Thread by @harshsinha

Slow financial rails are creating useless products and wasting our time in “innovation”. With the #GMEstock dust settled, here are some thoughts on how our archaic financial infrastructure is becoming an impediment to innovation and simply put - slowing us down! (1/18)

Earlier @vladtenev of @robinhoodapp called for the elimination of T+2 securities settlement.

While securities settlement time impacts a % of folks, we have bigger issues in our economy as we run ACH - one of the slowest payment systems in the west.

https://twitter.com/vladtenev/status/1356687248746455041?s=20

(2/18)

In 2021, sending money should be as fast as sending email - instant! But ACH is slow...

And what’s worse, to address its issues, we are all spending time building products that shouldn't exist or not get used as often.

Here are a few that come to mind. What did I miss? (3/18)

Overdraft: Imagine if funds hit bank accounts the moment payroll runs. There would be fewer people using overdraft services or taking out high interest debt. (4/18)

. @PayPal, @stripe, @Venmo charge fees for instant payouts: In a real-time system, this is expected. You shouldn’t have to pay more money to get access to your hard earned money. (5/18)

. @Zelle: Bank’s response to Venmo? Should not exist if we have real time payments. (6/18)

. @Visa Direct, @Mastercard Send: Card networks have built a separate network using their own infrastructure to process funds via credits to bank accounts linked to debit cards. This entire system does not need to exist. (7/18)

Early salary access features: There are some banks and entire businesses now touting access to your salary a day or two earlier. This is a nonexistent problem in a real time payments system. (8/18)

Apps fronting funds: Apps like @RobinhoodApp have the feature to front you a % of the money you transferred from your bank once they’ve authorized the transaction - knowing that it will take 3-5 days for funds to clear through ACH. Again a feature that shouldn’t exist. (9/18)

Frequent payroll - Imagine if we could do instant payouts on all transactions for all workers at low-no cost so people had access to funds sooner. No need to wait two weeks for payroll. Again, less overdraft and debt taken on. (10/18)

In 2020, the ACH network did 26.8 billion transactions powering $61.9 trillion of money movement!💰

But what’s an even more interesting statistic is that only 2% of ACH transactions and 0.7% of this massive volume settled same-day! Wowzer! 🤯 (11/18)

nacha.org/sites/default/…

This delay has real implications! This is money that didn’t make it to someone in time to make rent, buy groceries & they had to take on debt. Money that didn't reach businesses to pay suppliers, make payroll. Funds that charities could use to help those in need faster. (12/18)

The velocity of money - the number of times a dollar is used to purchase final goods and services - can be an indicator of how healthy an economy is. (13/18)

If money is stuck in our financial infrastructure for days waiting to settle and become useful for the receiver, it basically slows down our whole economy and our ability to cycle these funds for real goods and services. (14/18)

I had the chance to share my thoughts & learnings from @TransferWise in my testimony to the U.S. House Committee on Financial Services in 2019 where I outlined the need for us to move faster to adopt real-time clearing & settlement of payments. (15/18)

congress.gov/116/meeting/ho…

We're spending way too much time dealing with the symptoms of having slower money movement & applying band-aids to fix the symptoms v/s treating the root cause. It’s like continuing to take Tylenol to treat a recurrent fever rather than treating the underlying disease. (16/18)

The US isn’t the only country that’s faced this problem. Other countries had similar systems. They just bit the bullet to upgrade, moved to real-time systems and pushed adoption. The regulators and law makers in these countries played a big role in driving this change. (17/18)

It’s hard for banks & biz to push the change. No one event is big enough to warrant an overhaul & the $ to do it. It needs a regulatory push. Else we'll suffer for decades with poor services, lose economic value & build things we don’t need. @JanetYellen @federalreserve (18/18)