western Union.

When traveling internationally, I used to withdraw local currency (using my US-bank-issued debit card) at the destination airport, and then mostly pay with cash. These days I find that most places I travel will accept US credit cards in many places, so I essentially pay the same way I pay at home, while being sure to use a card that doesn't impose foreign transaction fees. Certainly there are countries where US credit cards aren't all that useful, but I think the point is that those places are likely a minority when it comes to where most Americans might travel, not to mention that most Americans rarely or never leave the US in the first place -- many don't even have passports!

CaliforniaKarl• 3 years ago

(2021)

RcouF1uZ4gsC• 3 years ago

For me as a consumer in the USA, one of the biggest advantages for credit cards over bank transfers is where the money is in case of dispute.

With credit cards, I still have the money in my possession, the dispute process is about the credit card company trying to get paid. With a bank transfer, the money is gone from me, and the dispute process is about me trying to get my money back.

Even with the same policies on paper, this one fact makes me prefer to pay with credit cards wherever possible.

toomuchtodo8• 3 years ago

And you’ll still have that option, you’ll just likely pay for the privilege with the 3% fee pushed back onto customers who opt to use credit card rails. Think of it as a dispute insurance premium for less than high confidence transactions.

An early example of this is T-Mobile’s recent decision to remove their autopay discount if you use a credit card instead of a deposit account (their CC interchange fees are material at their scale). Instant settlements at low or no cost give merchants options to squeeze out their payment costs.

nzach• 3 years ago

In Brazil we have Pix[0] that seems pretty similar to India's UPI.

[0] https://en.wikipedia.org/wiki/Pix_(payment_system)

spaniard89277• 3 years ago

I'm sorry SEPA is pull based? IDK in other countries but in Spain is pretty common to use it for push and pull operations. I certainly do, and everyone I know. The only nuisance is that requires an IBAN number and most Banks require a security ritual which is pretty boring.

I didn't know that there's high fraud in SEPA either. Whoever tries to charge me, I can block em and contact my bank to make em know I didn't allow such charge, and in my case, when that happened (only once in my life) they handled everything and I got my money back.

raverbashing• 3 years ago

Yeah I think the pull based is not that common (usually for standing orders, and most of the time it's intra-country, through it works cross) but the push mode is also very popular

gorbypark• 3 years ago

Having recently-ish moved to Spain, I think both push and pull are fairly common. Both my health insurance premiums and phone/ISP bills are just taken from my account each month.

Sometimes larger transaction (buying a mattress for example) seem to SEPA push based, but I don’t do a lot of one off transfers (using SEPA).

It does seem like Bizum has taken over for person to person transactions, though. Even some companies are accepting Bizum for online payments, and I’ve seen some small shops posting a QR code for their Bizum at the checkout counter.

dementik• 3 years ago

I think article means SEPA Direct Debit.

Denvercoder94• 3 years ago

most Banks require a security ritual which is pretty boring

This varies significantly by country and bank. At my bank I can authorize transactions (up to a preconfigured amount) just with my fingerprint, and it takes like 5 seconds.

dyates2• 3 years ago

As a South African, it's weird seeing this presented as a strange/futuristic idea. I pay most of my bills through bank transfers and it's the standard way for two people with bank accounts to send money to each other. As long as you know someone's bank and account number, you can send them money.

All local online retailers, investment brokers, etc, support bank transfers, with some[1] even providing discounts for paying via bank transfer instead of credit card. I've even paid this way at a brick and mortar place that didn't have a card machine.

[1] https://www.evetech.co.za/

RandallBrown• 3 years ago

As long as you know someone's bank and account number, you can send them money.

This works in the US just fine as well, although you probably need to go to a bank to do it.

I've also been given the option to pay plenty of bills through bank transfers but usually choose not to if I can use my credit card for the same price.

nomel• 3 years ago

This works in the US just fine as well, although you probably need to go to a bank to do it.

Venmo and the like exist because that's not "fine". If you have the same bank, there's a good chance you can do it online, or with some crappy third party app. If you have different banks, there's a very slim chance they use the same crappy third party app, leaving you driving in person to initiate a digital transaction that usually takes between a few days to a week to clear.

robertlagrant• 3 years ago

SA banking regulations are meant to be extremely sensible[0]. It's possible that the US has very strange ones that not only enable some awful things, but also disable good ones.

