The Fed Is Getting Into the Real-Time Payments Business (cnn.com) 121
An anonymous reader quotes a report from CNN: The Fed announced Monday that it will develop a real-time payment service called "FedNow" to help move money around the economy more quickly. It's the kind of government service that companies and consumers have been requesting for years -- one that already exists in other countries. The service could also compete with solutions already developed in the private sector by big banks and tech companies. The Fed itself is not setting up a consumer bank, but it has always played a behind-the-scenes role facilitating the movement of money between banks and helping to verify transactions. This new system would help cut down on the amount of time between when money is deposited into an account and when it is available for use. FedNow would operate all hours and days of the week, with an aim to launch in 2023 or 2024. Currently, the process of sending and receiving money can take up to 72 hours, leaving businesses and consumers, and especially low-income people, in limbo. "For example, the current system can create problems for people paid by check at the end of a month, because they must deposit the check into their bank accounts and wait for it to be cleared before they can use that money to pay a utility bill at the start of the next month," reports CNN.
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I love how they are staying on the forefront to help us out.
Indeed. It is also wonderful how it will only take them four years, until 2023, to write a computer program ... that does exactly what other countries have been doing for more than a decade.
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You forgot to account for the government project multiplier. It'll actually be done in 2029.
Luckily, by the the other countries will be doing something else, so we won't have to feel bad anymore about being so far behind.
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FedWire, SWIFT: just a couple of "computer programs".
Re: They should consider bitcoin (Score:3)
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"Rest of us will take bitcoin."
Speak for yourself.
Good for them. (Score:2, Insightful)
This is a royal PITA for anyone close to the margin trying to get bills paid on time, for example. Banks charge a lot for same-day transfers (wires), and anything else they basically give you just ambiguous answers about when the payments will clear. This doesn't matter if you have enough wealth that your bank accounts have the money in them to deal with the ambiguity, but it slams people living paycheck-to-paycheck, which is a huge percentage of the population, as well as being super annoying for people wi
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Why not find a way to "guarantee" a check will clear by x date
There is no way to do that with paper checks. You submit a check to bank A drawn on bank B. So bank A submits a request to bank B. But bank B doesn't have guaranteed funds because a check was deposited that was drawn on bank C. Bank C has the payment on hold because a check was deposited drawn on bank D, which is in Nigeria and has a hold on payments because the deposit owner has bribed the bank to delay the payment as long as possible before rejecting it.
mandate that guarantee with damages included in case of overdraught? Put the impetus back on the banks.
There is no way the banks will, or should accept
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MOST checks are not some how dependent on a deposit drawn on a bank in Nigeria. Those few that are can be flagged as unreliable at the time of deposit and the depositor notified/warned. The rest should be clearable in a short and deterministic period.
The Nigerian check scams are based on a related problem, banks being unwilling to make a distinction between funds availability and a check actually clearing. Try depositing a check some time (A reasonably reliable check) and ask how long until the money will b
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Why is "anyone close to the margin" using a bank? Credit unions don't give you any of that bullshit.
My direct deposit is in my credit union account the day before payday.
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The Fed are going to spend 4 years creating a whole payment network to solve this. Elsewhere, we got the regulator to lean on the banks and all of a sudden, they could transfer money nearly instantly at zero cost to sender or receiver. No (new) payment network needed, and our central bank doesn't have to do anything to make it all work.
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Dude has a bike on Craigslist. A "buyer" says, "I'll take it!" and mails a check. Well, you open it up and see it's for a thousand dollars too much. The check writer says, "Oh shit! Hey, just Western Union $900 and keep the extra $100 for your troubles." So Johnny Honest does just that. Guess what? The check is shit and he owes it ALL back to the bank!
Sorry dude. I've got $42 in the bank right now. When your check clears, I'll write you one for the extra $1000. We'll meet at the same spot where you picked up the bike. Don't mind all the unmarked patrol cars parked around there.
Re:Hopefully, stop the over payment check scam &am (Score:3)
Sorry dude. I've got $42 in the bank right now. When your check clears, I'll write you one for the extra $1000.
Doesn't work. The bank will hold the funds for a certain amount of time, and then say it has "cleared", and release the funds. But the source bank may still keep a hold on the money until a deposited check drawn on yet another bank "clears". This chain of checks is how scammers work.
