The key is that there is a process for reconciliation. It IS NOT ENOUGH to simply have a ledger - you also need a mechanism for enforcing that the ledger matches reality. And reality is complicated, filled with reasonable disputes over terms and deals (in the best case) and outright fraud and theft (in the worst case).
A given party may be able to temporarily pull money from you with two numbers, but the process around reconciliation makes it so that you, the customer, are protected from the actions of the mediary (because at the end of the day, they're selling this service, and are responsible for their actions in relation to providing credit). This incentivizes those institutions to be careful, protect their reputation, and avoid taking on obvious risks.
Essentially - the system is structured in a way where incentives align to prevent abuse. And entry into the playing field is expensive and limited enough that institutional reputation matters.
Yep, and also methods to bring forward and rectify those disputes, as in the courts. I always wonder how many court orders each day need to go through the banks for enforcement, through wage garnishment, sheriff's auctions, power of attorney, etc.
"Overseas ACH" isn't a thing; anything which looks like it is fronted by a US institution
>There are various ACH systems around the world. The World Bank identified 87 systems in their 2010 Survey
Seems to me like there are many different ACH systems, but perhaps the one referred to colloquially as ACH is specifically FedACH, the American system.
There are many national and international equivalents, but the linked Wikipedia page gets many of the examples pretty wrong, listing e.g. card acquirers/processors and central banks as examples for other such networks.
Direct equivalents would e.g. be SEPA Credit Transfer (but not SEPA Instant) and SEPA Direct Debit in the Eurozone or FPS (credit push only) in the UK.
Giro might be the other, possibly broader term for something similar:
https://www.nacha.org/content/international-ach-transactions...
It still Nacha which is a US institution as you mention. However, I don't see how that protects in the case of a fraudulent overseas transaction. What recourse do you have if an overseas bad actor tricks you into sending money to his overseas account via international ACH?
1) settle the transaction in the next few days (3 usually).
2) ask for additional information on the next few days.
3) deny (return) the transaction if it looks too suspicious according to the bank.
[1] https://www.nacha.org/system/files/2019-07/IAT-Specific-Data...
Others have covered the overseas part, but for the bank claims they didn't receive you're transfer part, I would expect that to show up on the settlement process. If there is a disagreement between banks, when they later check how much each bank owes each other, there should be a discrepancy the banks need to work out.
Note: not an expert in how ACH works or how settlement is done.
If it surpass the 3 day window a "late return" will be sent to notify the origination that the transaction failed, however, the money may already have been transferred to the receiver.
[1]: https://www.moderntreasury.com/learn/ach-return-code-referen...
There are some projects which are attempting to fill in the "TradFi" gaps and support clawback at the protocol level.
I am aware of at least this project but I believe there are others.
https://developers.stellar.org/docs/glossary/clawback
(disclosure: I have like $10 of XLM).
So the regular outcry about “crypto is still completely non-viable as a real medium of exchange” is just complete nonsense; parroted here once again.
Problems that have been solved in a "Traditional Finance" setting (eg. clawback, chargeback, dispute resolution) are either solved or being worked on by many different cryptocurrency projects.
The question which remains to be answered is whether or not cryptocurrency can solve problems that TradFi can't solve or can it solve them in a better way, or more efficiently, etc.
The Stellar Network (and to some extent Algorand) seems to be more efficient than the current system and they aim to work with it as their solution(s) works faster, globally and cheaply, hence why Moneygram chose Stellar for its new product and why Stripe removed Bitcoin payments and re-entered again until regulations were clearer and more cryptocurrencies were available.
Not all cryptocurrency technologies are the same.
You do realize crypto can be wrapped up in a settlement layer, right?
Cash has the same problems until you introduce a settlement system.
what you say is true, but system-wide, this gate-guarding by reputable parties costs unimaginable numbers of dollars in fees and delay. Everything you list is obviously desirable except.. it has gone far in the other direction -- disproportionally expensive, too much gatekeeping.
For the two billion new customers in global trade that have emerged in the last twenty years, for commodity transactions.. why pay? For those that want to tie together dubious foreign agenda with market regulation (oil & gas markets), keep your own credit records and regulators.. but dont hold the rest of the world hostage.
crypto is inevitable with these networks, so make some interesting and useful ones. Of course the old system will object.