[0] Source: worked for African Bank for a bit, years ago

kasey_junk• 3 years ago

The comparison between SA bank transactions and UPI is pretty superficial. Precisely because the sender needs to know banking details about the receiver and to confirm the transaction on the receiver side you need access to the receivers bank data. UPI does not require either of those! It’s pretty great, and what modern bank transfers will look like.

SA bank transfers, like non-US bank transfers, are newer, cheaper and faster than their US counterparts, but aren’t fundamentally different in the mechanics and the edge cases. More in the regulations and market forces on banks.

That’s not to say they aren’t good! They certainly are in comparison to US bank transfers. But UPI does compare closer to sci fi.

davchana• 3 years ago

True. UPI is amazing. The Zelle in US is similar, but lacks in that private group of banks control it, whereas UPI central processing is public or government controlled. Also, zelle is not implemented same in every bank. For a person with multiple accounts in same bank, Capital One allows a unique email address for directing zelle txns to each unique account. Discover allows that specific mapping only if initiated from discover itself. Chase does not allow you to have zelle connected to more than 1 account of yours.

dyates2• 3 years ago

Later on the article, when he talks about not needing access to the receiving account to confirm payments, I kinda got it. Just the initial framing of "what if we used bank transfers for payments" threw me for a loop.

amanzi• 3 years ago

Everything you've said here applies to New Zealand too. Most of the banks maintain a register of businesses' bank account details so you usually don't even need to know their account number to make a payment - you can just search up the business name when you're making the transaction.

numpad02• 3 years ago

Not all banking systems are realtime. Some are batch processed at each X hour marks or during weekday nights and updated 9AM, on literal mainframe computers somewhere running COBOL programming. It's fine for sending a plush to a friend(literally did recently) but not for a lunch takeout and so where that's common it'll be strange.

godelski• 3 years ago

I've always wondered why big banks don't implement a lot more technologies, and I guess this gets to some of it. But it does seem like banks would have the incentives to kill services like Venmo and Stripe overnight. Like why are there not clear and straightforward banking APIs that let me create virtual cards and why doesn't my app let me just transfer money directly to my friend's bank account (I get global being a bit more difficult, but country wide is similar regulations, right?). I feel like there's just so much that I don't know that I don't even have the ability to reasonably answer these questions and I'm pretty sure there's reasons the above companies exist and it isn't simply static friction of big banks.

anaganisk5• 3 years ago

India has done this for more than a decade at this point with IMPS and NEFT, and recently UPI. And I'm sure several other countries have them too, but for some reason the US chooses to remain backwards in this case.

kelnos5• 3 years ago

It's funny how so many non-Americans call our payments system "backwards", but I generally prefer it to bank-transfer-based payments:

1. When I pay with a credit card, I haven't actually spent any money. That money is still in my bank account, and I have the chance to dispute the transaction if it's fraudulent, without putting my own money on the line first. I've heard a few horror stories where a merchant/service has mis-charged a debit card or ACH transfer, and the time it took to get the money back caused stress around things like making rent payments. It frankly doesn't matter to me how common or uncommon such a thing is; it's literally impossible when paying for a credit card. (Yes, I do have to trust that the credit card issuer themselves won't make an error when debiting my bank account when the bill is due, but I prefer only having to trust one party not to make mistakes, than some larger number.)

2. While everyone is of course paying for this through higher prices in stores, I'm reasonably savvy about using credit cards that give me cash back or rewards points or something, and tailoring what card I use to benefit a particular transaction (for example, one card might give 3% back on grocery purchases, while another might give me 3x points on travel expenses). Ultimately I end up paying a bit less for everything than if I were to use cash or a debit card (or a bank transfer). Certainly some merchants have credit card surcharges, or discounts for paying cash/debit, but I find that those are a tiny percentage of my transactions, and I can always use cash or debit in those instances. It's hard to say how much (if at all) prices would actually be lower if credit cards (and their associated fees) didn't exist; handling cash isn't free either for businesses (counting/reconciliation, storage areas, security for transport to a bank, etc.).

The main issue with our useless bank-transfer payments system is person-to-person payments. But these days, with Venmo, Cash App, and Zelle, that issue rarely comes up (and all of these are free for the sender if you use bank debit rather than a credit card). I can't remember the last time I had to give money to a friend that involved using cash. The big downside of all of these (similar to cash, I guess) is that there's very little fraud protection. If you send someone money, and they screw you over, you might not have much recourse.