So how long do you have to wait until you are SURE that a deposited check has cleared? The answer is never. Even if you withdraw the money and spend it, the bank can claw it back by suing you and putting a debt lien on your
Re:Hopefully, stop the over payment check scam &am (Score:2)
Re:Hopefully, stop the over payment check scam &am (Score:2)
That's a big issue. The bank shouldn't claim the check has 'cleared' until it can't be clawed back. Many people have been scammed because of that.
Is that a Federal Task? (Score:1)
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Not quite sure why thats a federal task...
The "Fed" is not part of the federal government.
I think the banks manage that by them self here.
This is exactly what is happening. The "Fed" IS the banks.
Just wait for the IRS scammers to use this (Score:3)
Just wait for the IRS scammers to use this
Sir you need to your FED NOW member store and get an western union money order to pay your IRS fine now or you will go to jail!
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There's actually a whole category of scam that depends on the delay in checks clearing, so this will make a lot of those scams obsolete.
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"In Europe, sending money from one bank account to another is instant, because government regulations require they take less than 8 seconds."
Depending how you measure, this might be true. But I doubt it. Really. Citation, please.
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It's hard to take ACs seriously when you ascribe to them such embellishment. I prefer to stick to what they wrote, even if it's stupid.
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I'm proving the ACs claim? Nope.
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don't know about Europe, but in India most transfers do take less than 8 seconds. It's called NEFT and has been around since 2005. A variant that works outside working hours, IMPS, has been around since 2011. This one is not run by the RBI (RBI == India's "Fed") but by a corporation that is owned by a consortium of banks, and promoted by the RBI.
My bank imposes a 30-minute wait to add a new payee, but once the payee is added, any number of payments to the payee can be done instantly, any number of times,
Re: This changes nothing (Score:2)
A quick read shows the SCT Inst standard dictates "When the payerâ(TM)s payment service provider ( ) is certain that all mandatory attributes for processing the transaction are valid, it marks this starting point with a timestamp. Within ten seconds, the beneficiaryâ(TM)s has to report to the payerâ(TM)s either that the money has been made available to the beneficiary or that the transaction has been rejected. If the maximum execution time of ten seconds cannot be met due to exceptional pr
2023!? Are you serious!? (Score:1)
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" You cannot tell me it takes 3-4 years to rollout this service. " - I'm sure it could be rushed. Would you promise to not complain if it were rushed and a problem found and exploited? Pinky swear?
TBH that's kind of just what it takes to get all the pieces in place, built, tested, certed, re-penned, re-certed... I would want 3 years to build and roll out a system like this on a national/global scale, yes.
Could it be done in 18 months, maybe. What corners are you willing to cut (as business sectors woul
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I pointed it out elsewhere, but you should go dive into the workings of SWIFT and FedWire. These are massive conglomerations of code to handle MASSIVE conglomerations of ever-changing regulations.
They're not friggin' apps on a phone.
The Fed != Government (Score:5, Informative)
It's the kind of government service
The Federal Reserve is a private bank with congressionally appointed officers. It is not a government entity.
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Nope,
the Federal Reserve is a federal agency. It has several layers. Don't equate the member banks with the Fed itself.
fed is private in real world (Score:2, Informative)
Federal reserve banks (which are main component of the Federal Reserve) are private corporations [2,3], they are only public [2,3] in as much it fits their interests in siphoning wealth and control while lending everyone else 'virtual out of the air' money. The even audit themselves and even that not completely [1]. Sounds like a cool trustworthy transparent organization totally not evil in any way. Its all super transparent [4] indeed. Thank you Woodrow Wilson, so nice of you. [5]
References (wikipedia):
[1]
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Yes, that's the banks. However, the Fed is NOT THE BANKS. Those banks are just one layer of the Fed. The Federal Reserve is a Federal agency, and also has one "child federal agency".
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it's good opportunity to learn. The Fed has other parts including the Board of Governors and the Federal Open Market Committee (which is a child federal agency of the Fed which is a federal agency, by the way)
Re: The Fed != Government (Score:4, Informative)
The Fed (which is literally a government agency) is in absolutely no way "private". It's mission was set by the government, it's profits go to the government, it's leaders are appointed by the government.