The difference is that while crypto can do both, the legacy finance system cannot.
Nothing in banking is un-undoable. Some just require more effort to undo.
As opposed to ACH which could bounce or you could issue a stop payment.
And for fraudulent transfers, Zelle’s trying to pin them on the customer is them hoping you’d give up rather than remind them that regulation E governs it as well, and they used to acknowledge that on their web site.
If you want to have a third party mediate the exchange, you can use a multi-signature transaction (https://monerodocs.org/multisignature/). For example you send the cryptocurrency to a 2-of-3 address where the mediator, the vendor, and the customer each hold a key and two of them are needed to move the funds (the mediator sides with either vendor or customer, or the vendor and customer both side against the mediator). Or you can send the cryptocurrency to a 2-of-2 address, which allows the customer to permanently withhold the funds from the vendor at the cost of withholding some funds from themself that they put down ahead of time, like an escrow that is locked in case of dispute.
If you wanted something more like that, you could pay via a smart contract that holds the funds in escrow for a while, with the arbitrator key able to refund the money to you.
Both parties to this kind of transaction understand why finality is required, and don't have a problem with it. It's a second hand "sold as seen" transaction. The buyer knows where the seller likely lives. The seller doesn't know anything about the buyer. Neither party typically carry that kind of cash around, so there are two trips to the bank (with their own risks) that could be saved if there were some sort of easier digital equivalent.
Maybe, but since I also wouldn't be too happy if they reversed the transaction after taking the car, we both agree in advance that the sale will not be reversible. For the payment, that's done by using cash (and the possession of it), and for the car, also just possession. I give the buyer the opportunity to inspect the car before committing to the sale, and then it is "sold as seen". Unless I committed fraud, the engine falling out from underneath the car will be the buyer's problem, including in law.
It is always possible to seek redress through the courts whether the financial transaction itself was reversible or not, so that's not relevant here. Neither is the fact that to do that knowledge of identity and evidence is required; those concerns also exist regardless of transaction reversibility.
Which is exactly the point of the finality of the transaction. Private party car sales in the US typically are not warranted. The risk of maintenance on a used car is non-zero, and the buyer accepts this risk when buying a vehicle with no warranty.
But in all seriousness, if you are a vendor then any purchase by a customer that is not associated with a legally accountable entity must be settled with finality, because you have no way of preventing charge-back fraud yourself.
In cryptocurrency marketplaces, the customers vet the vendors, not the other way around. This is because the vendors have a higher upfront investment in their business and reputation. The customers are not expected to maintain a reputation (for sake of their privacy) or an investment (outside of an multisig escrow) so any attempt to vet them is prone to sybil attack.
The process of vetting customers is usually assumed by some monopolistic intermediary like PayPal. These companies are able to vet customers by implementing a mass surveillance system.
There are, for instance, no longer many mainstream online merchants who accept only irreversible transactions. There once was a time when online transactions were primarily paid via money order, but PayPal and credit card processing has made that obsolete.
I think most customers pay with credit cards more because of convenience (or rewards, where applicable).
There's a myriad of QR payment systems popping up around the world (e.g. WeChat, UPI, PayNow) that are getting considerable adoption — and those aren't reversible. They're popular because customers don't have to worry about carrying enough cash with them.
A physical merchant usually has a storefront in a public place that they can't abandon on a whim, a reputation to lose etc, whereas the customer is usually anonymous and mobile. This is why customers are generally ok with paying using a (to them) irreversible/final payment method, and merchants will insist on it.
In e-commerce, the risk lies almost exclusively with the customer: An online store's reputation is not easy to judge (and brand impersonation is its own risk), and even at reputable merchants, the time between order and delivery is much longer, goods can usually not be inspected ahead of time etc.
Not coincidentally, the various card schemes' rules reflect this circumstance by assigning default liability for online payments to the merchant (or their acquiring bank, in case of a fraudulent or bankrupt merchant), whereas for in-person payments it lies with the cardholder (or in case of fraud with their issuer, in some circumstances).
In the early days of eBay, it wasn’t unheard of to send out a money order in the mail, wait a month, and never get the item.