I very much consider our banking system backwards in many ways, but I find our payments system to be just fine, and, in some ways, quite good. And our banking system is backwards in part due to lack of demand.

astrange4• 3 years ago

The US has had multiple instant payment methods for years. Zelle is not the only one, debit cards are another.

zubairshaik3• 3 years ago

Plenty of banks are competing with Venmo and Cashapp. They use Zelle[1], it's zero-fee and included in most bank apps already.

But it's not intended for business payments like Stripe or PayPal, or Venmo for business.

[1] https://www.zellepay.com/get-started

bscphil2• 3 years ago

Correct me if this is wrong, but I've read somewhere that Zelle gives you no recourse in the event of fraudulent transfers. This makes me extremely reticent to use it, or even use a bank that provides access to it without a signup process.

melenaboija• 3 years ago

Which comes with big fraud issues and nobody wanting to take the blame

cpursley7• 3 years ago

Both of those suck hugely vs Asian bank apps. You can just quickly and instantly send money by entering somebodies phone number. And it’s built into all the banking apps.

r00fus• 3 years ago

Zelle is a mess. I can't wait for FedNow deployments.

lucasfdacunha• 3 years ago

Brazil does have a system similar to what you mentioned. It's called PIX (https://www.bcb.gov.br/en/financialstability/pix_en) and it's basically an API that banks and payments systems implements and we use to make instant transfer from/to any bank account in the country. Can also be used to pay for things, most of the card machines that we have in the country today support paying with Pix instead of a Credit/Debit card as well, you read a QR code with your bank app and pay for whetever you're buying (from a big grocery store to a street vendor selling popcorn).

Brazil has a lot of negatives, but I always find amusing that we managed to have a bank system that is light years ahead of the US.

raincom3• 3 years ago

I worked for a couple of banks. The older the bank is, the difficult it is to 'implement a lot more technologies'. They have the old COBOL codebase running on mainframes from 70's, then a lot of Java, COBRA interfaces that deal with this ancient, but reliable COBOL in the backend. Who is going to implement these technologies 'without being responsible for failures'? Modern management is all about taking credit for success, but not being responsible for failures. This sets up very bad incentives for any paradigmatic changes underneath.

That's why newer banks without legacy cruft, without a large customer base, can implement better stuff: for instance, Capital One entered retail banking in 2005, so they are better at some stuff.

WorldMaker2• 3 years ago

Relatedly part of why it is interesting watching Goldman Sachs' even more recent entering into retail banking (Apple banking and Marcus), including their interesting partnership with Apple as something of their "technical R&D department".

eweise• 3 years ago

fintechs could provide those service using modern tech and just have an omnibus account at the bank.

Analemma_3• 3 years ago

A lot of it is because they suck at technology, software, and marketing. You may recall that when Apple first announced Apple Pay, a bunch of banks were worried this would lock them out of the loop, and they announced, to no fanfare whatsoever, a competitor called Isis (lol, oops), quickly renamed to CurrentC. It went nowhere and was killed with nobody noticing a few years later.

In the banks' defense, they have to work with absolutely archaic infrastructure like ACH, so maybe once the considerably-improved FedNow takes over they'll have a better shot at building something people actually want.

lotsofpulp2• 3 years ago

CurrentC was an effort by retail stores, not banks, to exert some control:

https://en.wikipedia.org/wiki/Merchant_Customer_Exchange

ClearXChange was started by the big banks, before CurrentC, and that turned into Zelle.

patmcc• 3 years ago

There's a few big problems, at least on the "friend-to-friend" transfer.

1) You kinda need everybody on board. The biggest banks in the US have something like 5% market share, so it's not just 3 companies you need to get on the same page. This probably means it needs to be mandated from above. Any 1 bank could probably throw together an easy account-to-account transfer for other customers at the same bank without too much trouble, but inter-bank? Yikes.

2) 90% of the institutions are slow and conservative. Even if they agree this is a good idea, it's a couple years of meetings and gathering requirements, then a couple more to implement.

3) You can either have instant transfers or you can have reversibility, you can't really have both. People want the first...until they (desperately) want the second. This becomes a support nightmare for banks. Now, you limit this if you have really good security (password requirements, 2FA, transaction limits, recipient verification, risk analysis)...but all that needs to be in place first, so we're back at point 2.

lotsofpulp2• 3 years ago

The big US banks have implemented a friend to friend transfer system. It started between BoA/Chase/Wells Fargo as ClearXChange in 2011, now known as Zelle, and has covered more and more banks ever year since. At this point, the banks of 80% of US population are participants.

numpad02• 3 years ago

They probably won't get huge cashout by killing Venmo and Stripe by sheer force, rather they'd invest and buy them as needed.

cubefox3• 3 years ago

Instant bank transfers are coming to the US now, literally this month. It's called FedNow and RTP.

toomuchtodo8• 3 years ago

For some history, the biggest US banks built Zelle as a consortium because the Fed didn’t, and the Fed built FedNow because Congress didn’t want community banks beholden to the big banks for access to this capability.

