> Charges applied by a PSP in respect to instant credit transfer transactions in euro cannot be higher than the charges applied to “non- instant” credit transfer transactions in euro.
does this mean instant SEPA transfers must now be free ? Because currently my french bank charges 1€ or something for instant SEPA transfers but doesn't charge anything for non-instant SEPA transfers.
- Guaranteed by the European central bank, that is advancing the money for free
- Done instantaneously, by the ECB
- Cost around 0.01 euro per transfer
So the entire delay between sending and receiving the money, that banks pretend is used to guarantee that the transfer is legitimate, and that the money exists etc, etc is actually purely artificial. The ECB is shouldering the risk, and advancing the money, free of cost.
All the rest (extra charges, delays, etc.) are banks handsomely lining their pockets.
IIUC, it depends on your bank. If your bank doesn’t charge you for normal transfers, it can’t charge you for instant transfers. Since most banks don’t charge for normal transfers, it will be free for most users.
How does a law like this increase competitiveness? It looks like it decreases competitiveness, since banks can no longer compete on who has the fastest transfers.
Companies (not banks) that can now settle payments almost in real-time rather than wait a day to confirm that the payment has been received makes them more competitive global-economy wise.
Do they actually compete on speed here? The law seems like a mitigation for market failure -- there is not enough competition and the banks don't compete on things like this
We know that sub-10-second-transfers are possible, by making it the norm you are not decreasing competition, just forcing players who are not competitive in this regard to conform or exit the field.
Markets are not perfectly efficient and you can have competitors surviving due to foul play or simply customer inertia. This protects consumer interest by forcing such market players to at least get to a baseline level or die.
Eh? No-one ever competed on that. It's not like there's much of a range; banks either do SEPA Instant (instant) or normal SEPA (same/next business day depending on cutoff timing).
You can make EUR transfers to anyone in those 27 countries.
"Euro Transfer" as in SEPA means that the currency of the transfer is set to EUR and that currency exchange is not part of the transfer itself (it can be done at originating or retrieving bank when the account involved is not in EUR, but the transfer itself has to be denominated in EUR at entry and exit from SEPA system)
But there have been some noises in the direction of expanding regular service through Latin America. India's UPI also seems to be internationalizing. And there's FedNow in the US that is probably going to get automatically popular just for being from the US. Wonder if we're going to end up with a bunch of incompatible systems around the world or what.
Meanwhile here in the US, we still have payments that take up to 5 days to fully "clear". As far as I can tell, the only reason for this because other payments take a long time to clear, and thus until those have been reconciled you won't know if there's actually enough money in the source account or if some fraud has taken place. Of course, this is kind of a self feeding problem, so it would seem that such a limit on transaction time would make the problem (with transaction time) disappear.
> FedNow is an instant payment service developed by the Federal Reserve for depository institutions in the United States, which allows individuals and businesses to send and receive money.[1][2][3][4]
> The FedNow Service went live on July 20, 2023. It is available to depository institutions in the United States and enables individuals and businesses to send instant payments through their depository institution accounts. […] At the most fundamental level, the service provides interbank clearing and settlement that enables funds to be transferred from the account of a sender to the account of a receiver in near real-time and at any time […]
> The Federal Reserve said on Monday that it would create a real-time payments system, with the goal of making paychecks and money transfers available for use more quickly.
Banks provide the interface, FedNow will provide the rails. Alias support is on the roadmap, and the service is intended to support peer to peer as well as consumer payments per their documentation.
FedNow enables banks to offer near instantaneous bank transfers to their customers -- if both the banks involved in the transaction have implemented the relevant FedNow protocols. Since FedNow is relatively new, most banks probably don't support it yet.
Well, it's a service for banks that will allow them to offer their customers realtime transfers between banks. Just like ACH. I don't use ACH directly, but I do use it through my bank all the time.
Very interesting! It doesn't seem to be the default yet, at least not for anything I use. Glad to hear we're making progress though, if a bit slowly and behind other nations.
Excepting AML (Anti-Money Laundering) laws, which can hold up transactions over $10k, funds are available within 24 hours in the US. This is how fraudulent check scams work. The time allowed for clawing back money on fraudulent payments is, IIUC, measured in months, so you can still end up with the banks owed money by their customers.
