Cost of domestic and international money transfers

[EWC]

Maybe according to what Yves Mersch calls the Law and Order Camp.   He wrote a op-ed for Der Spiegel (German) about the decision. Mersch is a member of the ECB's Executive Board.

He emphasizes that the €500 note will continue to be legal tender, and that the ECB also decided to have more €100 and €200 notes produced. Then he writes about three major groups behind the anti cash campaign: the alchemists (negative interest rates), the fintech alliance, and the law and order camp ... and he seems to not be in any of those camps. By the way, earlier this year Doris Schneeberger, head of the ECB's Currency Management Division, stated that less cash does not mean less "shadow economy", and mentioned Sweden as an example.

Interesting.  But surely anyone who rents out private money in the course of a transaction has an interest here - and that covers all transactions by  bank drafts, credit or debit card transactions.  Actually, Europe has a better track record that the UK in some ways on this, and both have a better track record than the US. 

US businessmen I spoke to feared being labelled as terrorists if they even attempt to use the US direct charge-free electric payment system...........

Rob T

[Figleaf]

As the link Chrisild refers to is in German, here is a précis:

The ECB has halted production of the €500 note. That does not mean the EU aims at abolishing cash.

"Alchemists" argue that cash is a safe haven when the interest rate is negative. However, even under moderate negative rates, certain financial operations are endangered. Moreover, people may react differently to "excessive" negative rates than to moderate negative rates, e.g. they may save more in order to achieve their financial goal net of cost. Also, other means of hoarding capital (cigarettes, precious metal) can be found.

For "FinTech enthusiasts", cash is an unloved competitor for market share. Therefore their arguments are commercial, even when presented as scientific.

Cash is privacy, also for criminals, but so are mobile phones. This is all the more important because internet companies want to collect ever more private data. Abolishing cash would promote total state control over privacy.

Abolishing cash is not on the agenda, but we can easily do without the €500 note.

Please keep in mind these are Mersch's thoughts, not mine. I find it relatively easy to take issue with his criticism.

Peter

[EWC]

Further to my last - here is the Transferwise assistance concerning direct electronic payments in the USA

https://transferwise.com/help/article/2918950/borderless-account/how-do-i-use-my-usd-bank-details

So - as far as I can tell, in the US - big businesses can use the ACH system - which takes 3 days (!) but is free.

Ordinary folk still have to use wires - which will cost $20 to $30 a shot!

Since as I understand it - everyone in the UK and Europe can now make direct electronic payments almost immediately and at no cost - probably its important to US citizens to know about this?

Please correct me if I am wrong.................

Rob T

[chrisild]

Here in Germany only three bank groups (with the Sparkasse group being the biggest one) currently offer outgoing instant transfers - "Echtzeit-Überweisung" according to the SEPA Instant Credit Transfer (SCT Inst) standard. While a "traditional" transfer payment may take two days (online payments are supposedly faster), such a SEPA instant payment takes just a few seconds.

Problem is that obviously many banks do not allow their customers to make such payments yet, that so far only 16 countries are involved, and that some banks charge extra (50 to 80 cent!) for each instant payment. Of course I hope that, the more banks get included, the fees that those "pioneers" charge will drop. Otherwise it will be hard to compete with services such as Swish (in Sweden) or third party services like Transferwise and PayPal ...

Christian

[Figleaf]

So - as far as I can tell, in the US - big businesses can use the ACH system - which takes 3 days (!) but is free.

Ordinary folk still have to use wires - which will cost $20 to $30 a shot!

Since as I understand it - everyone in the UK and Europe can now make direct electronic payments almost immediately and at no cost - probably its important to US citizens to know about this?

Don't know about cost in the US. I need to make small payments only and make them by sending banknotes registered. Americans acknowledge that it is the cheapest method. In the EU, euro transfers within the € zone must be charged the same fees as domestic transfers, practically always zero. There are no EU-regulated fees within the EU for non € transfers, but they are regulated by the member states in their national banking laws.