_zamorano_• 3 years ago

In Spain, to send money without commercial purposes, Bizum is everywhere.

No cost, no need of IBAN, SEPA, or any other information. Just a phone number, that might be in your contact list or not, the desired amount, and is done.

Some business use it too but of course, its application is very limited due to not charging a fee to end users.

fsniper• 3 years ago

In Turkey there is EFT, electronic funds transfer. Works with IBAN's. It's fast and mostly free on business hours (depending on originating bank). You can order EFT outside business hours next work day. This is more expensive most of the time. Recently Turkey also built a newer and faster transfer network FAST. This one has improvements over EFT for limited amounts of transfer and it's nearly instant any time of the day. You can use your email address, mobile number, or IBAN for transfers. It defaults to EFT of you are trying to transfer over the limit.

Europe's SEPA or International SWIFT are archeic compared to these networks. Even using Bank-Exchange-Crypto-Exchange-Bank transfers can be considered better UX

emmelaich• 3 years ago

(2021)

tough• 3 years ago

Mollie in the netherlands offers an stripe like api for SEPA bank transfers, sadly they don't offer localised accounts for every country in europe yet

also only 50 cents comission, no %.

Big for big item sales

smcf2• 3 years ago

Didn't get a mention in the article but Singapore's PayNow is magical. Direct bank-to-bank transfers that operate instantly 24/7, and for free. QR code-based so it's not uncommon to pay at retail outlets with this method; some shops will only accept PayNow or cash, because they're free. You can also pay directly to someone's NRIC (national ID number) or mobile number so you don't have to tack in their bank details or get a QR code from them.

Honestly the only thing that isn't perfect about this system is that there's no hyperlink standard. If you want to pay a PayNow QR code on your phone, you have to screenshot the QR code and then share it to your banking app. Would be nice if you could just tap the QR code. Other than that it's hard for me to imagine a better payment system.

255kb• 3 years ago

We have the same here in Luxembourg (name is Payconiq). It starts being accepted a bit everywhere. We scan the QR code with our banking app and it sends the money instantly. Some providers (telcos, electricity, etc.) started putting QR code on their invoice. Very convenient. Otherwise we pay nearly everything by bank transfer.

ix-ix2• 3 years ago

Canada has that too, it's great!

jayaura• 3 years ago

Did you mean interac? If not, could you provide more context please?

mahathu• 3 years ago

Czech republic too! \o/

latchkey6• 3 years ago

What is the transaction size limit though?

smcf2• 3 years ago

S$200,000 (~US$150,000) per transaction in principle; some banks impose lower limits.

rjmalagon• 3 years ago

In México, we have SPEI. Allows free instant transfers between bank accounts (with some exceptions). We employ an 18-digit code (CLABE), and debit card numbers are also permitted. You can add a phone number to your bank account to receive money transfers with it. SPEI supports push and pull, the latter being less common. SPEI can be utilized to remit payment for certain credit cards and specialized services. CLABE 18-digit codifies the bank, account location, account number and a verify digit. SPEI is managed by a subsidiary of the Mexican central bank. For a country where many things work slow a clunky, SPEI woks surprisingly well and fast. We really missed it when we tried to send money outside of Mexico.

ProAm• 3 years ago

"The Wheel of Time turns, and Ages come and pass, leaving memories that become legend. Legend fades to myth, and even myth is long forgotten when the Age that gave it birth comes again. In one Age, called the Third Age by some, an Age yet to come, an Age long past, a wind rose above the great mountainous island of Tremalking. The wind was not the beginning. There are neither beginnings nor endings to the Wheel of Time. But it was a beginning."

laurencerowe2• 3 years ago

The Single Europe Payment Area (SEPA) offers free, instant transactions between European banks. They’re pull based; a user communicates their banking information to a business, which debits the user’s account, rather than the business communicating their banking information to the user in order to send them money.

I think this is something of a simplification since SEPA encompasses multiple types of payment. While Direct Debits are pull based you can also make push based payments from your bank, usually for free.

