The Fed Gives a Timeline For FedNow, Its Payments Platform (axios.com) 66
An anonymous reader quotes a report from Axios: Federal Reserve Vice-chair Lael Brainard gave a timeline for the launch of FedNow, the platform it has been working on to enable nearly instant payment settlement within the U.S. FedNow should launch in 2023 between May and July. This is the most specific the Fed has been yet about when the service will go live. "The payment system is a critical part of America's infrastructure that touches everyone," Brainard said in a speech she gave today via webcast to the FedNow early adopters workshop in Rosemont, Illinois. "We have been working hard to deliver on time, but ultimately the number of American businesses and households that are able to access instant payments will depend on financial services providers making the necessary investments to upgrade our payments infrastructure," Brainard said.
FedNow is a platform the Fed will provide for banks to build on top of and create payment features in existing or new products. Products enabled by FedNow will have nearly instant settlement around the clock. Ever needed a cashiers check after all the bank branches had closed? FedNow could be an answer for that kind of situation. Depending on how its partners implement FedNow, it could be used consumer-to-business, business-to-business or consumer-to-consumer. [...] Consumers probably don't realize that every time they swipe a debit card, it costs the merchant an average of $0.23, according to Merchant Maverick. Those costs stack up and ultimately get passed on in sticker prices. The FedNow platform, meanwhile, will cost a fifth of that to make a transaction. "FedNow is not a blockchain-based product and it's not a central bank digital currency (CBDC). It still very much relies on third parties, to operate, for example," notes Axios. "But -- if it catches on -- it would make money as we know it more competitive with cryptocurrencies, by lowering the cost to transact and providing low risk settlement around the clock."
FedNow is a platform the Fed will provide for banks to build on top of and create payment features in existing or new products. Products enabled by FedNow will have nearly instant settlement around the clock. Ever needed a cashiers check after all the bank branches had closed? FedNow could be an answer for that kind of situation. Depending on how its partners implement FedNow, it could be used consumer-to-business, business-to-business or consumer-to-consumer. [...] Consumers probably don't realize that every time they swipe a debit card, it costs the merchant an average of $0.23, according to Merchant Maverick. Those costs stack up and ultimately get passed on in sticker prices. The FedNow platform, meanwhile, will cost a fifth of that to make a transaction. "FedNow is not a blockchain-based product and it's not a central bank digital currency (CBDC). It still very much relies on third parties, to operate, for example," notes Axios. "But -- if it catches on -- it would make money as we know it more competitive with cryptocurrencies, by lowering the cost to transact and providing low risk settlement around the clock."
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Closed ledger, centralized, nonscarce (Score:2, Troll)
Re:Closed ledger, centralized, nonscarce (Score:5, Insightful)
No, it's the opposite of that. This is payment processing using USD, which avoids the extra steps associated with cryptocurrency.
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Some see this as the first step towards introducing FedCoin.
Re:Closed ledger, centralized, nonscarce (Score:4, Informative)
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They could've done that years ago though. This seems, special. They've totally lost any credibility they've ever had so of course people will assume the worst.
Re:Closed ledger, centralized, nonscarce (Score:5, Informative)
Posting AC because I worked on FedNow for a time (and limited capacity! No stolen valor here, full props to the team behind it - I was a tech grunt) but have not had any involvement in almost two years (after double digit years at the FRB, I moved on to another job during the pandemic).
A replacement for ACH has been in the works for a LONG time but there's a ton of complexity to it and while all of that was easy for an engineer to say "I can fix that!" it was actually all the legal aspects (federal law, state law, ect) that make things crazy difficult. The number of times I saw something that looked like an easy fix but found there was a legal requirement for the complexity? I lost count years ago.
FedNow (at least when I worked on it) wasn't really seen as a successor but more like an alternate. That usually gets a response of "but there are alternates!" and yes there are. But most of them are terrible and there are zero legal protections for when someone accidentally venmo's three months rent to the wrong name and wrong name won't return it, or when a user triggers a Paypal protection and Paypal empties their account and won't give them their money back, or when someone gets scammed. "But those are one-off excuses!" No... oh no... Dude, no... We got these complaints DAILY of people who used an alternate payment system and got screwed. The best we could tell them is to read their terms of service for dispute resolution, which we all know no one reads and there's no real hope of challenging them through their claims process.
But why are people using such terrible and unprotected ways of transferring money? Because ACH is SLOW! I mean, for everything it does - it's pretty fast. But it's calculating EVERY transaction. For the average person, waiting a few days for transactions to clear is SLOW! (There's also a HUGE push to replace how we deliver money to our service members AND allow them to route money to where it needs to go in a timely manner when they may have limited time to do it while they are deployed.)