The fees you are quoting in the US look excessive to me in the framework of economic efficiency. However, that is a political judgement. Banks are reckoned to have an economic task as financial intermediaries as well as a social task as payment facilitators. Government supervision's tasks include making sure that the social tasks (e.g. being accessible for the public, receiving money, making ATM's available, making transfers possible) are fulfilled and at what fees, even though they are loss-making.

US political dogma is to minimise government intervention into private enterprise. In that state of mind, services that are normally free in European countries attract a fee in the US. This can be maintained in domestic transactions, as all US banks happily charge such fees. In international transactions, this would have made all US banks uncompetitive for money transactions. Rather than having to negotiate fees for every international transactions, US banks probably have developed a separate fee schedule for international transactions. This may have irked US enterprises enough for the banks to develop a free domestic payment system for big clients.

Today, the internet is a great leveller. Internet sites compare the cost and execution time of payments from the US. I just received a USD sum from the US that was changed into EUR and sent to my account. Execution time was 2 days and cost for money changing and transfer amounted to about 4%. Pretty good for the US. However, for comparison, a transfer from my Dutch to my French account takes one day or less and is free.

Yes, there are differences in cost for domestic transfers. They are a direct consequence of differences in dominating political dogma. The US public can be aware of these differences if they do a little research on the net. In view of their voting pattern, they seem to be happy with the situation.

Peter

[EWC]

Here in Germany only three bank groups (with the Sparkasse group being the biggest one) currently offer outgoing instant transfers

Thanks – interesting.  So at least on this, the UK is out in front of most?

Don't know about cost in the US. I need to make small payments only and make them by sending banknotes registered. Americans acknowledge that it is the cheapest method.

That would cost just under GDP 8 from the UK, and its dubious about whether it is insured, so I would not call it cheap for small payments

Government supervision's tasks include making sure that the social tasks (e.g. being accessible for the public, receiving money, making ATM's available, making transfers possible) are fulfilled and at what fees, even though they are loss-making.

Yes – we agree on this I think.  We live in market based economies, and if society is to work, Gvt has to make all purpose money reliable, and readily available to those due to it.

US political dogma is to minimise government intervention into private enterprise. In that state of mind, services that are normally free in European countries attract a fee in the US.

I do not think that has traditionally been correct.  Banking in the US was traditionally free, provided you maintained the minimum balance – and that included about the most cumbersomely expensive chequing system anywhere in the world.  Have things changed very recently?  I suspect US clients are being pushed from cumbersome cheque payments rather directly into costly credit card payments, without the third option of a free direct transfer?

Rather than having to negotiate fees for every international transactions US banks probably have developed a separate fee schedule for international transactions. This may have irked US enterprises enough for the banks to develop a free domestic payment system for big clients.

My concern is not for US enterprises!!!!!  My concern is how above 300 million US citizens get to pay each other.........

Today, the internet is a great leveller.

Well, yes, it ought to be.  And its easy to find operators who want to set up cheap free transfers in the US.  So the key question is – who is blocking them, and why?

I just received a USD sum from the US that was changed into EUR and sent to my account. Execution time was 2 days and cost for money changing and transfer amounted to about 4%. Pretty good for the US. 

4%!!!  Transferwise does it for 0.5%.  But apparently they are being blocked by the US banks  Why?  Well 4% - 0.5% = 3.5% is why.  Surely?

Yes, there are differences in cost for domestic transfers. They are a direct consequence of differences in dominating political dogma. The US public can be aware of these differences if they do a little research on the net. In view of their voting pattern, they seem to be happy with the situation.

You think the US public is happy with their political situation?  Last time I checked, commercial breaks in US TV were completely filled with politically funded ads of candidates shouting "liar" at each other.

We agree that the problems here are ultimately political matters - about what voters are "happy with".

We do not agree that their voting pattern indicates they actually are happy.....

Rob T