You're likely getting confused by the fact that they are considered "independent" just like the other independent government agencies like the CIA, FEC, FCC, EPA, etc. Which just means the president's ability to fire the leaders is more limited.
The Fed stands out a little on this list because they earn more money then they cost so don't need a budget allocation, but their profits still go back to the government, which makes it patently not private.
https://en.m.wikipedia.org/wiki/Independent_agencies_of_the_United_States_government
it's just hilarious how this is being handled (Score:1)
Maybe those legislators who have worked out how to REINVENT MATHEMATICS so that encryption-backdoors-for-law-enforcement doesn't actually COMPLETELY destroy encryption can show these guys how things get done?
It's called Venmo (Score:2)
And there are others. Late to market, Fed.
And most of the low-income people, in limbo, are unbanked. Either by choice or necessity, some cannot even use a bank to pay their payday or title loan, so they would have to stop at an ATM, get cash, get to the loan window, miss it by a minute, and walk.
Besides which, the Fed wants to become the bank for the rest of us? Huh? Can we tell them to stay out of a business they ought not be in?
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Well, if the Fed is positioning this as a replacement for ACH, good. Just a decade late.
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I would like it to be like Venmo with couple of things changed:
1) No profit motive, so no fees for transfers. This is infrastructure for the efficient movement of money. Like building roads and highways, but much cheaper and maybe more important. And infrastructure that improves the lives of a lot of normal people is something I can support spending taxpayer money on.
2) The ability for the "service" to undo cases of fraud or error. This is why I tell people not to use Venmo or Zelle. Use credit cards or Pay
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"1) No profit motive, so no fees for transfers."
Oh, the Fed will run this gratis? Really? Not on this planet. There are costs. Profit is not the point in this use case.
" This is infrastructure for the efficient movement of money. Like building roads and highways, but much cheaper and maybe more important. And infrastructure that improves the lives of a lot of normal people is something I can support spending taxpayer money on."
Aaaannnnnddddd there are the fees. Excellent.
"2) The ability for the "service" to
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"1) No profit motive, so no fees for transfers."
Oh, the Fed will run this gratis? Really? Not on this planet. There are costs. Profit is not the point in this use case.
" This is infrastructure for the efficient movement of money. Like building roads and highways, but much cheaper and maybe more important. And infrastructure that improves the lives of a lot of normal people is something I can support spending taxpayer money on."
Aaaannnnnddddd there are the fees. Excellent.
"2) The ability for the "service" to undo cases of fraud or error."
Duh. But in most cases such direct transfers are without any possibility of recovery. As in, if you send to someone's checking account, and they take the money out, where do you go to get the mistaken transfer recovered? I thought so... PayPal is regularly found wanting in this. Credit cards have the underlying credit to rely upon in one direction, and the merchant relationship in the other.
I did say it would cost the government, but as national infrastructure, it is better run by the government than by a private entity that needs to turn a profit. The analogy I drew is to the national highways, which cost money to build and maintain but generally no one complains about having highways being paid by the government. And the idea that a private entity would build and toll the highways seems ridiculous, although there are a few exceptions.
You're right about the current ability of people to withdr
Re: It's called Venmo (Score:2)
The 'infrastructure' argument worries me. By this measure almost anything can become a government controlled process. In America we had a limited government. It's creeping into every part of our lives. Private industry already provides innovative payment services. Government need not compete...
But the fraud issues are the same, and for the same reasons. Don't you think the same fraud vectors that now permit someone to slip away with funds they ought not have would work no matter who runs the system? Identit
On purpose to get rid of CASH (Score:5, Informative)
mod parent up (Score:1)
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Yes of course it's on purpose to get rid of cash. Consumers and businesses want to get rid of cash. It's a friggin PITA. It's 2019. I can in moments convert hundreds of thousands of dollars between currencies and whisk them around the world. I can also pay for a postage stamp with my debit card.
EVERYTHING ELSE in between should therefore work cashless as well.
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If you are able to do it from a proper computer (or rather, using a browser), NEFT has been around since 2005, so instant transfers during bank working hours have been around since then.
Instant transfers outside bank working hours is IMPS, which has been around since 2011 or so.
European Central Bank already has this. (Score:1)
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What is a "throwaway" e-mail service?
Mailinator.com was the first AFAIK. Now there are lots. Email accounts not actually associated with any specific human, but they still work.