> if customers demand
Rather than
> customers demand
The landscape of trust online is varied. Someone is likely to have lower trust for random website you’ve never heard of (which was most stuff in the early days) than an established business or one with a physical presence.
Now that online retail is mature and trust is high, credit cards are more for convenience, but this wasn’t the case in the early days… and still isn’t the case for lesser established sellers or marketplaces.
This was also normal for eBay payments at the time.
There were, of course, a few that did accept credit cards, but many people were weary about using those features because very little of the web used HTTPS at the time. Even Amazon accepted money orders (and personal checks!) for this reason.
There is a narrow sense in which the merchant "always prefers finality" but it isn't the relevant sense.
My guess is that if I had no option to do a chargeback, it would have been harder to get a refund then.
There is an asymmetry here because anyone can be a customer but not everyone can be a vendor- that requires a certain level of reputation and upfront investment. So it is more risky for a vendor to scam a customer than the other way around.
Cryptocurrency transactions require high trust in the sense that they cannot be refunded, but they also require low trust in the sense that the vendor cannot possibly steal any more money than what you sign them.
With an open season of friendly / chargeback fraud, customer lies, refund tricks, etc which customers keep doing every day and so on which too many of that and Amazon will ban your account and they should.
Most don't do because convenience wins for the user and increases the value.
The user knows if something is wrong (like stolen funds, accounts etc) they will get their money back, and trusts the system so spends more.
İf you don't provide this trust system, they won't spend as much as they do.
You will get less volume.
The way I see it, the reversibility of ACH is mostly a 'workaround' of ACH's security flaws. If a crypto does not have security flaws, then it does not require such workarounds. The only drawback is that it cannot correct for human error. But IMO, I don't see human error as a major issue since it's a reality of life that people should be responsible for their mistakes. There are an infinite number of ways in which a person can ruin their lives within the space of a minute, sending money to the wrong address is just one more of them.
Society has absolutely zero sympathy for this point of view.
Eventually society will give genuine, serious consideration to crypto.
"No ability for the legal system to reverse transactions in the case of fraud you say?"
And that will be that.
No-one in the majority of the populace actually wants an ungovernable financial system.
I understand HN is a shit-on-crypto echo chamber but it's naive to think crypto is just settlement.
Settlement is simply a low-level primitive. With smart contracts, you can build whatever mechanism you want before making something final. Multisig, clawbacks, timed-delays, time-locks, escrow, recovery wallets, etc.
It’s a very intrusive data-mining service that should not be trusted with bank account credentials, at-least if you care about data privacy.
Change your bank account password, and you may even see Yodlee (like Plaid) trying to login to your bank account every night to scrape daily transaction data based on some ’bank verification’ you previously gave to some app or 3rd party.
What if, in this order:
1. they take $10k from my account to their account
2. they take the $10k out of their account immediately
3. I call my bank and ask them to reverse the transaction (aka the funds are no longer there to yank back)
Most likely, the originating bank will release the money to the account that requested it a day or two later. 3 business days is pretty typical. More if they're high risk.
You complain, make a statement under penalty of perjury that it's Unauthorized. Your bank sends a return (R10 or one of the other shades) to the Fed. The fed debits the originating bank, and sends them the return message. You've got your money back, and it's the originating bank's problem.
The originating bank then has a potential problem. They go after the company that initiated the debit. Depending on things, that might be a company or a 3rd party payment processor. If it's a 3pp, then they probably still have money from that originator or another, and now it's their problem. They may have a reserve or rolling settlement against such things.
But generally, it's the fact that there's a trusted third party (The Fed) that makes sure that banks pay up on returns that makes it not your problem.
A push puts the financial responsibility for fraud on the originating bank. Imagine account X pushes to account Y, and then account owner Y walks into the bank looking to withdraw cash. From Bank Y's perspective, everything looks fine. Later on, bank X finds out the push was fraudulent, but bank Y has relied on the transaction to dispense actual cash. Bank Y may help investigate, but they surely aren't going to be out the cash due to relying on X's false transaction.
Whereas the pull transaction (with Y as the originator), bank Y will put a withdrawal hold, scrutinize the cash withdrawal and ask if this is really their customer, etc, since there is no other party they can blame.