It's completely normal and safe in Europe to share your bank account number (IBAN) with others so that they can send you money through online banking. This is how I paid my rent (you can setup a recurring payment, kinda like bill pay but instant and without the risk of a physical check potentially being delayed in the mail); settled up with friends for shared expenses; and got paid for freelance consulting (I'd put my IBAN on the invoice.)

mschuster912• 3 years ago

It's completely normal and safe in Europe to share your bank account number (IBAN) with others so that they can send you money through online banking. This is how I paid my rent (you can setup a recurring payment, kinda like bill pay but instant and without the risk of a physical check potentially being delayed in the mail); settled up with friends for shared expenses; and got paid for freelance consulting (I'd put my IBAN on the invoice.)

Just because everyone does it this doesn't mean it's safe to do. If some trolls manage to get hold of your IBAN and the account isn't protected from direct debit, you will get fucked by idiots ordering pizza and dildos.

laurencerowe2• 3 years ago

Just because everyone does it this doesn't mean it's safe to do. If some trolls manage to get hold of your IBAN and the account isn't protected from direct debit, you will get fucked by idiots ordering pizza and dildos.

I don't know anyone who this has ever happened to. Only vetted companies are allowed to perform Direct Debits, e.g. utilities who know your physical address. In the UK (still a member of SEPA even post Brexit) the Direct Debit Guarantee [1] makes it easy to reverse any errant Direct Debits through your bank.

The pizza or dildo company likely won't accept Direct Debits and will require a debit or credit card for the transaction instead.

[1] https://www.directdebit.co.uk/direct-debit-explained/direct-...

hyperman1• 3 years ago

I don’t understand why SEPA direct debit was started a few years ago. Push based methods were working great for decades, and SEPA had unified national payment methods to a european level. There were national pull based methods with built in fraud guard rails, and automatic recurring payments for e.g. monthly subscriptions.

Then came direct debit, where giving out your IBAN now somehow became a fraud risk. Meanwhile, most companies still publish their IBAN on their websites. Customers hate giving away control over their account and seeing random money transfers from mysterious companies. Banks hate all the random middleman grabbing money out of accounts. We need these new middleman for some reason.

I have no idea why they implemented SDD like this. It reeks as if someone decided to force the US payment system on top of SEPA, even if the legal framework for it is missing, there is a huge cultural impedance mismatch, and the credit card based system is inferior in almost every way to the existing debet cards. Things that were working just fine in the 1980’s are now losing consumer trust because of SDD. All of this was a very predictable idiotic clusterfuck. Why?

Denvercoder94• 3 years ago

Having a single European-wide integrated pull-based payment method is great for cross-border commerce. When I went studying abroad, I just gave the rental agency my IBAN, and they pulled the rent from my account the same way my local landlord did. I can sign up for services from any company in the EU and have recurring payments just like I would for local companies. That's not as easy if there's 27 national methods.

Furthermore, I don't think SDD is a big fraud risk. To be able to make direct debits, you need a contract with a bank, and, at least in my experience, they're quite thorough about that: you need to have a legal entity, banking history and show government identification; and even then the amount you can direct debit is limited to just a little more than your usual turnover. If a fraudulent debit happens anyway, you can one-click, no-questions-asked reverse them for up to eight weeks. After that, you can report it as an unauthorized transaction for up to 13 months and the bank will reverse it unless the creditor can show a signed mandate.

I don't think I've ever heard of anyone having had a direct debit from an unknown party. At least over here in the Netherlands, all banks also support requiring pre-authorization for direct debits nowadays, eliminating the risk completely.

zajio1am• 3 years ago

Then came direct debit, where giving out your IBAN now somehow became a fraud risk.

I do not know about other EU countries, but here in CZ, i have to allow each counterparty and set a limit to maximum amount of direct debit to that counterparty in order to direct debit transfer be accepted.

It is useful for transactions like monthly phone payments, where exact sum is different each month.

If your bank accepts direct debit without you allowing it, then it is a problem with your bank, not with SEPA.

crystaln• 3 years ago

One major issue nobody has mentioned: privacy.

Do we really want every payment we make in database where it can be passed around and used to analyze, market, and persecute us?

I was a big fan of MobileCoin the privacy token in Signal because as far is I can tell it’s the best solution out there. They have gotten much traction largely because the feds and banks haven’t let them, however I hope some day some how I can buy groceries without my location and purchase details being sold to every data broker in the world.