At least when I was there, the heart and motive of the project was a genuine effort to help people by providing a quick access to transfer money in a way that is federally protected and backed by those with legal teeth to go after scammers, bad actors, ect. The idea that this would be great for small merchants who could avoid credit card fees was a nice touch which we knew would be a big hit among small business owners.
But as I said, it's been a while since I was a part of it. And we all know that a great tool built with good motives/intentions can be wielded by politicians in horrific ways. And I've got a ton of criticism for how the FRB is operating these days and some of the claims being promoted are not concepts that I worked on or with so things have certainly shifted a bit. Many on the FedNow team were great to work with, but part of the reason why I left was because the higher-ups refused to listen to issues. They were completely tone-deaf during the pandemic and that was the final straw for me.
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Clearly you've never worked with a bank. They probably have been working on this for 10+ years, and are only now getting around to launching it.
That's the standard speed for banking system developers.
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They could've done that years ago though. This seems, special. They've totally lost any credibility they've ever had so of course people will assume the worst.
Your quote smells exactly like all these shitlord republican senators telling their constituents for years that the election system was broken, then claiming that we need to do all kinds of special bullshit because people don't trust the election process. They manufactured that situation, just like you're trying to do now.
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Soo much projection, bro you should work for IMAX. The people who changed the rules/special bullshit was the Democratic governors in blue states(where Hilary lost) due to their(the govern
backed by real banks and fdic (Score:2)
backed by real banks and fdic
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What? Even your ransom payments are done by money transfers and leave a proper paper trail? That's well organized crime!
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Having done some ACH integrations for accepting check payments, it is indeed a ridiculously antiquated system that includes the best of antiquated data processing techniques: fixed-width format clear text files, batch processing that only happens once a day, retrieval of confirmation files for the previous day's batches, rate-limited connections, single-file-upload-per-connection enforcement, no parallel connections allowed, etc.
It's terrible. But explains so many things about why it takes forever to move
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Or, it's a serious upgrade to the de facto batch processing standard of ACH payments and wire transfers. If they don't fuck this up, things will get a whole lot easier for people that don't bank with the trillion-dollar-bank set, and the occasions where you need certified funds for large transactions (buying property, etc.).
nationalization (Score:3)
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UPI (Score:3)
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Never you fear (Score:4, Insightful)
Great News! (Score:3)
After how-many-years the US gets a system for direct account-to-account money transfers.
But please keep it halfway compatible (compatible, I don't mind how similar it is) to the SEPA system. This has potential to put PayPal & Co out of buisness
Re:Great News! (Score:4, Insightful)
The real question is, who's liable for what? I happily use my credit card because I can challenge charges to my card. If there is a fuckup, I have a reasonable assumption that I won't wind up paying for it.
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Well, if they take the SEPA how it is over here as a blueprint, the get something that is now working for decades: If you are transferring money, you are responsible for what you are doing (but have checksum in the account number) and any charges to your account can be reversed within 8 weeks or within 13 months if the charge was without your consent or the merchant screwed up on formalities.
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That all depends on who the bank values more. I know of a few occasions where the bank took the merchants side even though the charges were fraudulent. I had a terrible issue with Amex which resulted in me cancelling the card that I had for over 15 years. There are many horror stories on the Internet with credit cards as well as debit cards.
This will never, ever, EVER fly with the banks. (Score:5, Interesting)
Banks have gotten used to the idea that when they transfer money or perform any other form of transaction, they can sit on your value for a few days, earning interest on the "pile up" of payments not yet processed. The Fed giving a payment system guaranteed to be instant? The banks will flip them off so hard they'll probably have to fire the developer's moms before the developers were born. There is ZERO chance they'll give up that precious multi-day interest bonus, even for a lower per-transaction fee. Unless the banks are allowed to charge the customer $x amount extra for a FedNow transaction over a standard transaction. Then expect it come at a cost of around $30 / $100 or something equally ridiculous.
Re: This will never, ever, EVER fly with the banks (Score:4, Interesting)
While not wrong many banks are already doing same day deposits for recurring values(payroll) at their own expense.
I used to use HSBC. After getting hit with a couple of overdraft fees i fianaly realized they would add up all the withdrawal than hit you with an overdraft fee and then add up your deposits.
All the HsbC near me are now long gone. Instant money transfers will save good banks money.
Also note this is on the back end. This isnt for John Snow. This is between banks and the fed.
The banks are the ones that will be pushing for it (Score:2)
... and will have contributed to its formation. This is how it already works in many smaller countries where it wasn't such a hurdle for all the banks to agree on a single rapid interchange.
What it won't compete with is cryptocurrencies. Since those are not used for day-to-day purchases.
Re:This will never, ever, EVER fly with the banks. (Score:5, Interesting)
As a bank, we already use NACHA for moving money (the US ACH system with the federal reserve). We are SUPER excited for FedNow and have been watching closely for years at point. It costs several cents for us to deposit an amount same-day. An order of magnitude less for next day. FedNow will flip that and make faster flows much cheaper. That's a win for us as a bank and a win for our customers. We're excited for it.
