Of all the articles on the instant payment service, this one is simultaneously the most honest and hilarious (<a href="https://www.wsj.com/articles/banks-newest-fed-headache-nonstop-instant-payments-8ac97c15" rel="nofollow noreferrer">https://www.wsj.com/articles/banks-newest-fed-headache-nonst...</a>)<p>> FedNow could destabilize banks’ reliance on customer cash, fanning the flames of deposit flight<p>> In addition to losing revenue from the time between a payment’s initiation and settlement, banks now have to worry about deposit flight outside of business hours.<p>> The system isn’t expected to be ubiquitous in the U.S. for a few years.<p>> ...customer deposits were sticky ...That assumption allowed bankers to comfortably borrow cash at low rates and lend for long periods at higher rates.<p>> But instantaneous transactions allow customers to pull cash with ease, and without notice. That threatens smaller banks...<p>Meanwhile, the rest of the world, including countries traditionally referred to as "third-world countries," have leapfrogged the US and provide instant payment and settlement without crying about the loss of revenue from the time between initiation and settlement, or a run on their banks.
This would be great if it can cut down payment processor fees which are mainly driven by the rates that Visa and MasterCard charge, essentially as a duopoly power in the market. They also control what you can and can't buy, such as for example heavily frowning upon adult content, even if you are legally an adult.
I always found it funny when dealing with the money transfer to folks in the US that they had to use terrible 3rd party apps to move money between accounts.<p>You end up in situations where moving money can almost be impossible when the banks don't support the same apps. Here in the UK immediate transfers between accounts has been a thing for a very long time.<p>Glad to see the US catching up, because sometimes the pace of technology is amazing and other times with much simpler things it's positively archaic.
I wish there was a bit more detail about this part:<p>> The initial release of the FedNow Service will include features to help banks manage fraud risk and mitigate fraud losses. [...] In addition, there will be tools that help a financial institution investigate erroneous or suspected fraudulent transactions.<p>Let's say Alice's "Bank A" processes a FedNow transfer of $1,000 to Bob at Bank B. What happens if Alice calls her bank and says the payment was unauthorized?<p>If Bank A investigates, and finds evidence that Bob hacked Alice's account, do they then have to call up Bank B and persuade them to return the money? Does the Fed get involved as an arbiter? Or is Alice just out of luck?<p>(To be fair, I'm not sure exactly how this happens behind the scenes with credit/debit cards, either.)
In my country (Singapore), the instant payments system was rolled out in 2017 but took several years to get traction. The pandemic seems to have marked a turning point: it's now accepted pretty much everywhere, and it's great. You can use it to pay plumbers, small-scale food vendors who don't take credit cards, car workshops, people on Craigslist, friends you split a bill with, etc. Very convenient.
If this is what I think it is, I can't wait. My bank's Zelle experience is abysmal, and it's annoying to manage a Venmo balance. I will strongly consider switching banks if it means a convenient FedNow UX
Remember this story from a couple months ago? <a href="https://news.ycombinator.com/item?id=36041059">https://news.ycombinator.com/item?id=36041059</a><p>Does this system prevent abuse?
It's petty of me, but I hope that FedNow utterly eradicates Zelle: I've spent my entire life in the mess that is the US's banking system, and every trouble I've ever had pales in comparison to the troubles that Zelle gives me on a near-daily basis.
Fed is moving so slowly compared to China or India. Going to be left in the dust soon.<p>They need to open settlements up to everyone not just "financial institutions". Fed deposit accounts for everyone or Interest bearing CBDCs should be rolled out to every one. The fucking banks need to be disintermediated from all transaction involving Depositors. Convert them to pure lenders.<p>If the goal is to "improve settlement efficiency without introducing liquidity or credit risks" then provide a path to get the dumb sender and receiver banks out of the loop in every dumb transaction.<p>If I want to send my grandma cash, why do 2 banks have to be sitting in the middle? It's 2023 get those fuckers out of the loop. So when the next bank collapses due to "credit and liquidity risks" they haven't thought about why should grandma worry about her savings?