Analemma_3• 3 years ago

I hope some day some how I can buy groceries without my location and purchase details being sold to every data broker in the world.

Nothing about which type of payment system you use can possibly help with this— doesn't matter if it's cash, credit card, crypto, or something else— because regardless of how you choose to pay, the grocery store knows which items you bought and where, and (laws permitting) can sell that data to whomever they want. And the credit card companies already don't have that data: they just see a single dollar amount, not an itemized receipt.

TRiG_Ireland• 3 years ago

He says that SEPA has a pull model. But when someone gives me their IBAN, and I go to my bank's website (or phone app), type in that IBAN and tell it to send X amount of money, that feels like a push model to me. (I can also include a payment reference, which will probably have to be manually checked, much as he describes for the Japanese model.)

I've used this method for paying back friends for minor loans, or suchlike, and also for paying my rent. And once for buying physical goods from a website: they gave me an invoice with a payment reference number and an IBAN, and I sent the amount requested to that IBAN with the reference number supplied, after which they shipped the goods.

Maybe SEPA has both push and pull models, and this article neglected to mention the push one? (I do have direct debits on my account, for a few charities, which are a pull transaction. And standing orders, which I think are also a push transaction.)

Denvercoder94• 3 years ago

You're right, SEPA does have both push (SEPA Credit Transfer, aka SCT) and pull (SEPA Direct Debit, aka SDD) models.

AtNightWeCode3• 3 years ago

Why Americans love credit cards so much is a mystery. In Europe debit cards have been the way to go for a long time. Most countries in Europe also have direct payments through mobile apps.

linsomniac• 3 years ago

Credit cards provide protections that debit cards do not, in particular related to skimming-adjacent losses. Europeans: Realize that chip-based transactions are relatively new in the USA, and we still have places that do not have chip-enabled POS (primarily I've seen it lacking at car washes, but it was only in the last couple years that my gas station started, allegedly, doing chip -- it still takes the whole card AND asks you to remove it quickly).

kelnos5• 3 years ago

I really don't get why this is so hard for some people to understand. It's simple: when I pay with a credit card, the money is still in my possession. If the merchant screws up or there is fraud, I can dispute the charge and get resolution without any money leaving my bank account.

On top of that, I get cash back and other benefits/rewards from using a credit card (like extended warranties and insurance on the things I purchase). Yes, these things make purchase prices go up for everyone, but if you don't play the "game", you're leaving money on the table.

Most merchants do not pass credit card fees on to card-using customers (so you don't save by using debit or cash), though that practice has increased over time. Certainly if/when that becomes the norm, I'll have to decide if the benefits of using a credit card are worth the cost.

AtNightWeCode3• 3 years ago

"I can dispute the charge and get resolution without any money leaving my bank account."

Really? In what cases can an average credit card user challenge a payment that has not already occurred?

If there is a fraud usually it is quick to get money back if debit cards were used.

supertrope2• 3 years ago

Because they live outside the United States. In some other countries all bank card transactions include the level of fraud protection that is only reserved for credit card users in the US.

raincom3• 3 years ago

Buying things that are not needed with the money one doesn't have = credit cards. That's the beauty of credit cards. It increases the spending in economy. With debit cards, one has to spend within their means.

pepa652• 3 years ago

And I think CC users (and more in general, the US populace) are more used to having debt. If you use a debit card, nothing needs to be paid back or remembered. With a credit card, you have to make sure that every month you clear your debt, otherwise you're starting to incur juicy fees -- this is what banks hope for! If you do clear your debts faithfully, you're having free very short terms loans every month..! But, being human, circumstances can happen where a monthly debt repayment does not happen, and then: kaching! But many people do not pay everything back every month, and this is a good money maker for banks.

refurb4• 3 years ago

Why on earth would I use my money (and the risk of fraud) when I could use the banks money, interest free for a month?

And if I have a dispute with a business, I can have the credit card company reverse the charge for me? If it's debit, that money is gone.

I would never use debit if I could use a credit card. The US system is far superior for consumers.

pepa652• 3 years ago

Only if you faithfully clear your debts every month. Are there any account types that do this automatically?? (Unlikely, I would think...)

Denvercoder94• 3 years ago

The US system is far superior for consumers.