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> did they just nationalize the debit card payment system ?
The Fed is not a government agency. It's run by private banks and charges Americans interest on their own issuance of money.
That's why savings accounts have 0.00001% interest rates - the Federal budget to repay the interest on the debt to the Federal Reserve can't go above 1-2% and even at that they borrow money to repay the interest. So you have to send your money to Wall Street (also owned by these same banks) to earn enough in a mutal fund t
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My understanding is that it will be able to settle within seconds, more like a venmo transfer with positive confirmation. Just, that it is hosted by the feds instead of Venmo and the accounts can be from any participating bank on the platform.
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Anyone that has ever used NACHA will be rejoicing at this. What a horrible, antiquated system.
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"What do you mean that I can't submit an ACH with the same file amount twice in the same day for the same amount, even if the company ID and file identification letter are different?"
Ya, the ACH system was built for a different age. Shoehorning into modern tech is painful: It is more like a series of queues (folders, since it is file based) that aren't expected to relate to each other, but then have been forced to.
And lets not start talking about reporting elements......
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Well that's what happened here with SEPA-instant (as opposed to regular SEPA) transfers. It started out ridiculously high at a low digit but now is down to anything between 0.50 - 2$
Re:This will never, ever, EVER fly with the banks. (Score:4, Interesting)
Taking days for something to clear is bullshit. I knew a guy who would cash his paycheck and then turn around and deposit that cash right back into his account. The bank hated him but the funds were instantly available.
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Banks have gotten used to the idea that when they transfer money or perform any other form of transaction, they can sit on your value for a few days, earning interest on the "pile up" of payments not yet processed. The Fed giving a payment system guaranteed to be instant? The banks will flip them off so hard they'll probably have to fire the developer's moms before the developers were born. There is ZERO chance they'll give up that precious multi-day interest bonus, even for a lower per-transaction fee. Unless the banks are allowed to charge the customer $x amount extra for a FedNow transaction over a standard transaction. Then expect it come at a cost of around $30 / $100 or something equally ridiculous.
In Brazil there's a payment plataform called PIX and it integrates all banks with instantaneous money transfers and no fee for the users. We use it for everything, ever buying popcorn outside my son's school. It works and it's beautifull.
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Dud you're nuts
https://thexrpdaily.com/2022/0... [thexrpdaily.com]
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It sounds like you think a bank gave you a raw deal?
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I have yet to have any interaction with a bank that doesn't leave my ass feeling sore for weeks afterward. And no, I do not believe electronic transfers take three days to process. Yes, banks give all of us raw deals. It's what they exist for.
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They're welcome to try putting a huge charge on it like they do with wire transfers, and other banks will compete with them. If the FED isn't charging transaction fees, there will be banks that similarly do not charge fees. And the banks that do will see customers leave.
This is no different than when banks wanted to charge you a monthly fee for a checking account, and then a bank started offering free checking. Now they all do.
I am wondering how they will handle fraud refunds (Score:3)
Step in moving to a cashless society (Score:3)
Can we require banks to do instant transaction, 24x7?
Using online banking, if I execute a Friday evening payment to Verizon the money won't get there until Tuesday.
It's 2022. There is no physical check or the moving of cash. WTF?
what could possibly go wrong? (Score:2)
But -- if it catches on -- it would make money as we know it more competitive with cryptocurrencies
what could possibly go wrong? Competition did not exactly stabilize those cryptocurrencies.
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That looks like a bit of editorial flourish by Axios, the Fed speech about the platform does not mention crypto at all but it will probably get you a few extra clicks on your article.
Surprised they are not requiring IPv6 (Score:1)
would be a large motivator if they did
Hmm (Score:3)
Where is the catch?
Re:Hmm (Score:4, Interesting)
It wont be secure. At least based on my very limited experience working with a US gov't treasury application that allowed local State agencies to move money into and out of their various holdings. Everything was stored in plain text (including usernames and passwords and full bank/routing numbers) that I, as the admin for, had full access to.
So when I user called saying they'd forgotten their password, I'd look up their agency, and read them off their password.
It was a horrible system ripe for abuse (I could, for instance, add new accounts at will, and the only oversight, was an e.mail generated to the system admin...which was me...letting me know I"d created said new account) and when I brought up these glaring security issues, I was told not to worry about it.
I left shortly thereafter. As far as I know, these flaws still exist.
Sounds just like TARGET2 of the E.C.B. (Score:2)
Or like KRONOS2 and RIX in smaller countries.
at the other side of the pond (Score:1)
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You might want to save up that smug, and use it to heat or insulate your homes this winter.
CBDCs, the more they squeeze⦠(Score:2)
Silly comments (Score:1)
No mention of the direct competition? (Score:4, Interesting)