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Comment by ryanwhitney | Hacker News Reader

It’s like oauth except you type your password for site A into a box on site B’s domain

Pretty wild it even exists

It is a hack around regulatory failure to mandate this functionality at finance firms (both Congress and the Fed have failed in this regard). The Fed's instant payments product (FedNow [1]) goes live in 2023, which is going to put downward pressure on Visa's debit business. The Fed only began to move on instant payments when pressured by Congress [2] (who didn't want smaller banks held hostage by Early Warning System's "Zelle" product, which is operated by a consortium of the nation's largest banks).

Europe mandated this functionality (PSD2) [3]. With instant payments and if regulations required banks to offer this functionality, Plaid's value would evaporate.

[1] https://www.frbservices.org/financial-services/fednow/index....

[2] https://www.paymentsjournal.com/timeline-the-feds-real-time-...

[3] https://en.wikipedia.org/wiki/Payment_Services_Directive

Does FedNow solve all of the problems Plaid solves? I'm thinking specifically about Plaid functionality that lets consumers expose transaction history, investments, etc.

It would appear that FedNow solves for "How do I get money into my Schwab brokerage account?" but not "How can I let Schwab do risk analysis across all my investment accounts?"

It does not, which is why I mention Europe's PSD2, which would. You don't build a startup to do this, you mandate your financial institutions to provide this functionality to users.

Baby steps!

You'd think even without a mandate, banks would be motivated to implement secure auth instead of this insanity?

FedNow is a while away. RTP (Real-time payments) from the The Clearing House is already doing it. They have appx half the DDAs (bank accounts) in the US covered. Another year or two they will have 80-90% Also Push to Card and VISA/MC Debit are real-time payment systems i.e. 7x24x365 where you can pull or push money to the bank account linked to the VISA/MC branded ATM card Bottom line: Fednow may be too little too late, but real-time payments are happening outside of VISA/MC

VISA/MC are aware of this. They expect "Interchange compression" i.e. reduction in revenue from Credit Card fees as users switch to other systems. However it isn't a show stopper because in parallel they have discovered (and are using ) new ways to increase interchange revenue e.g. Virtual Cards, Prepaid Cards etc.

2-3 years isn't that long in financial services. Sure, The Clearing House provides an RTP platform (and is also a financial rail for Zelle payments). Can they do it as cheap as the Fed offering FedNow as a utility similar to ACH? And to every deposit account provider in the US at a reasonable cost? Probably not. Doesn't matter how many deposit accounts you cover if someone is going to come eat your lunch because they have a Congressional mandate.

Agree on interchange compression (it's fairly obvious credit card networks are overpaid for what they offer, so of course innovation is going to bring revenue destruction), but there's no way virtual and prepaid cards are going to make up the shortfall (especially with Congress starting to lean left and progressive banking policies on the table, such as central bank pass through accounts, negating the need for prepaid cards when deposit accounts become accessible to everyone).

Long story short, finance still consumes too much of a percentage of GDP, and it's a good thing when tech comes along that pushes that drag down.

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