"Easy" fix here - don't allow banks to claw back any cash that they've made available for use. Nobody will tolerate "you have to wait 60 days for this check to be available" so the problem will fix itself in short order.
Banks are incentivized to make money available basically immediately because there is very little risk to them if it turns out to be fraudulent. And they're the only ones that can fix the infrastructure to clean this up. You move the liability from the blue collar worker cashing a check for $50 to the multi-national billion dollar corporation and it gets fixed pretty quickly.
The funds are available in a day or three. There is a big difference between cleared and reversing fraudulent transaction.
Are you requiring people to check their statements every week to find fraudulent transfers? Are people who go on vacation screwed? How do you handle instantaneous transfers when the funds are available in seconds?
For example, someone asks to use your phone and you foolishly give it to them. They make a bank transfer when you aren't looking. With instantaneous transfer, you are screwed caused the funds are already available and fraud report isn't allow.
It might be possible to make the banks responsible for fraudulent transactions since they are ones that can do the verification.
The onus is already on individuals to find fraudulent transactions and report them. If my CC gets a fraudulent charge and I don't see it, and it doesn't trigger the bank's anti-fraud logic, it will just get paid.
Your example doesn't really work because for this to happen not only would I need to give this person my phone, I'd need to give it to them with my banking app open and the screen unlocked. At that point it's not a fraudulent transaction.
> The onus is already on individuals to find fraudulent transactions and report them. If my CC gets a fraudulent charge and I don't see it, and it doesn't trigger the bank's anti-fraud logic, it will just get paid.
Right, but if I find it 60 days later when I balance my registry, then the CC company refunds me the money.
IIRC the banks in the US had to be forced (by law) to make the funds available in 24 hours. That doesn't mesh with what you have said at all.
[edit]
Also, the banks really would rather not be loaning their customers money interest-free (which is what happens when they make funds available prior to fraud checks finishing). I think you have the incentives completely wrong.
If both you and your competitor bank can come back 90 days later to withdraw fraudulent funds, you can advertise that your deposits are available immediately while theirs aren't. What is the risk to you? You can just pull the money back.
There is no technological roadblock from verifying within seconds that a) a bank account exists with the given account and routing number; b) it is associated with the name on the check being deposited; c) it has available funds to cover the balance of the check. As it stands the banks give you the money as soon as its deposited (or very shortly thereafter), but that's no risk to them. They can come back and get it whenever should they need to.
If you didn't allow them to do that, we'd have the infrastructure for instantaneous fraud checks/balance verification nearly overnight.
> If both you and your competitor bank can come back 90 days later to withdraw fraudulent funds, you can advertise that your deposits are available immediately while theirs aren't. What is the risk to you? You can just pull the money back.
The risk is insufficient funds in the account to cover the deficit
> There is no technological roadblock from verifying within seconds that a) a bank account exists with the given account and routing number; b) it is associated with the name on the check being deposited; c) it has available funds to cover the balance of the check. As it stands the banks give you the money as soon as its deposited (or very shortly thereafter), but that's no risk to them. They can come back and get it whenever should they need to.
You missed "d) was printed by a forger with otherwise valid information"
An instant credit transfer is supposed to be executed regardless of the day or hour and the money must arrive into the recipient’s account within ten seconds.
SEPA instant already exists, but banks charge money for it sometimes. For instance N26 charges 49ct for an instant transfer vs free for one that settles next day. Not sure why banks decided to nickle and dime you on this.
And not all banks support this, as I found out to my dismay. Now I have accounts at two different banks, because having the option to make an instant transfer is always great.
Because they can, and when you're talking about tens or hundreds of millions of people, enough are willing to spend .49 to get the money immediately that it adds up to a nontrivial amount of money.
Within the UK is a different beast than within 20 different nations, which the EU (or here the Eurozone) still is, despite all progress that’s been made.
I agree FP is great, and free, and it feels instant most of the time…
But it's actually allowed to stall for up to 2 hours if either bank wants to perform additional verification (which it sometimes has to based on who you are, who they are, etc).