I also personally tend towards using pulls because that's the way the system expects to work since it grew out of checks. If one pushes money and it never shows up, then the blame is ambiguous. From the originator's perspective they've completed what you've asked them to do, and from the receiver's perspective they know nothing. Whereas with a pull, the main thing you're doing is asking the originator to credit your account. If the transaction gets lost without your other account getting debited, then the discrepancy doesn't really affect you.
I have a weird, occasional fear that some of the companies I do business with might eventually enter a Chapter 7/11 bankruptcy of some sort, and that my ACH push payment could be clawed back.
- Their account will be negative - Bank wouldn't allow them to withdraw 10k due to a hold - Bank wouldn't allow them to spend money due to a hold
Anyway, in the end, victim's bank will get money back. A lot depends on the relationship of the scammer with their bank:
- On my fresh account, I once did an ACH transfer around 15k, the bank placed a 60-day hold on those funds, it was a saving account, so I literally couldn't do anything with it for 60 days.
- Some time later, the same bank got a 500k ACH transfer, bank placed a hold on half of it, but allowed me to withdraw the rest.
- Another time I had 15k ACH transfer on "well established" checking account, bank still placed a hold on 10k.
If it's a "fresh" bank account - you're not getting money out, specially if it's a transfer between two random consumer accounts until bank feels safe.
Banks and payment service providers generally mitigate this risk by e.g. demanding a security deposit and/or delaying funds availability for new customers.
I'm not sure if this is what you meant to begin with, but the institution is probably not doing anything at all. They're just waiting to see if the name gets flagged and to give you time to cancel your credit card or whatever it is. The fishiest transactions start to smell immediately and all you have to do is wait a second for the smell to waft in.
> with feeling and 4 part harmony
What do you mean by this in this context? I tried googling it, but only found results on musical theory. I guess you mean this as a (funny) metaphore?
"Once more, with feeling," is a cliche that a conductor might say to an orchestra during rehearsal. Presumably professional orchestras usually play with feeling, even on the first attempt. So the conductor means, somewhat condescendingly, more feeling. It has been said so many times by so many conductors that it has become a running joke. If you were doing a comedic impression of a conductor, you might insert that phrase.
Four-part harmony is the performance of a song by four singers (or four groups of singers): soprano, alto, tenor, bass. You could have just one person sing a song, but if you have a whole chorus sing it, it will sound fuller (though not always better).
It was a funny way to say that the bank not only will require the money from the person who began the transaction but also will impose severe fees.
I was curious if I could track them down by giving them real info but wasn’t convinced enough about the reversibility of it to risk basically my entire checking account.
https://krebsonsecurity.com/2010/01/top-10-ways-to-get-fired...
Is there any particular reason to believe that the number the scammers said they were going to take was the actual number they were going to take?
Interestingly enough the amount the scammers “quoted” continually increased as I was on their “recorded line” - it started at $250 or so and kept increasing.
I pretended to be incensed at their lack of integrity, but they just shouted back and eventually resorted to their master insult - calling me a mother fucker. I wish they would come up with some better insults as I’ve been called that exact thing hundreds of times now. Do they teach that at school or something?
Definitely lol’d at that, thanks
As if. Ask the tens of thousands of people who have been scammed sending ACH payments if the bank has ever fucking reversed jack shit for them.
The originating bank will then do the same to the merchant who debited your account, with feeling and 4 part harmony. If they do this too much (>1% unauthed, or >5% overall), then they get cut off. (Exact thresholds depend on the bank and their risk tolerance and what they've underwritten the merchant for. But those are about the highest numbers you'll see, though sometimes NSF returns can be higher. )
ACH never settles. There's no security as such. An ACH transaction happens overnight, on trust, and may come back (by agreement) 60days later, and longer in cases of extreme fraud. So any time you're seeing a 2-3 day hold on ACH, it's the bank doing risk management decisions, not something in the underlying transfer. (note, that may not be strictly true for some correspondent small banks in alaska or other odd time zones, where there really is a day+ delay on things)
The only thing that's keeping fraud under control is the banks doing underwriting on the merchants who can do debits. They're on the hook (ultimately) if there's fraud, so it's in their interests to keep it clean. They're also not likely to cut and run, because banking connections to the ACH network are not cheap/easy to come by.
(source, I've worked in this space for 18 years)