Consumers are also forced to pay for it, though. The transaction fee in the US is routinely 2-3%, while in the EU it's capped at 0.3%. Because of borderline anti-competitive behaviour from VISA and Mastercard, that fee is also not charged separately to creditcard-using consumers but integrated in the price, so everyone pays for it.

dang• 3 years ago

Discussed at the time:

Bank transfers as a payment method - https://news.ycombinator.com/item?id=29357215 - Nov 2021 (323 comments)

cpursley7• 3 years ago

Most Americans don’t realize how atrocious the US banking system is when it comes to technology and transfers. It’s embarrassingly bad. Shameful, even.

kelnos5• 3 years ago

I agree, but I also am not sure how much it matters. I think the US banking system would get better if it had to, but it doesn't, because we have credit cards, Venmo, Cash App, Zelle, etc. It does certainly suck for lower-income folks or people with bad credit who don't have great access to these things. There are also a lot of unbanked people in the US, but that's in some ways a separate issue.

Yes, things like wire transfers are annoying (and stressful), but most people do them only very rarely (like when buying a house). ACH is slow and a dumb protocol, but that's often a "set it and forget it" thing when you set up autopay for your electric utility or credit card or whatever, or set up direct deposit for a new employer.

Meanwhile, I can do 80% of the money-moving things I need to do with my phone, 19% with a little piece of plastic I always have on me, and the remaining 1% (or less, really) is mostly cash, with some teeny tiny fraction being wire transfers. I expect my situation isn't entirely typical (as I live in a large city and do a lot of my transactions on the internet). I'm sure many Americans use cash a lot more than I do (either out of necessity or desire), but it's... really not that bad?

refurb4• 3 years ago

I don't know.

I was helping a Canadian friend with their bank account and TD's website looks like it's from the 90's.

And getting an SMS message when your credit card is charged? Yeah, it used to be a separate website (why?) but no longer offered.

It looked absolutely archaic compared to my US bank.

cpursley7• 3 years ago

Now compare your US bank to Asian or others outside the West.

Actually, just check screenshots in the App Store for foreign non-Western banks.

cubefox3• 3 years ago

(2021)

This piece mentions FedNow, an instantaneous 24/7 bank transfer system for the US, whose launch happens to be imminent. Details:

https://www.clevelandfed.org/collections/speeches/2023/sp-20...

However, unlike UPI in India, neither banks nor businesses are required to support FedNow, so adoption will likely be slow, especially because the traditional (and more expensive) credit card based payment system is already firmly established.

There is also another upcoming system called RTP, which is very similar to FedNow, but is governed not by the Fed, but privately by the The Clearing House, an association of large US banks. The piece above mentions that both implement ISO 20022, which could allow future interoperability.

ggm2• 3 years ago

Australian banking regulator appears to think there is a natural floor cost of interbank payment settlement, which I am going to call "rent" and basically said as long as it doesn't exceed some metric for CPI related costs, it's fine to charge it no matter what the impact on transactions.

This is a loaded comment, because I think it's bullshit. The cost to process any payment of any size under the $10,000 AML threshold is constant, and functionally zero. As consumers, we've become a profit centre, and there is between $600m and $1b of "cost" which is being met by a % value of transaction fee, irrespective of the real costs of operation. It's regulated theft. Tax office loves it because the black economy is shrinking, small traders are wearing processing costs, intermediaries like stripe are hoovering up data, alongside p2p and inter account direct debit and payment models. Credit unions and banks have an uneasy alliance with "key" and "associated" status to inter bank clearing data networks.

The direct payment scheme we have (osko/payid: typically Australia they couldn't decide a single branding) is seconds to complete sometimes and competes with other forms of transaction clearing for cost and time.

We still have chequebook process clearing times. We still have "not on weekend" and "3 business day" rules. It's totally Bizarre.

When they spun credit and debit card fees out from each other I asked some questions of the finance regulators and they said "works for us, cheaper overall" but I think they left this $600m+ profit component in on bogus logic:

Tl;Dr real costs of settlement per transaction do not relate to how costs are met. Banking is highly profitable and is a protected industry under a benign regulator.

paulusthe2• 3 years ago

This is a loaded comment, because I think it's bullshit. The cost to process any payment of any size under the $10,000 AML threshold is constant, and functionally zero.

Your argument fails here, because you are wrong here. The cost is not zero, because what the bank does for interbank payments is subject to the same regulations and procedures as everything else a bank does. Banks charge money for transfers because there's regulatory overhead and shared liability.

What happens if they've missed you're a money launderer for the cartel and have to pay a $2bn fine because they processed your transaction for nearly nothing, instead of doing proper checks and stopping it?