So yeah, normally great but not quite Great Enough™ that you can build a payment processing system on top of it. Go Cardless tried with DD and now they're hooking directly into each banks's transfer flow.
SEPA Instant is actually quite old at this point, but it was unfortunately introduced without a mandate; while SEPA was mandated, SEPA Instant was not. I think FPS has been compulsory for a while.
Is there a good reference for how fraud is handled in this kind of EU transfer context? Or even recommended general reading resources for EU transfer standards?
When these were first introduced in 2017, it was around the time of one of those crypto crazes. People were arguing in favor of blockchain because of fast transfer times. It felt to me as if the banks were like: "hold my beer, we can do that too."
So if that contributed to it, it'd actually be something good that came out of crypto.
I don't think it's anything to do with cryptocurrency.
The large British banks introduced their equivalent (being outside the Euro) in 2009-2010. I expect other European countries had national systems at around that time too.
British banks were arguably quite slow at the time, with cheques and 5 business day clearing still being common (as well as inane account numbering scheme).
But SEPA system was something that was "in the works" for I think a decade by then. A lot of it was essentially setting up faster interconnection that was compatible and cooperated with existing SWIFT systems and essentially enforced one standard set of parameters.
And not a blockchain in sight for this improvement.
Looking forward to the US getting something like this for consumers in 10 years (going off the credit card chip progress)
Not cross-currency, I don't think? SEPA is for euro only; while there are a few non-euro-using countries in SEPA, it's applicable only to euro transfers for those countries.
I believe it also covers transferring euros from a non-euro account (where the bank implicitly processes the FX). But yes, I suppose that isn't really cross-currency.
76 comments
[ 1.7 ms ] story [ 173 ms ] threaddoes this mean instant SEPA transfers must now be free ? Because currently my french bank charges 1€ or something for instant SEPA transfers but doesn't charge anything for non-instant SEPA transfers.
It seems that is the point. With my current bank it‘s free, but I need to enable it for every transaction. Annoying.
They're just trying to milk every possible avenue while they can. Poor banks. /s
- Guaranteed by the European central bank, that is advancing the money for free
- Done instantaneously, by the ECB
- Cost around 0.01 euro per transfer
So the entire delay between sending and receiving the money, that banks pretend is used to guarantee that the transfer is legitimate, and that the money exists etc, etc is actually purely artificial. The ECB is shouldering the risk, and advancing the money, free of cost.
All the rest (extra charges, delays, etc.) are banks handsomely lining their pockets.
No. It just means that your transactions will fail because of poor internet. /s
I’m really glad to see Europe making laws that improve citizens quality and competitiveness for companies.
How is this anything but a win for consumers?
We know that sub-10-second-transfers are possible, by making it the norm you are not decreasing competition, just forcing players who are not competitive in this regard to conform or exit the field.
Markets are not perfectly efficient and you can have competitors surviving due to foul play or simply customer inertia. This protects consumer interest by forcing such market players to at least get to a baseline level or die.
In any case, transfers rely on both banks processing the transaction speedily, so it wouldn't seem like something one bank could do unilaterally.
Imagine being able to pay that quickly to your economically challenged neighbor (Argentina)?
"Euro Transfer" as in SEPA means that the currency of the transfer is set to EUR and that currency exchange is not part of the transfer itself (it can be done at originating or retrieving bank when the account involved is not in EUR, but the transfer itself has to be denominated in EUR at entry and exit from SEPA system)
"There are 36 countries in the SEPA area." https://www.revenue.ie/en/starting-a-business/documents/guid...
https://g1.globo.com/economia/noticia/2023/07/16/pix-tipo-ex...