Sorry, but you're just plainly wrong here. Very populist and very wrong

ggm2• 3 years ago

Fine, call it risk cost. Noting, the AML limits were in my statement and the post transfer processing to find multiple conjoint sub AML represent washing is sitting out there.

Functionally zero per transaction (sorry I should have been more explicit) obviously there are real world data comms and CPU and compliance costs. They are not "equal" to the amount of revenue the system is extracting. The absence of variance in system costs unsettle me when a % transaction value price is applied. under the AML reporting limits

Fund the risk side from proceeds of crime! What they've done is spread throughout the system the risk costs onto all of us.

I, not "plain wrong" we just disagree about cost assignment, risk, and benefit.

Do you disagree that the banks and fintech are profiting from their transaction cost models? Hint: in 2029, about 36% of card transactions were Debit cards, with no component of credit card interest or risk: it's money held in account earning banks profits twice: once as deposits earning far lower interest (bank gets to leverage the money) and once again as merchant fee and transaction cost.

80% or more of profit comes from the other side: credit card interest, and you can certainly assign income from card fees to a "cost" bucket for tax purposes but we and the merchants pay it!

kumarvvr2• 3 years ago

UPI in India works, in principle, like this.

I use it to pay for anything from 10 cents to 1500 USD.

Its awesome, free and has enabled a banking revolution in India.

Small vendors now prefer UPI to cash, as small change is a hassle.

In India, even beggars are using it.

crooked-v• 3 years ago

Also, for more context, many, many daily transactions in India are in amounts under 1 USD. For obvious reasons this makes eating credit card fees deeply impractical for many businesses and entrepreneurs.

kumarvvr2• 3 years ago

Yup.

An average Chai (Tea) costs about 30 cents.

A Samosa costs about 15 cents

Most street foods cost under 50 cents.

Water bottles cost about 35 cents.

I strongly believe that every government should provide this sort of inter-bank and intra-bank transaction services as a public utility, for free.

The benefits of UPI cannot be overstated.

We also have UPI lite now. We can add about 20 USD to a UPI Lite account. Maximum transaction value is 2 USD. Daily transaction limit is 20 USD and the advantage of UPI Lite is that once you load your account with the money, the transaction completed without bank intervention, meaning lower chance of failure. Also, it does not need authentication (apart from your phone security).

I have been using this only recently and its an even more hassle free method of paying for almost 95% of my daily spends. Now I don't have to enter the UPI PIN to authorize a transaction.

Its a great way to give pocket money to kids.

stevetron• 3 years ago

I still have trouble with money and finance not being on the gold standard. And the stock market just seems like gambling to me, which I don't partake in (gambling or stock market). probably why I'll always be poor.

smokelegend• 3 years ago

No risk, no reward...

buzer• 3 years ago

There are lots of things that many countries do better than US in regards to banking.

One thing that I don't often see mentioned are invoices. In Finland you can get many of them delivered as standardized e-invoice to your bank. This then allows you to setup automatic payment for them on your side (pay on the due date, set maximum value that will be approved automatically if the amount is not static). For consumer protection if the due date falls on weekend/bank holiday, the due date in reality is the first normal day. It's also the day when you need to make the payment, it doesn't need to arrive on seller's account on that date (though these days it normally will).

AdeptusAquinas• 3 years ago

Isn't this just EFTPOS? I've been paying with that since I first got a eftpos card thirty years ago in NZ

miki123211• 3 years ago

Poland has a really interesting system (Blik), based internally on fast interbank wire-transfers I believe.

Each banking app that supports this system can give you a six-digit code valid for two minutes. You can enter this code in a supported store or ATM, either online or in-person, you get a popup in the app with the amount to be paid, the merchant and a description of what you're paying for, you click "confirm" and the transaction goes through.

This system is great because it enables secure payments on devices you don't trust. Because the codes are single-use and transactions require an extra confirmation step in the app, it's perfectly fine to give a code to your child who wants to buy something online, text it to a family member who is at an ATM, or give it to a friend who has free shipping due to a loyalty program and wants to order something for you.

This system can also do transfers and transfer-requests to a phone number. In some banks, you can even generate "Blik checks", 9-digit codes that are valid for 24 hours, cover a pre-set amount and don't require a confirmation, which you can give out to someone. These checks have been used to efficiently send money to unbanked Ukrainian refugees when the war started, as they could simply be redeemed at any supporting ATM.

Bank transfers as a payment method (2021)

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