But there have been some noises in the direction of expanding regular service through Latin America. India's UPI also seems to be internationalizing. And there's FedNow in the US that is probably going to get automatically popular just for being from the US. Wonder if we're going to end up with a bunch of incompatible systems around the world or what.
https://www.frbservices.org/financial-services/fednow
> FedNow is an instant payment service developed by the Federal Reserve for depository institutions in the United States, which allows individuals and businesses to send and receive money.[1][2][3][4]
* https://en.wikipedia.org/wiki/FedNow
> The FedNow Service went live on July 20, 2023. It is available to depository institutions in the United States and enables individuals and businesses to send instant payments through their depository institution accounts. […] At the most fundamental level, the service provides interbank clearing and settlement that enables funds to be transferred from the account of a sender to the account of a receiver in near real-time and at any time […]
* https://www.federalreserve.gov/paymentsystems/fednow_about.h...
> The Federal Reserve said on Monday that it would create a real-time payments system, with the goal of making paychecks and money transfers available for use more quickly.
* https://www.nytimes.com/2019/08/05/business/economy/fed-real...
(Your back-end has to be fast before your front-end can be.)
Banks are incentivized to make money available basically immediately because there is very little risk to them if it turns out to be fraudulent. And they're the only ones that can fix the infrastructure to clean this up. You move the liability from the blue collar worker cashing a check for $50 to the multi-national billion dollar corporation and it gets fixed pretty quickly.
Are you requiring people to check their statements every week to find fraudulent transfers? Are people who go on vacation screwed? How do you handle instantaneous transfers when the funds are available in seconds?
For example, someone asks to use your phone and you foolishly give it to them. They make a bank transfer when you aren't looking. With instantaneous transfer, you are screwed caused the funds are already available and fraud report isn't allow.
It might be possible to make the banks responsible for fraudulent transactions since they are ones that can do the verification.
Your example doesn't really work because for this to happen not only would I need to give this person my phone, I'd need to give it to them with my banking app open and the screen unlocked. At that point it's not a fraudulent transaction.
Right, but if I find it 60 days later when I balance my registry, then the CC company refunds me the money.
[edit]
Also, the banks really would rather not be loaning their customers money interest-free (which is what happens when they make funds available prior to fraud checks finishing). I think you have the incentives completely wrong.
There is no technological roadblock from verifying within seconds that a) a bank account exists with the given account and routing number; b) it is associated with the name on the check being deposited; c) it has available funds to cover the balance of the check. As it stands the banks give you the money as soon as its deposited (or very shortly thereafter), but that's no risk to them. They can come back and get it whenever should they need to.
If you didn't allow them to do that, we'd have the infrastructure for instantaneous fraud checks/balance verification nearly overnight.
The risk is insufficient funds in the account to cover the deficit
> There is no technological roadblock from verifying within seconds that a) a bank account exists with the given account and routing number; b) it is associated with the name on the check being deposited; c) it has available funds to cover the balance of the check. As it stands the banks give you the money as soon as its deposited (or very shortly thereafter), but that's no risk to them. They can come back and get it whenever should they need to.
You missed "d) was printed by a forger with otherwise valid information"
"""
An instant credit transfer is supposed to be executed regardless of the day or hour and the money must arrive into the recipient’s account within ten seconds.
"""
(India is now there with UPI, and I hear Brazil is doing great too. The USA has started the process, although it’ll take some time.)
Only 35 later than Japan's ZENGIN, which launched in 1973.
But it's actually allowed to stall for up to 2 hours if either bank wants to perform additional verification (which it sometimes has to based on who you are, who they are, etc).
So yeah, normally great but not quite Great Enough™ that you can build a payment processing system on top of it. Go Cardless tried with DD and now they're hooking directly into each banks's transfer flow.
Then:
PSD2 https://en.wikipedia.org/wiki/Payment_Services_Directive
SCA https://en.wikipedia.org/wiki/Strong_customer_authentication
So if that contributed to it, it'd actually be something good that came out of crypto.
The large British banks introduced their equivalent (being outside the Euro) in 2009-2010. I expect other European countries had national systems at around that time too.
But SEPA system was something that was "in the works" for I think a decade by then. A lot of it was essentially setting up faster interconnection that was compatible and cooperated with existing SWIFT systems and essentially enforced one standard set of parameters.
Seeing this made me kind of happy. At least there are still some topics where most politicians can still agree on something.
Not cross-currency, I don't think? SEPA is for euro only; while there are a few non-euro-using countries in SEPA, it's applicable only to euro transfers for those countries.